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The fishy death of Red Lobster

businessinsider.com

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Re: The fishy death of Red Lobster

#91

Post by [deleted] »

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…

[deleted]

Re: The fishy death of Red Lobster

#92

Post by nekoashide »

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…

You see the same with Dentist, the cost to start a practice after paying for college? Or get a job at a big PE owned Dentist Office and work for commission.

Re: The fishy death of Red Lobster

#93

Post by bluGill »

organsnyder wrote: post #58
swampthinker wrote: post #33

Earlier quoted context omitted.

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.

That depends - how long will the location be a great location for that business? You really need an good accountant and a reliable psychic to figure this out, an accountant can figure out how tax code, laws, and other details apply - while the psychic can tell you how the tax code, fads, and your life will change in the future. (I don't believe a reliable psychic exists - but you still need one to figure out the correct answer)

If you will be there for decades it is worth owning. The land can be paid off and still working for you. Likewise the building is depreciated and paid for (check with an accountant!), but you are still there using it - you still need to remodel and maintain it though. You pay more upfront, but long term it is a better investment.

However many businesses are fad - they do well for a few years and then people move on to the next fad and you should close up. If you only need the real estate for a couple years you should rent/lease: you won't see a payoff from the upfront costs, and you are stuck with the real estate while trying to sell it.

Re: The fishy death of Red Lobster

#95

Post by floren »

mindracer wrote: post #26
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... )

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

Here in the Bay Area I've been quoted $800 to clean a dog's teeth.

Re: The fishy death of Red Lobster

#96

Post by [deleted] »

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.

[deleted]

Re: The fishy death of Red Lobster

#97

Post by bombcar »

triceratops wrote: post #51
swampthinker wrote: post #33

Earlier quoted context omitted.

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.

Part of this is because of how McDonald's handles franchise agreements (for various reasons).

Re: The fishy death of Red Lobster

#98

Post by bluGill »

gosub100 wrote: post #68
coldtea wrote: post #47

Earlier quoted context omitted.

> 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.

There are chain restaurants that serve high quality food. They cost a lot to eat at though, and so rarely have more than one location in a large city.

Re: The fishy death of Red Lobster

#99

Post by ElevenLathe »

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.

This will work until a PE firm buys you out.

Re: The fishy death of Red Lobster

#100

Post by mandevil »

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…

Sister-in-law is a vet tech at a place that sold out to PE a few years ago. Wife is a pharmacist who worked at a small chain of pharmacies and had it taken over by one of the national ones. Both industries are seeing massive consolidation.

A couple of things that they observed between them: A) a lot less interest among newly graduated pharmacists and vets for going into business themselves- they are deeply in debt from school, taking out business loans to start up a new business on top of those loans is a real threat to their financial stability B) they want to do vet/pharmacy things with a reasonable work/life balance, not running a business things with an insane work/life balance while carrying that huge risk C) (unique to vet) people want the convenience of big, one stop shops that can offer complimentary goods like grooming, boarding, surgeries, and their medications all in one place, which requires large capital investments- the vet firm my s-i-l works for just got a nice brand new facility with brand new fancy equipment and surgery centers etc. D) (unique to pharmacy) Pharmacy Benefit Managers are destroying the reimbursement rates of small pharmacies, if you aren't a national chain you don't have the scale to effectively negotiate with the three PBM's that control 80% of the drug insurance business, and they are getting gutted by those PBM's, forcing pharmacy consolidation (one of those three PBM's is actually one of those national drug stores, CVS Caremark- thank the George W Bush administration for that bit of anti-competitive nonsense).

I'm not as sure about vet as I am about pharmacy, but at least in pharmacy it is not generally any harder because of regulations or anything like that, to start up than it was decades ago. My wife also points out that because we have more drugs than before, with more varied storage requirements, and they are more expensive than before, inventory costs a lot more than it did decades ago. So these newly graduated Pharm.D's with their 200k in debt would need to get even larger loans to start up a new business, and they get reimbursed less for it thanks to PBMs, making it hard for the indy pharmacies to stay in business whether they are new or old alike.

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