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The fishy death of Red Lobster

businessinsider.com

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Re: The fishy death of Red Lobster

#141

Post by achow »

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?

PepsiCo acquired Pizza Hut, Taco Bell, and KFC to increase its soda fountain sales of Pepsi products.

Re: The fishy death of Red Lobster

#142

Post by JackFr »

sokoloff wrote: post #108
floren wrote: post #95

Earlier quoted context omitted.

Here in the Bay Area I've been quoted $800 to clean a dog's teeth.

That sounds like a "we're not in the teeth cleaning business; go away!" price. I love my dog and spend pretty freely on him, but no way is he getting an $800 teeth cleaning. At that point, you might as well locate your practice on the airport and cater only to people who fly their dog in on a private jet.

Please. Those folks have a canine dental hygienist on staff. They don't go to walk in clinics.

Re: The fishy death of Red Lobster

#143

Post by tonymet »

duped wrote: post #130
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?

More than half close within a year and it's closer to 80% after five years, but the ones that make it past that point are a lot more likely to thrive. Kinda like turtles going out to sea. > Tons of capital investment I mean it's not that much capital, compared to most businesses. You need way more money to start a software shop than a restaurant.

Well thankfully restaurant & AI startup aren't the only two industries worthy of investing in.

Jokes aside, I get mom & pops. But I'm dubious on the "growth" chains like a Shake Shack or Chick Fil A.

My current theory is that they are effectively MLMs with different structures: private equity MLM, owner-operator (franchisee) MLM.

See Subway for the end result

Re: The fishy death of Red Lobster

#144

Post by quickthrowman »

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.

McDonald’s is an REIT that happens to sell hamburgers.

Re: The fishy death of Red Lobster

#145

Post by JackFr »

bonestamp2 wrote: post #74
sevagh wrote: post #7

Earlier quoted context omitted.

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

Are they entirely to blame? No. Everyone who capitalizes on the deal shares some blame. The consumer and the economy do get hurt. Late stage capitalism is starting to destroy what was good about capitalism and we need regulations to keep things sane. There is a finite amount of capital in the world (with a little more printed each year of course). But they're not printing 20% more every year, so companies can't keep…

I don't have the books of Red Lobster, but the economic rationale is that if the enterprise is continuing to persistently lose money, it is destroying capital not increasing it.

It's likely that the real estate that the Red Lobsters were built on was worth more than the entire enterprise. In such a case the implication is that the ongoing operation is negatively valued. Splitting the real estate off and valuing the restaurants at zero is a rational action -- and good for the economy.

Put a mom and pop restaurant on the spot. Or a nail salon. Or anything that can justify its costs.

Re: The fishy death of Red Lobster

#146

Post by aklemm »

I'd like to see business schools codify "brand value extraction" or "enshittification" as explicitly unethical. Any activity that degrades a brand for short-term cashflow--and is reasonably know to decrease future business--is necessarily fraudulent.

If that is codified and taught, then journalists can point to that in all cases (of which we are overrun). It's pathetic.

Re: The fishy death of Red Lobster

#147

Post by kevin_thibedeau »

bradjohnson wrote: post #113
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.

Tim Hortons

They're on my lifetime ban list after PE ruined their menu.

Re: The fishy death of Red Lobster

#148

Post by aklemm »

happytiger wrote: post #40

I can’t wait until private equity companies are exposed as the exploitive side of our current system that needs to be corrected. At the heart of so many good companies are bad decisions driven by PE structures and personalities, most of whom seem very toxic and short sighted. Surely there is a better model of capitalism — I am not so vapid as to turn against the obvious advantages of the system. But I am also not wil…

There's a solution, I posted it in the thread.

https://news.ycombinator.com/item?id=40238807

Re: The fishy death of Red Lobster

#149

Post by aklemm »

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.

That's an excellent idea. I posted in the thread another angle I'd love to see get traction:

https://news.ycombinator.com/item?id=40238807

Re: The fishy death of Red Lobster

#150

Post by abirch »

bradjohnson wrote: post #113
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.

Tim Hortons

Tim Hortons is part of $RBI [1] and not private equity.

[1] https://en.wikipedia.org/wiki/Tim_Hortons

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