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The fishy death of Red Lobster

businessinsider.com

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Re: The fishy death of Red Lobster

#461

Post by johngladtj »

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…

Yes, I did.

Sale-leasebacks are common and perfectly reasonable business strategies.

Generally speaking lease liabilities have a lower cost of capital than other types of debt, so making such a deal can help the company.

None of the decisions described in the post are either unusual or unreasonable from a management team trying to save a troubled company. They were just unsuccessful.

Re: The fishy death of Red Lobster

#462

Post by el_duderino_ »

moralestapia wrote: post #427
pfannkuchen wrote: post #424

Earlier quoted context omitted.

I think depending on staffing levels a restaurant at certain times does not have the capacity to handle all of its tables and so some are considered inactive. If you sit at a table that is not active it would be treated as equivalent to not sitting at a table at all. It seems like once the bouncer types got involved they thought the reason you were ignoring their system might be because you were crazy or high and the…

>they thought the reason you were ignoring their system might be because you were crazy or high and they might have to kick you out Yeah, that's exactly the kind of dining experience I want when I go out. /s

To be clear here, you were the one who broke the norms of the restaurant. If you had waited to be seated 99% chance of them treating you like you expect to be. As someone who worked in restaurants for years, you would not believe what front of house staff has to deal with from the general public. I find no fault with how they responded.

Re: The fishy death of Red Lobster

#463

Post by s1artibartfast »

thrance wrote: post #456
s1artibartfast wrote: post #438

Earlier quoted context omitted.

I'm absolutely okay with the market destroying companies. It's literally one of the points of having a market to begin with. That sometimes also includes profitable companies. I think the parent post is a fundamental misunderstanding of what markets are intended to do. If you want a static world that doesn't and can't change, then of course something like a command economy is preferable

I have no problem with unprofitable, severly mismanaged companies going out of business. I do have a problem when a company is liquidated to give an exit to shareholders when it is still profitable, as described in the article.

Honestly curious why? It seems a perfectly legitimate and even successful end to a company.

It seems to me that some people simply don't like change for sentimental reasons. There is no shortage of restaurants, and most frankly seem better.

Re: The fishy death of Red Lobster

#464

Post by thrance »

s1artibartfast wrote: post #463
thrance wrote: post #456

Earlier quoted context omitted.

I have no problem with unprofitable, severly mismanaged companies going out of business. I do have a problem when a company is liquidated to give an exit to shareholders when it is still profitable, as described in the article.

Honestly curious why? It seems a perfectly legitimate and even successful end to a company. It seems to me that some people simply don't like change for sentimental reasons. There is no shortage of restaurants, and most frankly seem better.

If a company provides some utility while still making a profit, wouldn't it be morally better to let it be?

Killing the company immediately hurts its employees, its customers and reduces the income available to the collectivity through taxation. It even also hurts its stakeholders in the long term, who could have earned a steady dividend for many years to come.

I don't care much about Red Lobster and other chain restaurants, as I'm not even american. I simply believe we should coerce markets into optimizing for utility instead of short-term profit, which is their natural behavior.

Re: The fishy death of Red Lobster

#465

Post by creer »

pfannkuchen wrote: post #424
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…

I think depending on staffing levels a restaurant at certain times does not have the capacity to handle all of its tables and so some are considered inactive. If you sit at a table that is not active it would be treated as equivalent to not sitting at a table at all. It seems like once the bouncer types got involved they thought the reason you were ignoring their system might be because you were crazy or high and the…

My thinking in these kinds of situations is "Seems like one more business that thinks they make too much money", with the obvious consequence of not coming back except under extreme duress (like, someone in the party really insists or they are the only place open.)

Is there no awareness in that industry - at any level - that some rules are an excellent way to lose business?

