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The fishy death of Red Lobster

businessinsider.com

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Re: The fishy death of Red Lobster

#31

Post by AdamN »

red_trumpet wrote: post #20
dmurray wrote: post #16

Earlier quoted context omitted.

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.

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.

Re: The fishy death of Red Lobster

#32

Post by Xcelerate »

coldtea wrote: post #27
rl3 wrote: post #22

Earlier quoted context omitted.

> Watching private equity take over and subsequently destroy businesses is so frustrating! I agree. I uh, hope they don't do the same thing to Olive Garden, or Applebee's. That would be tragic..

Ah, American classism, where crap like McDonalds is OK, but pissing on Olive Garden and Applebees is a signal for "I'm not working class, I have taste". Perhaps because the latter are associated with aspirational working class, which is to be mocked. The upper middle class and higher going to coffee shops and restaurants targeting them and dialing the pretentiousness and crap fusion food and such to 11 is OK though,…

> Perhaps because the latter are associated with aspirational working class, which is to be mocked.

No, what’s being mocked is the quality of the food. The “aspirational working class” in Europe has much better food options for even better prices—has nothing to do with classism and everything to do with the development of an American culture that ruined food in this country.

My grandparents grew up in rural Appalachia and what they prepared themselves and ate back then was much tastier and fresher than Olive Garden.

Re: The fishy death of Red Lobster

#33

Post by swampthinker »

red_trumpet wrote: post #20
dmurray wrote: post #16

Earlier quoted context omitted.

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.

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.

Re: The fishy death of Red Lobster

#34

Post by Broken_Hippo »

coldtea wrote: post #29
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…

> Shrimp - the cockroaches of the ocean Ah, culinary wisdom based on internet memes and bro quotes: the cockroach of the mind! > ate a few and back at the hotel you know what happened :) Reverted to the fast-food baseline?

Sorry, but no. I've thought that shrimp and lobsters were simply ocean bugs since I was a child in the 80s. It isn't quite accurate in science terms, but still holds out as a thing in my brain. Even if I happen to eat them (Not disgusting, not delicious either)

I'll also mention that folks allergic to shellfish also have to be careful with crickets and other land insects. They have their similarities.

Re: The fishy death of Red Lobster

#35

Post by rl3 »

coldtea wrote: post #27
rl3 wrote: post #22

Earlier quoted context omitted.

> Watching private equity take over and subsequently destroy businesses is so frustrating! I agree. I uh, hope they don't do the same thing to Olive Garden, or Applebee's. That would be tragic..

Ah, American classism, where crap like McDonalds is OK, but pissing on Olive Garden and Applebees is a signal for "I'm not working class, I have taste". Perhaps because the latter are associated with aspirational working class, which is to be mocked. The upper middle class and higher going to coffee shops and restaurants targeting them and dialing the pretentiousness and crap fusion food and such to 11 is OK though,…

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.

Re: The fishy death of Red Lobster

#36

Post by nickpp »

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

I used to feel the same, but eventually I came to understand that they have a tremendously important role in the business ecosystem.

Like sharks in the sea or wolves in the wilderness, they identify and remove sick and ailing businesses. Additionally they offer a convenient exit to tired owners and investors, thus incentivizing further business creation. Finally, they identify and exploit regulation-created monopolies, enabling the government to re-allow competition through deregulation - something more and more important in today's populist and regulation-happy climate.

Re: The fishy death of Red Lobster

#37

Post by getwiththeprog »

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?

Yep.

Re: The fishy death of Red Lobster

#38

Post by somenameforme »

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…

IMO the fundamental issue is that the goal of private equity isn't to save the company, but to make as much money as quickly as possible off of it. The article hits on the exact pattern. Equity strips down a business, does whatever they can to juke the numbers with no concern for sustainability. As soon as they can make the numbers look appealing [enough], they sell it to the next sucker, and that person is left holding the bag, while the PE gets out with a tidy profit. From the article:

---

After the real estate move, Golden Gate sold 25% of the company in 2016 to Thai Union, a Thailand seafood company, for $575 million and unloaded the rest of the company to an investor group called the Seafood Alliance, of which Thai Union was a part, in 2020. Golden Gate likely came out ahead, but the same can't be said for Thai Union, which also controls the Chicken of the Sea brand. It is now looking to get out of its stake in Red Lobster...

---

The bigger question to me is why there are so many entities interested in buying up businesses from private equity, when this exact pattern has been repeated about a million times. I suppose in this game nobody ever thinks they're the sucker. After all if you can casually toss around billions of dollars, you must clearly have had plenty of financial success at some point, and it most certainly was due exclusively to your exceptional financial genius.

It reminds one of NFTs in a way. Spending hundreds of thousands of dollars on a poorly drawn picture of a cartoon ape is either moronic or brilliant dependent exclusively on whether you're the one left holding the cartoon.

Re: The fishy death of Red Lobster

#39

Post by pif »

globular-toast wrote: post #21
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

I wouldn't expect anything to change now. This is essentially what we're all doing to Earth: wringing it dry because we know we'll be dead before the oil runs out. People stopped dreaming of something better a long time ago.

We didn't stop dreaming: it's just that we have not yet found non-polluting oil!

Re: The fishy death of Red Lobster

#40

Post by happytiger »

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 willing to endorse the current approach as anything but exploitation with extra steps.
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