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The fishy death of Red Lobster

businessinsider.com

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Re: The fishy death of Red Lobster

#61

Post by jethro_tell »

TheMagicHorsey wrote: post #53
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... )

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 differ…

Part of what's happening here is a combo of making a small business being expensive and a good chunk of the population living hand to mouth.

The people with the cash to start the business and get the space and equipment just sold to PE and you have people that were employees and a much smaller number of these people are going to be able to just quit and fire up a business.

Re: The fishy death of Red Lobster

#62

Post by gosub100 »

gadders wrote: post #10

I need to resurrect my idea of a list of companies (especially ones that manufacture goods) that are owned by Private Equity so people can avoid them. In most cases, the brand name stays the same but the quality falls off a cliff.

I would like this service but for vet clinics, apartment rental forms, and dentists.

Re: The fishy death of Red Lobster

#63

Post by gosub100 »

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?

"look what they (sellers) made them (PE) do!"

Re: The fishy death of Red Lobster

#64

Post by bsder »

TheMagicHorsey wrote: post #53
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... )

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 differ…

> 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?

Finance.

Throwing in with the PE firm means you don't have to negotiate real estate leases, don't have to think about POS systems, and don't have to worry about collections.

So, the vet probably gets paid the same and spends a lot more time on being a vet. On the other hand, the consumers spend a LOT more once the PE firm has a monopoly position and switches to gouging them.

Re: The fishy death of Red Lobster

#65

Post by verteu »

TheMagicHorsey wrote: post #57
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…

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?

It's common for PE to buy many "mom n pop" practices with the goal of reducing competition (eg https://kgnu.org/investigation-finds-that-private-equity-was... )

Reducing the friction of starting new business is good. But I don't think it's sufficient to protect consumers. (If it was sufficient, we wouldn't need antitrust law at all, right?) For example, the rolled-up firms might have economies of scale that allow it to undercut new competitors.

Re: The fishy death of Red Lobster

#66

Post by toast0 »

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

Private Equity is a scapegoat business. Like Ticketmaster.

If you have a company that's been slowly failing for a while, PE is here to help you out.

They will pay you money today and take over the company and in 3-5 years it will go out of business in a convincing way. And PE will take the heat.

Re: The fishy death of Red Lobster

#67

Post by maerF0x0 »

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…

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 maxima of invest for next few quarters. The obvious tradeoff being the risks/ability to predict the future.

Re: The fishy death of Red Lobster

#68

Post by gosub100 »

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…

Don't conflate class with quality. Chain restaurants serve mass-produced, low quality fare. They have to.

Re: The fishy death of Red Lobster

#69

Post by edgyquant »

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…

What world do you live in where Olive Garden is attacked for its food quality more than McDonalds

Re: The fishy death of Red Lobster

#70

Post by nicolas_t »

gadders wrote: post #10

I need to resurrect my idea of a list of companies (especially ones that manufacture goods) that are owned by Private Equity so people can avoid them. In most cases, the brand name stays the same but the quality falls off a cliff.

I had the dubious luck to work for a company that got acquired by private equity. The company was resold for double the price it was valued when the private equity injected capital after 3 years. But during those 3 years, they lowered the quality, increased the quantity of product sold and now, no customers are excited by their product anymore.
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