A local place has (well, had) an outstanding, unusual pizza. We were big fans and went often. Soon they started ignoring the ingredient ratio in their own recipe, then started ignoring the (paying) "extra X" options in the order. We started pointing out the problem, then pointing out the problem at the time of the order, then making sure the staff knew what it was we wanted when we ordered... then obviously gave up. Some places just aren't cut out for staying in business.

Re: The fishy death of Red Lobster

#466

Post by creer »

el_duderino_ wrote: post #462
moralestapia wrote: post #427

Earlier quoted context omitted.

>they thought the reason you were ignoring their system might be because you were crazy or high and they might have to kick you out Yeah, that's exactly the kind of dining experience I want when I go out. /s

To be clear here, you were the one who broke the norms of the restaurant. If you had waited to be seated 99% chance of them treating you like you expect to be. As someone who worked in restaurants for years, you would not believe what front of house staff has to deal with from the general public. I find no fault with how they responded.

The parent does mention there was nobody at the front to greet customers. Then nobody who considered fixing the situation.

Do you feel the problem (sorry, "norm") contributed to improve or lower the bottom line of that business? Do you feel this improved or hurt the likelyhood these customers will come back? Do you feel they were the only ones to have run into this problem?

Re: The fishy death of Red Lobster

#467

Post by s1artibartfast »

thrance wrote: post #464
s1artibartfast wrote: post #463

Earlier quoted context omitted.

Honestly curious why? It seems a perfectly legitimate and even successful end to a company. It seems to me that some people simply don't like change for sentimental reasons. There is no shortage of restaurants, and most frankly seem better.

If a company provides some utility while still making a profit, wouldn't it be morally better to let it be? Killing the company immediately hurts its employees, its customers and reduces the income available to the collectivity through taxation. It even also hurts its stakeholders in the long term, who could have earned a steady dividend for many years to come. I don't care much about Red Lobster and other chain rest…

When a company is liquidated, its value and assets go elsewhere and are put to more productive use. This value difference is how liquidation is profitable.

This means more taxes for the government. Owners get paid out when PE buys a company, usually with a premium so they are happy.

PE liquidation IS utility optimization. The only way it makes profit is if the money made is invested into something with higher returns than the company had.

Killing a company is bad for employees that have to find new jobs, but permanent jobs are extremely toxic economically. If we avoided corporate churn for the sake of employee transitions, we would all be wearing textiles woven by luddites, and riding around in horse carts.

Re: The fishy death of Red Lobster

#468

Post by novariation »

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…

It's funny because I just got out of a professional training session where the instructor told us sale-leaseback agreements are a common business practice and helped a few companies he worked for secure long term growth.

Let's use a metaphor HN might understand: sale-leasebacks are a bit like migrating to the public cloud from an on-prem setting, and in some cases the government pays you for migrating to the cloud. It helps you balance capital expenditure among other things.

Re: The fishy death of Red Lobster

#469

Post by fasteo »

johngladtj wrote: post #461
fasteo wrote: post #405

Earlier quoted context omitted.

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…

Yes, I did. Sale-leasebacks are common and perfectly reasonable business strategies. Generally speaking lease liabilities have a lower cost of capital than other types of debt, so making such a deal can help the company. None of the decisions described in the post are either unusual or unreasonable from a management team trying to save a troubled company. They were just unsuccessful.

>>> from a management team trying to save a troubled company. They were just unsuccessful.

My take is that they were not there to save the company, but to extract all its assets and let it go.

Re: The fishy death of Red Lobster

#470

Post by johngladtj »

fasteo wrote: post #469
johngladtj wrote: post #461

Earlier quoted context omitted.

Yes, I did. Sale-leasebacks are common and perfectly reasonable business strategies. Generally speaking lease liabilities have a lower cost of capital than other types of debt, so making such a deal can help the company. None of the decisions described in the post are either unusual or unreasonable from a management team trying to save a troubled company. They were just unsuccessful.

>>> from a management team trying to save a troubled company. They were just unsuccessful. My take is that they were not there to save the company, but to extract all its assets and let it go.

Sometimes that's the best option.
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