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The fishy death of Red Lobster

businessinsider.com

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Re: The fishy death of Red Lobster

#81

Post by devmor »

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…

For the same reason that large tech firms lay off thousands and shutter successful, or yet to be released projects.

Short term gains over a long, steady market is the current driving mentality of Western capital.

Re: The fishy death of Red Lobster

#82

Post by whycome »

zikduruqe wrote: post #52
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... )

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

This sounds like something out of Idiocracy

Re: The fishy death of Red Lobster

#83

Post by Whatarethese »

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.

Did this happen to Chipotle?

Re: The fishy death of Red Lobster

#84

Post by toast0 »

TheRealDunkirk wrote: post #73
toast0 wrote: post #66

Earlier quoted context omitted.

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.

Well, they have to make money somehow. You can't just buy a failing business, run it into the ground completely, and take the blame without being compensated.

If these businesses had a promising future, the owners would have been less interested in selling, someone interested in actually operating the business would have made an offer, or it could have been publicly traded.

Re: The fishy death of Red Lobster

#85

Post by phkahler »

>> 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

I wonder if the Golden Gate investors also own American Realty, or are good friends of theirs. Sure GG made their money, but owning the real estate seems like a second good investment so long as the chain doesn't go under and the lease terms are favorable.

Re: The fishy death of Red Lobster

#86

Post by lupusreal »

whycome wrote: post #82
zikduruqe wrote: post #52

Earlier quoted context omitted.

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

This sounds like something out of Idiocracy

It's a highly prophetic movie. (And my thinking so is probably another example of it!)

Re: The fishy death of Red Lobster

#87

Post by threemux »

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…

It's especially jarring to see a story like this with Red Lobster as its subject.

I'm curious if anyone who has a negative reaction to this article has actually been to a Red Lobster in the last 10 years. They serve poor quality food for similar prices as other sit-down restaurants. You're as likely to get poor service as you are anywhere else (maybe more so), but you'll still have to tip the same amount and spend the same amount of time there. There is no value proposition and certainly no cause for mourning or hagiographies.

Re: The fishy death of Red Lobster

#88

Post by rendang »

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?

Presumably because mom n pop businesses are not perfect optimizers and end up charging below the profit-maximizing price

Re: The fishy death of Red Lobster

#89

Post by pavovap »

tl;dr summary in 3 points: 1) Heavy debt from private equity deals and increased lease costs made Red Lobster financially vulnerable. 2) Customers drifted away to other dining options, and frequent leadership changes hindered a stable turnaround plan. 3) The Endless Shrimp promotion, while a poor decision, underscored the company's larger management issues.

Re: The fishy death of Red Lobster

#90

Post by stalfosknight »

whycome wrote: post #82
zikduruqe wrote: post #52

Earlier quoted context omitted.

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

This sounds like something out of Idiocracy

Every day it feels like we are getting closer and closer to making Idiocracy a reality.
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