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The fishy death of Red Lobster

businessinsider.com

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Re: The fishy death of Red Lobster

#131

Post by HeyLaughingBoy »

rl3 wrote: post #50
coldtea wrote: post #47

Earlier quoted context omitted.

> The fundamental problem is that all of these businesses are devoid of soul, and the majority of the profits don't go to the people working them. That however is a problem of capitalism in general, not Olive Garden in particular. And I'd say class snobbism against lower class "taste" (independent of unhealthy fast food vs fine cuisine, since for example something like In and Out is totally acceptable by the same peo…

> That however is a problem of capitalism in general, not Olive Garden in particular. Sure, but the lengths Olive Garden's marketing goes to present the facade of a soul is so cringe that they deserve to be emblematic of said problem. > And I'd say class snobbism against lower class "taste" (independent of unhealthy fast food vs fine cuisine, since for example something like In and Out is totally acceptable by the sa…

Right. My local non-chain Mexican restaurant charges far less than Olive Garden, or any other nearby chain for that matter, and manages to put out large quantities of very tasty food. Not surprising, the place is usually very busy.

Re: The fishy death of Red Lobster

#132

Post by SoftTalker »

coldtea wrote: post #47
rl3 wrote: post #35

Earlier quoted context omitted.

I mean, if McDonald's along with every restaurant in SoDoSoPa wanted to join Olive Garden and Applebees on a voyage into the sun, that wouldn't be a bad thing. The fundamental problem is that all of these businesses are devoid of soul, and the majority of the profits don't go to the people working them.

> The fundamental problem is that all of these businesses are devoid of soul, and the majority of the profits don't go to the people working them. That however is a problem of capitalism in general, not Olive Garden in particular. And I'd say class snobbism against lower class "taste" (independent of unhealthy fast food vs fine cuisine, since for example something like In and Out is totally acceptable by the same peo…

> the majority of the profits don't go to the people working them

False. A well run restaurant might make 10% profit. But they pay double or triple that to the staff and managers.

Re: The fishy death of Red Lobster

#133

Post by threemux »

g_sch wrote: post #107
threemux wrote: post #87

Earlier quoted context omitted.

It's especially jarring to see a story like this with Red Lobster as its subject. I'm curious if anyone who has a negative reaction to this article has actually been to a Red Lobster in the last 10 years. They serve poor quality food for similar prices as other sit-down restaurants. You're as likely to get poor service as you are anywhere else (maybe more so), but you'll still have to tip the same amount and spend th…

> in the last 10 years. From the article: > In 2014, amid flagging sales and pressure from investors, Darden sold Red Lobster for $2.1 billion to Golden Gate Capital, a San Francisco private-equity firm.

Yeah looking back I don't know why I qualified it - it was bad before then too.

Re: The fishy death of Red Lobster

#134

Post by astura »

whycome wrote: post #82
zikduruqe wrote: post #52

Earlier quoted context omitted.

M&M Mars here in the US has been buying up the independent veterinary practices and turning them into corporate run businesses. https://en.wikipedia.org/wiki/Mars_Inc.#Mars_Petcare

This sounds like something out of Idiocracy

They already own most of the pet food brands, so this move actually makes sense.

I still hate it though.

Re: The fishy death of Red Lobster

#135

Post by 01100011 »

tonymet wrote: post #118

Can someone help explain restaurant industry economics? when the business starts out, it's high risk and low margin. Tons of capital investment. Labor intensive and hard to staff. If you are lucky you are pulling 15% margins Besides some exceptions, if you are lucky you may get some growth for 5-10 years. Then your brand falls out of favor (trends) and you spiral into bankruptcy. Who invests in this stuff?

Speculators hoping to catch the next Chipotle. Tons of activity in this space right now. I got burned trying to short one of them. These are, many times, low-float or institutionally owned and prone to heavy manipulation as well.

$CAVA, $WING, $SG, $SHAK, $TXRH... lots of names that will either be the next $CMG or crash back to earth when the next trendy restaurant catches the attention of social media.

I think a lot of young people are abandoning older brands like McDonalds in favor of these trendier options, so there's a lot of business there if a new brand can capture it. But like you say, nothing lasts long in that industry.

Re: The fishy death of Red Lobster

#136

Post by SoftTalker »

red_trumpet wrote: post #43
AdamN wrote: post #31

Earlier quoted context omitted.

Because it was a dead man walking by the time PE bought it. The underlying assets were worth more than the sale price so it was never going to make sense to do anything other than what happened. With that said, the tax code and employee law could be improved so there are stronger guardrails to protect some stakeholders more.

> The underlying assets were worth more than the sale price That's not so clear to me. The real estate wouldn't have been worth so much without the existing restaurants having to pay rent.

Retail property value is mostly about location, not whether there is a currently successful business operating there.

Re: The fishy death of Red Lobster

#137

Post by SoftTalker »

triceratops wrote: post #51
swampthinker wrote: post #33

Earlier quoted context omitted.

That's pretty standard, even for well-run chains. Gives the primary business (making food profitably) a huge cash infusion, and removes a distraction. Obviously deal terms are important, but that action on its own isn't stripping for the sake of stripping.

McDonald's, possibly the most successful chain of them all, doesn't seem to think owning real estate is a distraction.

That's because McDonald's is a real-estate company that finances itself by selling hamburgers.

Re: The fishy death of Red Lobster

#138

Post by JackFr »

erikerikson wrote: post #115
Whatarethese wrote: post #83

Earlier quoted context omitted.

Did this happen to Chipotle?

And then it was reversed, purchased back by the founder for less

Chipotle took on McDonalds as an early investor, used McDonald's investment to quickly expand from 16 to 500 stores. Chipotle had a tremendously successful IPO, which they used to fund further growth. McDonalds, who was always a minority investor, divested themselves from Chiptole earning $1.5 billion on a $450 million investment. It trades on the NYSE as CMG and has a market cap of 88 billion.

Re: The fishy death of Red Lobster

#139

Post by tonymet »

tempsy wrote: post #122
tonymet wrote: post #118

Can someone help explain restaurant industry economics? when the business starts out, it's high risk and low margin. Tons of capital investment. Labor intensive and hard to staff. If you are lucky you are pulling 15% margins Besides some exceptions, if you are lucky you may get some growth for 5-10 years. Then your brand falls out of favor (trends) and you spiral into bankruptcy. Who invests in this stuff?

You should look at Chipotle's stock.

an exception that proves the rule

Re: The fishy death of Red Lobster

#140

Post by tonymet »

tempsy wrote: post #122
tonymet wrote: post #118

Can someone help explain restaurant industry economics? when the business starts out, it's high risk and low margin. Tons of capital investment. Labor intensive and hard to staff. If you are lucky you are pulling 15% margins Besides some exceptions, if you are lucky you may get some growth for 5-10 years. Then your brand falls out of favor (trends) and you spiral into bankruptcy. Who invests in this stuff?

You should look at Chipotle's stock.

also, stock prices aren't economics. In aggregate they can be useful indicators, but they are not a measure of a business' results (due to derivative factors)
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