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The fishy death of Red Lobster

businessinsider.com

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Re: The fishy death of Red Lobster

#151

Post by munificent »

I look at private equity as sort of like a bacterial infection. The infection may be the thing that kills its host by sucking of all of its energy, but the reason the host was infected in the first place was because of some other problem that led to a weakened immune system.

Private equity firms prey on companies that are already struggling. Yes, they take a struggling company and hasten its demise. But healthy companies don't end up getting bought by private equity in the first place.

In this case, I think dining culture has just changed in a way that's incompatible with Red Lobster's brand. It used to be considered higher-class fare, but drifted down market like almost every large restaurant chain does (see also: Friday's, Applebee's, etc.). For a while, it survived on the unusual combination of being a nice-seeming sit-down seafood restaurant, but not actually that expensive or close to the sea.

But, of course, the way they were able to do that was by cutting every possible corner (for example, calling langostino "lobster"). Diners today care more about their health and where their food is coming from. The post-WWII culture of "we can trust big companies because they're successful business" has been replaced by "we can't trust big companies because they must have grown by doing shady shit".

Frankly, a cheap restaurant in the midwest that lets you eat unlimited lobster no longer seems a delightful treat and a hell of a lot more like a suspicious food poisoning trap.

Re: The fishy death of Red Lobster

#152

Post by javagram »

tonymet wrote: post #143
duped wrote: post #130

Earlier quoted context omitted.

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

Chick fil A is privately held and their franchise operator model doesn’t require a large infusion of cash from the franchisee. Only 10k cash, so it’s more like a manager job with profit sharing and I don’t see how it could be a MLM.

Re: The fishy death of Red Lobster

#153

Post by OkayPhysicist »

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…

In-n-Out is cheaper than McDonald's. A preference for McDonald's isn't a class issue, it's a taste issue.

The popular disdain for family dining comes from people who don't want to sacrifice food quality for table service. Olive Garden isn't competing against fine dining, it's competing against fast casual restaurants. And that's far less of a class divide than a generational divide: restaurant dining as widely available phenomenon is a relatively new concept, with it being a relatively rare luxury for the Greatest Generation. This put a level of perceived prestige on being served, which the family dining restaurants managed to reduce the cost of substantially the latter half of the century.

With ubiquity, though, the novelty wore off. Young people who grew up regularly eating restaurant fare aren't particularly impressed by table service, and thus for a given price point, on average, Millenials and younger tend to choose a fast-casual restaurant with better food quality over a family dining establishment that has to cut into their food quality to pay for table service.

What you're perceiving as a class divide is a urban/rural divide, where trends of all sorts (including this one) lag a decade or two behind in rural areas relative to urban ones.

Re: The fishy death of Red Lobster

#154

Post by madaxe_again »

sib wrote: post #56
madaxe_again wrote: post #48

Earlier quoted context omitted.

That was €10 here in Portugal.

How long does the process take? What is the overhead (space / equipment / other costs)? And therefore, how much is the provider earning per hour?

About 20 minutes, some disposable gloves, a disposable toothbrush head impregnated with toothpaste. So about €25 an hour. Commercial rents for small spaces are dirt cheap here - probably about €600/mo. That’s probably the driving factor in the U.K. - commercial property is eyewateringly expensive.

Re: The fishy death of Red Lobster

#155

Post by khill »

maerF0x0 wrote: post #67
ars wrote: post #4

Earlier quoted context omitted.

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…

It's rooted in societal culture and what people incentivize (ie assign the highest multiple to). Until Americans take on a mindset of longterm/family (as I've seen many Chinese families express), they'll be doomed to make short term decisions. Right now very few Americans are able to accept an optimization that looks like "I invest today, and my grandkids will get the returns". So America is stuck in that local maxim…

At some point in my lifetime, the mindset switched from "I'm investing because I want to see long-term, steady growth and get regular dividends" to "I want to make as much money as possible as quickly as possible and damn the consequences to others".

The short-sightedness and greed is destroying so much.

Re: The fishy death of Red Lobster

#156

Post by whartung »

zikduruqe wrote: post #52
rwmj wrote: post #17

Earlier quoted context omitted.

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... )

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

Out here, they’re all being bought up by VCA.

My vet is absolutely considering selling his practice. We (selfishly, not seriously) suggested selling his practice and then opening a new one closer to where we live. (We moved out of the area several years ago, but continue to drag the cats in to see him.)

We said it in gest but he said he was already giving it serious consideration. When he bought his practice from the previous vet, the original owner did exactly that —- opening a new practice elsewhere.

Re: The fishy death of Red Lobster

#157

Post by DiggyJohnson »

TheGlav wrote: post #121
phkahler wrote: post #85

>> 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 I wonder if the Golden Gate investors also own American Realty, or are good friends of theirs. Sure GG made their money, but owning the real estate seems like a second good investment so long as the chain doesn't go under and the lease te…

What a short sighted, money grubbing decision by people that didn't actually care about the wellbeing of the company. Keeping the land the restaurants are on means higher margins of profit long term and the ability to weather problems. Selling it off and then leasing it back does...exactly what happened here.

You're responding as if the person you're replying to wasn't asking a question, but stating a fact. Do you know about the details or even a general outline of the considerations that went into this decision?

Re: The fishy death of Red Lobster

#158

Post by asdfman123 »

bachmeier wrote: post #127

To me this is not even slightly surprising. Red Lobster used to be at the top of our list of restaurants. Then in recent years the quality of both the food and service deteriorated. One visit the food was so bad I couldn't even eat it. That was compounded by not having a server to talk to. Took our order and never returned - even had someone else bring out the order. The thing about a restaurant is that you'll always…

Increasingly I think the financialization of everything makes us less capable of understanding the world.

"Red Lobster failed because of X corporate restructuring," "Red Lobster succeeded due to Y ad campaign." People go to restaurants for reasons completely unrelated to things like that. Those things are important, but just constitute the small slice of reality that can easily be measured.

I saw a Twitter thread arguing how the video game Stardew Valley succeeded due to the way it was marketed. Marketing is important, but maybe the game succeeded because it was cute and had a soul and is fun to play. You can't measure that.

Re: The fishy death of Red Lobster

#159

Post by asdfman123 »

andrewla wrote: post #103

These private equity deals are the convergence of a couple of phenomena. The most obvious is low interest rates, which is fortunately dying off. The ability to borrow lots of money is something that smaller, well-run companies, are reluctant to do. Why bring in a bunch of cash to expand and take on debt when you are operating at a reasonable profit? The secondary is the undervaluing of customer goodwill -- what PE fi…

Private equity takeovers are often just scams to convert customer trust to short-term profits, but labeled as growth.

You can get away with cutting quality for a little while, but eventually customers are going to lose trust and you're not going to get it back.

Re: The fishy death of Red Lobster

#160

Post by tonymet »

01100011 wrote: post #135
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…

i hear that. but how about the actual economics of the businesses. e.g. return on capital .

Obviously a handfull of stocks have spiked with speculation. but every town has hundreds to thousands of restaurants. And regions have dozens of growth chains all receiving investment.

I get why mom & pop's invest, even if it's high risk low reward. But everything in the middle that takes on millions in capital makes no sense

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