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The fishy death of Red Lobster

businessinsider.com

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Re: The fishy death of Red Lobster

#51

Post by triceratops »

swampthinker wrote: post #33
red_trumpet wrote: post #20

Earlier quoted context omitted.

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.

McDonald's, possibly the most successful chain of them all, doesn't seem to think owning real estate is a distraction.

Re: The fishy death of Red Lobster

#52

Post by zikduruqe »

rwmj wrote: post #17
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

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

Re: The fishy death of Red Lobster

#53

Post by TheMagicHorsey »

rwmj wrote: post #17
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

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... )

If the PE firm is charging more than a vet operating alone would, then why wouldn't a vet operating alone just undercut the PE firm's veterinary practice?

There must be some barrier to entry in the market that prevents that, and that's what I would target. Because the PE firm isn't the root cause. After all, if you can't just enter a market and charge whatever you want as a standalone vet, what makes a PE firm different?

Re: The fishy death of Red Lobster

#54

Post by owlninja »

rwmj wrote: post #17
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

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... )

I just saw a blurb about something similar in the US! Mars (the candy company) is 'the largest owner of stand-alone veterinary clinics in the United States.' Also: 'JAB Holding Company, the owner of National Veterinary Associates’ 1,000-plus hospitals (not to mention Panera and Espresso House), also holds multiple pet-insurance lines in its portfolio.'

https://www.theatlantic.com/ideas/archive/2024/04/vet-privat...

Re: The fishy death of Red Lobster

#55

Post by bena »

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…

That's the trick though, they don't own it. They often take a company private and make the company "own itself". Then make it take out exorbitant loans to pay them their consultation fees. Then they fuck around as consulting management as the company struggles to meet even the interest payments on the massive loan taken out in its name.

All reward, no risk.

Re: The fishy death of Red Lobster

#56

Post by sib »

madaxe_again wrote: post #48
mindracer wrote: post #26

Earlier quoted context omitted.

A few years ago my cat needed his teeth cleaned my local vet charged me £125. The same vet, now owned by CVS, is now going to charge £250

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?

Re: The fishy death of Red Lobster

#57

Post by TheMagicHorsey »

dmurray wrote: post #16
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

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…

I never understood how PE firms get blamed for rising costs in doctor's offices and vets. If a PE firm can just unilaterally raise prices, then why didn't he mom n pop practices do the same? Where is the competition? Why is there a barrier to entry that prevents some new young doctor or vet from coming in and undercutting the PE business?

Re: The fishy death of Red Lobster

#58

Post by organsnyder »

swampthinker wrote: post #33
red_trumpet wrote: post #20

Earlier quoted context omitted.

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.

How is owning real estate a distraction for a restaurant chain? Presumably their new landlords aren't going to maintain kitchen equipment and other infrastructure that makes up a lot of the maintenance burden. If it's really such a distraction, outsource it—but don't sell the real estate.

Re: The fishy death of Red Lobster

#59

Post by organsnyder »

coldtea wrote: post #46
Xcelerate wrote: post #32

Earlier quoted context omitted.

> 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 Appalachi…

> No, what’s being mocked is the quality of the food If that was the case the "quality of the food" would be mocked elsewhere, in tons of brands with crap quality. But those seem to be particular targets in the way that say McDonalds and other fast food or higher tier but still crappy brands are not. Besides, most references/parodies I've seen (like online, on SNL, movies, and so on) always seem to mock the working c…

Olive Garden is hardly cheap. Eating there costs my family just as much as many local restaurants that have better food. It's not a class thing as much as a culture thing.

Re: The fishy death of Red Lobster

#60

Post by organsnyder »

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…

It seems like they keep getting "exposed", yet nothing changes.
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