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The fishy death of Red Lobster

businessinsider.com

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Re: The fishy death of Red Lobster

#11

Post by 48864w6ui »

ars wrote: post #4
loutre wrote: post #2

Watching private equity take over and subsequently destroy businesses is so frustrating! This is a story that comes up again and again and there isn’t yet the overwhelming backlash that’s necessary to stop it. I highly recommend the book “Plunder: private equity’s plan to pillage America” for an extremely cogent overview of the entire situation. https://www.goodreads.com/book/show/62874267

Something I don't understand is why private equity would destroy a business they themselves own. It doesn't make any sense - they paid billions for Red Lobster, they made some money, they could make even more by having a viable business. If this were a publicly owned company I could understand outrage, but it's privately owned, the owner presumably isn't interested in losing money. What's his motivation for taking th…

If they can make even more money on a different viable business by vampiring out this one, the NPV calculation says...

(What %age of eastern european enterprises got long term investment in the 1990s?)

Re: The fishy death of Red Lobster

#12

Post by forgetfreeman »

sevagh wrote: post #7
loutre wrote: post #2

Watching private equity take over and subsequently destroy businesses is so frustrating! This is a story that comes up again and again and there isn’t yet the overwhelming backlash that’s necessary to stop it. I highly recommend the book “Plunder: private equity’s plan to pillage America” for an extremely cogent overview of the entire situation. https://www.goodreads.com/book/show/62874267

Can we place blame on the people who sell their firms to private equity firms?

Nope.

Re: The fishy death of Red Lobster

#13

Post by plussed_reader »

ars wrote: post #4
loutre wrote: post #2

Watching private equity take over and subsequently destroy businesses is so frustrating! This is a story that comes up again and again and there isn’t yet the overwhelming backlash that’s necessary to stop it. I highly recommend the book “Plunder: private equity’s plan to pillage America” for an extremely cogent overview of the entire situation. https://www.goodreads.com/book/show/62874267

Something I don't understand is why private equity would destroy a business they themselves own. It doesn't make any sense - they paid billions for Red Lobster, they made some money, they could make even more by having a viable business. If this were a publicly owned company I could understand outrage, but it's privately owned, the owner presumably isn't interested in losing money. What's his motivation for taking th…

Once you realize the destruction of the sunk cost fallacy it's easy to detach from things that would harm you long term.

Re: The fishy death of Red Lobster

#14

Post by forgetfreeman »

tibbydudeza wrote: post #5

Shrimp - the cockroaches of the ocean. I never eat the stuff including lobster (non allergic) but one time I was relocated to Germany to help ship a new software release (English technical documentation) and was invited to a meal with my colleagues and his family. Out comes a big bowl of shrimp for everybody with the skins and feet and antlers on - think we had a language misunderstanding. Not wanting to offend and s…

Now if you'd said there was no Old Bay on the table I'd say you had a serious issue on your hands, but I'm guessing you don't know what that is?

Re: The fishy death of Red Lobster

#15

Post by DopplerSmell »

ars wrote: post #4
loutre wrote: post #2

Watching private equity take over and subsequently destroy businesses is so frustrating! This is a story that comes up again and again and there isn’t yet the overwhelming backlash that’s necessary to stop it. I highly recommend the book “Plunder: private equity’s plan to pillage America” for an extremely cogent overview of the entire situation. https://www.goodreads.com/book/show/62874267

Something I don't understand is why private equity would destroy a business they themselves own. It doesn't make any sense - they paid billions for Red Lobster, they made some money, they could make even more by having a viable business. If this were a publicly owned company I could understand outrage, but it's privately owned, the owner presumably isn't interested in losing money. What's his motivation for taking th…

When you value a business, part of it is brand and people's habits. The new owners are betting that they can trade in that value for cash, by selling a crap lesser product under the old name, and that this will return faster than a sustainable business.

It's not obviously bad from a finance point, it's just significantly shorter term thinking than the original owner.

Re: The fishy death of Red Lobster

#16

Post by dmurray »

loutre wrote: post #2

Watching private equity take over and subsequently destroy businesses is so frustrating! This is a story that comes up again and again and there isn’t yet the overwhelming backlash that’s necessary to stop it. I highly recommend the book “Plunder: private equity’s plan to pillage America” for an extremely cogent overview of the entire situation. https://www.goodreads.com/book/show/62874267

The "private equity kills beloved brand" stories are usually overcooked, as far as I can tell.

They usually involve PE taking over firms that were already in financial trouble, which is what made them attractively priced to PE in the first place. The PE firm would also prefer to have a nice profitable business, but if they can't turn it around, they have options like asset stripping or selling the name to a different company.

Here TFA mentions "flagging sales" already in 2014.

The most likely alternative to PE "killing" Red Lobster or Sears or Toys R Us wasn't that the businesses restructured with the same management and business model but 25% fewer stores. It was that they went out of business altogether.

I'm worried by PE buying up successful natural mom-and-pop businesses like dentists and vets and worsening the consumer experience at those. Not so worried about them managing the decline of massive national brands slightly more aggressively than another billionaire owner might.

Re: The fishy death of Red Lobster

#17

Post by rwmj »

loutre wrote: post #2

Watching private equity take over and subsequently destroy businesses is so frustrating! This is a story that comes up again and again and there isn’t yet the overwhelming backlash that’s necessary to stop it. I highly recommend the book “Plunder: private equity’s plan to pillage America” for an extremely cogent overview of the entire situation. https://www.goodreads.com/book/show/62874267

They're currently buying up veterinary practices in the UK and turning them into cash cows. This has the effect that pet insurance has gone through the roof, and general vet bills are much higher than they used to be. Pets suffer too if owners can't afford to treat them any longer. (https://www.theguardian.com/business/2024/mar/12/uk-vet-pric...)

Re: The fishy death of Red Lobster

#18

Post by rwmj »

gadders wrote: post #10

I need to resurrect my idea of a list of companies (especially ones that manufacture goods) that are owned by Private Equity so people can avoid them. In most cases, the brand name stays the same but the quality falls off a cliff.

Instant Pot was one ...

Re: The fishy death of Red Lobster

#20

Post by red_trumpet »

dmurray wrote: post #16
loutre wrote: post #2

Watching private equity take over and subsequently destroy businesses is so frustrating! This is a story that comes up again and again and there isn’t yet the overwhelming backlash that’s necessary to stop it. I highly recommend the book “Plunder: private equity’s plan to pillage America” for an extremely cogent overview of the entire situation. https://www.goodreads.com/book/show/62874267

The "private equity kills beloved brand" stories are usually overcooked, as far as I can tell. They usually involve PE taking over firms that were already in financial trouble, which is what made them attractively priced to PE in the first place. The PE firm would also prefer to have a nice profitable business, but if they can't turn it around, they have options like asset stripping or selling the name to a different…

From the article:

> To raise enough cash to make the deal happen, Golden Gate sold off Red Lobster's real estate to another entity — in this case, a company called American Realty Capital Properties — and then immediately leased the restaurants back.

So private equity didn't try to make Red Lobster profitable before stripping it of its assets. That was literally their first move.

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