“Last year, Red Lobster reported $11 million in operating losses following its flubbed ‘Ultimate Endless Shrimp’ deal, which backfired when it reeled in too many customers after the limited-time promo became a permanent menu fixture last June. The restaurant chain later reported $12.5 million in losses in the fourth quarter of 2023.”
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If they are going into chapter 11 then the losses are privatized. Chapter 11 halts debt collection temporally while restructuring happens. Afterwords the previous owners own none of the company or a much reduced chunk of the company. The previous debtors now own most or all of the company. Similar to a bank repossessing a house it’s debtors repossessing a business.
It’s also possible for the judge or who they appoint to run the bankruptcy too determine there isn’t any hope saving the business and convert it to a chapter 7 which is close everything and sell off the assets to try and pay back the debtors.
Either was the original owners usually get little to nothing.