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The fishy death of Red Lobster

businessinsider.com

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Re: The fishy death of Red Lobster

#441

Post by kalleboo »

jjice wrote: post #414
maxsilver wrote: post #411

Earlier quoted context omitted.

> Then something happened around 2017 and their coffee became awful (it was never incredible, but it got much worse) Tim Hortons got acquired by Burger King (Restaurant Brands International / QSR) in December 2014, and the quality started to decline over the next year or two

Ah I didn't even consider the time correlation there. Makes sense. I guess I shouldn't be surprised that the same company that operates Burger King (and their god awful Seattle's Best coffee) would also decrease the quality of another food business.

I thought Seattle's Best Coffee was Starbucks, but apparently since 2022 it's Nestlé, gross

Re: The fishy death of Red Lobster

#442

Post by s1artibartfast »

habitue wrote: post #430

I think the author has a hard time trying to put a "why should we care?" spin on this at the end: Middle class families need a nice night out, and red lobster is the best way to do that! Totally agree that this is vicious jackal like behavior by the PE funds. But as others have said, this is the lifecycle of a dying company. If red lobster's share prices were high because they were extremely profitable and everyone l…

I wish authors like this would explore the alternative they want.

Do they want Red Lobster to be socialized and run by the government for the public good? Should it be deemed a historic or essential business, with laws to ensure it lasts until the end of time? Do they really think owners shouldn't be able to sell companies they own, or "bust them out" (aka, simply selling off assets for profit).

Re: The fishy death of Red Lobster

#443

Post by [deleted] »

habitue wrote: post #430

I think the author has a hard time trying to put a "why should we care?" spin on this at the end: Middle class families need a nice night out, and red lobster is the best way to do that! Totally agree that this is vicious jackal like behavior by the PE funds. But as others have said, this is the lifecycle of a dying company. If red lobster's share prices were high because they were extremely profitable and everyone l…

[deleted]

Re: The fishy death of Red Lobster

#444

Post by kalleboo »

habitue wrote: post #430

I think the author has a hard time trying to put a "why should we care?" spin on this at the end: Middle class families need a nice night out, and red lobster is the best way to do that! Totally agree that this is vicious jackal like behavior by the PE funds. But as others have said, this is the lifecycle of a dying company. If red lobster's share prices were high because they were extremely profitable and everyone l…

B is not true. It's more profitable to extract lots of value in the short term and kill the company and then move on to the next victim, continually showing great profit spikes and cashing out yourself, than to slowly extract value over the years.

The system is full of perverse incentives.

Re: The fishy death of Red Lobster

#445

Post by s1artibartfast »

lesuorac wrote: post #432
habitue wrote: post #430

I think the author has a hard time trying to put a "why should we care?" spin on this at the end: Middle class families need a nice night out, and red lobster is the best way to do that! Totally agree that this is vicious jackal like behavior by the PE funds. But as others have said, this is the lifecycle of a dying company. If red lobster's share prices were high because they were extremely profitable and everyone l…

You have a wonky definition of a dieing company. If a company makes $X in reveune and has $X - Y (Y The price of RL share prices is pretty irrelevant to whether PE can kill it or not. Honestly the higher the price the better it is. If you can spend $100M to buy a company and gut it for $300M that sounds a lot more attractive then buying 100 $1M companies to gut for $3M a peice.

The company wasn't dying, but it was undervalued on the market. It also sounds like the component parts of the company were more valuable separate than together.

>Honestly the higher the price the better it is.

IF you have to buy at $300M, and can only sell for $100, then higher prices are not better.

Re: The fishy death of Red Lobster

#446

Post by s1artibartfast »

fasteo wrote: post #405
johngladtj wrote: post #398

I'm continually amazed by how much outrage normal and perfectly reasonable business strategies generate in the general public. None of this is unusual or in any way wrong. Red lobster (and olive garden) were mismanaged, and the investment funds were right about that. Their attempts at salvaging the situation were perfectly reasonable, even if they were ultimately unsuccessful. You're welcome to be outraged, but that…

Have you actually read the article ? It tells a different story: They wanted Darden to liquidate all of Olive Garden's real-estate holdings and declare a one-off dividend that would net investors a billion dollars, while literally yanking the floor out from beneath Olive Garden, converting it from owner to tenant, subject to rent-shocks and other nasty surprises. They wanted to asset-strip the company, in other words…

I think that is the point. That is considered mismanagement. If I'm using a gold as the foundation of a hotdog stand, someone will come along and say that the gold is mismanaged, and worth more as jewelry.

