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The fishy death of Red Lobster

businessinsider.com

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Re: The fishy death of Red Lobster

#71

Post by technofiend »

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.

When I jokingly talk about MBA Disease being the same as Dutch Elm Disease, this is what I mean: parasitic behavior that kills the host.

On one side this is a study in destroying a chain restaurant, but what'll be taught in business school will be the other side: was this transaction profitable for one party and if so how do we repeat it? It won't be taught as a cautionary tale unless the hedge fund lost out.

Re: The fishy death of Red Lobster

#72

Post by toast0 »

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…

> There must be some barrier to entry in the market that prevents that, and that's what I would target.

Training to be a vet is a long process. The patients are nice (mostly), but don't communicate well, and some of the customers are terrible. In my area, there's a shortage of small animal vets because they can make a lot more money in the big city. There's an even worse shortage of large animal vets because the job is worse, and they can make a lot more money working with small animals in the big city. Our large animal vet won't do callouts for emergency/urgent services anymore unless you're on contract for annual checkups; routine visits are good for vet morale and help the budget.

Re: The fishy death of Red Lobster

#73

Post by TheRealDunkirk »

toast0 wrote: post #66
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.

That belies that fact that the play is usually to finance a bunch of debt to prop it up, pay themselves PHAT bonuses, and then let it burn to the ground. Honestly, it's gotten way past tiring that the government continues to let this same scenario play out over and over and over again.

Re: The fishy death of Red Lobster

#74

Post by bonestamp2 »

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?

Are they entirely to blame? No. Everyone who capitalizes on the deal shares some blame. The consumer and the economy do get hurt. Late stage capitalism is starting to destroy what was good about capitalism and we need regulations to keep things sane.

There is a finite amount of capital in the world (with a little more printed each year of course). But they're not printing 20% more every year, so companies can't keep expecting to grow by 20% every year forever. It's just not possible and once a company reaches certain thresholds, we need regulations that prevent them from destroying the good parts of capitalism for simply more money than they had last year.

Re: The fishy death of Red Lobster

#76

Post by delfinom »

toast0 wrote: post #66
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.

Eh, PE also takes over businesses where the owners just want to cash out. Plenty of businesses too small to IPO but plenty of revenue to sell to PE.

Re: The fishy death of Red Lobster

#77

Post by devmor »

verteu wrote: post #65
TheMagicHorsey wrote: post #57

Earlier quoted context omitted.

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…

They don't really prevent new competition, rather than target markets that specifically have a larger barrier to entry such that new competition is rare to form.

i.e. these vet clinics - a PE firm can buy up 40 disparate vet clinics in a large city then raise fees and cut staff. You may be lucky if a few new clinics appear over the next couple years once customers are fed up with the increased price and reduced quality.

It's still a win for the PE firm and a loss for most of the consumers.

Re: The fishy death of Red Lobster

#78

Post by abfan1127 »

maerF0x0 wrote: post #67
ars wrote: post #4

Earlier quoted context omitted.

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 maxim…

I want my investments to pay back over 30 years to me. I don't care about quarter to quarter returns. I don't need to invest for my grandkids for any of this.

Re: The fishy death of Red Lobster

#79

Post by jfengel »

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…

Making money off restaurants is incredibly hard. It's just a lousy business. Even well-run, well-liked, well-attended restaurants are often running on incredibly thin profit margins.

Which seems crazy, since the costs of inputs are so low at most restaurants. They pay workers embarrassingly little money, and the ingredients have massive externalities. (Those "endless shrimp" are possible because of literal slave labor and environmental destruction in southeast Asia.)

And yet restaurants bleed money. There are so many invisible costs -- replacing bent silverware, repairing the walk-in fridge, shady suppliers whose produce you have to toss, etc etc etc etc. It's just a crappy business.

A private equity firm may not know how to turn a profit. Or they could run it with a tiny profit that just isn't worth their time and effort, and it's easier to just shutter it. It's a much bigger hardship to the employees than it is to them -- even the potential gains are too small.

Re: The fishy death of Red Lobster

#80

Post by TheRealDunkirk »

Tiffany Cianci is at the dead center of a battle with private equity trying to monopolize young child development centers. Her horrific personal story will open your eyes as to just how depraved and soulless private equity can really be in their attempt to take over the world. (TL;DR: they literally forced her give a deposition while she was having a miscarriage.) The government should be writing laws to curtail these kinds of bloodsucking parasites.

https://www.tiktok.com/@tiffanycianci

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