They would be right!

Re: The fishy death of Red Lobster

#447

Post by n8henrie »

jfengel wrote: post #434
moralestapia wrote: post #408

Earlier quoted context omitted.

I had a really bad dining experience the one single time I went to Red Lobster; happened at the same place probably (Toronto, the one in Bay Street?) hence why I want to share. I came in to the restaurant and there was no one at the front desk, but the place seemed to be operating normally so I just went on to seat at the nearest table I found. Waiters just started ignoring me; at some point I realized this was on pu…

Just to explain a bit of restaurant procedure: It sounds like you seated yourself at a section that wasn't open. "Sections" are often not obvious to customer, but they're really important to the wait staff. You don't grab tables outside your section; it can be seen as attempting to grab more tips. (A Red Lobster probably has tip pooling, but still, working outside your section is a no-no.) Eventually they got somebod…

Been a while, but I served tables at RL for 4 years (in 2 different locations). Did not do tip sharing. However, we had designated sections and were prohibited from running more than 3 tables at a time; easily could be that the servers could have gotten in trouble for taking this extra table.

Re: The fishy death of Red Lobster

#448

Post by s1artibartfast »

matthewdgreen wrote: post #422
johngladtj wrote: post #398

I'm continually amazed by how much outrage normal and perfectly reasonable business strategies generate in the general public. None of this is unusual or in any way wrong. Red lobster (and olive garden) were mismanaged, and the investment funds were right about that. Their attempts at salvaging the situation were perfectly reasonable, even if they were ultimately unsuccessful. You're welcome to be outraged, but that…

The article tells a fairly clear story of business consolidation and monopoly. The chains had buying power, so suppliers consolidated and removed that power. Then the suppliers became so strong (with the help of PE) that they bought and looted the remaining value from the chain. Ultimately the loser at the end of this story will be the consumer, who has no market power, and any new small restaurants that develop to r…

I dont think it is as one dimensional as that. You are also watching the breakup of a vertically integrated megacorp that owned many restaurants, and underlying real-estate.

Re: The fishy death of Red Lobster

#449

Post by snakeyjake »

PE is currently in the process of destroying my employer, a nearly 100-year-old engineering firm. Two PE firms teamed up to do some kind of financial voodoo debt transfer reverse mortgage buyout takeover and are slowing inserting their claws inch-by-inch into the management structure of the company.

We've been profitable every single quarter of every single year for almost a century. We're a money-printing machine that nobody has heard of unless you build nuclear reactors and satellites and need something only we make.

But we are not profitable enough. We are relatively vertically integrated in our niche field and are very, very, slightly less profitable than our competimates, within 1% of places like Northorp and Boeing (uhh.. when they, you know, make money) who outsource practically everything.

So fat needs to be trimmed to get that 1%.

I am moving on, going 1099 as a consultant, after 17 years at the same desk in the same office in the same building, as is practically everyone else and we're spending precisely 0% of our remaining time passing on our institutional knowledge.

Re: The fishy death of Red Lobster

#450

Post by schmidtleonard »

Log_out_ wrote: post #433
habitue wrote: post #431

Earlier quoted context omitted.

Couple points: Strong companies usually aren't killed in this way. They are making everyone money and their share price is too high to allow activists to get a controlling interest. "Regulations are lobbied to the ground" is not what is described in the article. The regulation was to conserve fish, and it was so onerous to comply with that only large companies could do it efficiently. Assuming this description is acc…

There should be a law that allows companies to self split once they become monopolies. As in a person can collect evidence of a monopolie and then can walk out of the busters office with the standalone part of the company thats the monopoly as a compamy of its own. Make those that conspire and lobby for the r monopolies those who would profit the most on busting.

I like the fundamental idea, but I don't like that structure. My own proposal would be progressive corporate taxation that gets increasingly punitive at extreme scale, intentionally pushing companies to split. We could set the "heel" of the curve higher than existing companies and inflate our way into it to give them plenty of time to prepare. We would need limitations on ownership to prevent "notionally separate but actually owned by the same people" cheating, but that's doable.

It will never happen, of course. The purpose of capitalism is not to serve customers by fostering competition, the purpose of capitalism is to give rich people an excuse to pay themselves for being rich. To establish, reinforce, and perpetuate a class hierarchy where the people on the bottom must constantly pay to exist while the people on top get paid to exist through their stocks, bonds, and real estate holdings. From this cynical perspective monopolies are a feature, not a bug. But if they were a bug, progressive taxation is how you would fix it.

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