[HN Gopher] The fishy death of Red Lobster
___________________________________________________________________
The fishy death of Red Lobster
Author : qsi
Score : 103 points
Date : 2024-05-02 05:38 UTC (17 hours ago)
(HTM) web link (www.businessinsider.com)
(TXT) w3m dump (www.businessinsider.com)
| loutre wrote:
| 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
| readthenotes1 wrote:
| Similar story with Sears. Bought by a real estate investor who
| didn't care about running the stores that much...
| gadders wrote:
| Wait until you hear about Thames Water and Maquarrie in the
| UK.
|
| https://www.theguardian.com/business/2023/jul/10/as-
| thames-w...
| ars wrote:
| 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
| these steps that are "obviously" bad?
| gadders wrote:
| Not certain, but I would guess it is to do with investment
| horizons and getting a 10x return on the money they put in to
| return to their fund, rather than 1x revenue per year.
| 48864w6ui wrote:
| If they can make even more money on a different viable
| business by vampiring out this one, the NPV calculation
| says...
|
| (What %age of eastern european enterprises got long term
| investment in the 1990s?)
| plussed_reader wrote:
| Once you realize the destruction of the sunk cost fallacy
| it's easy to detach from things that would harm you long
| term.
| DopplerSmell wrote:
| When you value a business, part of it is brand and people's
| habits. The new owners are betting that they can trade in
| that value for cash, by selling a crap lesser product under
| the old name, and that this will return faster than a
| sustainable business.
|
| It's not obviously bad from a finance point, it's just
| significantly shorter term thinking than the original owner.
| somenameforme wrote:
| IMO the fundamental issue is that the goal of private equity
| isn't to save the company, but to make as much money as
| quickly as possible off of it. The article hits on the exact
| pattern. Equity strips down a business, does whatever they
| can to juke the numbers with no concern for sustainability.
| As soon as they can make the numbers look appealing [enough],
| they sell it to the next sucker, and that person is left
| holding the bag, while the PE gets out with a tidy profit.
| From the article:
|
| ---
|
| After the real estate move, Golden Gate sold 25% of the
| company in 2016 to Thai Union, a Thailand seafood company,
| for $575 million and unloaded the rest of the company to an
| investor group called the Seafood Alliance, of which Thai
| Union was a part, in 2020. Golden Gate likely came out ahead,
| but the same can't be said for Thai Union, which also
| controls the Chicken of the Sea brand. It is now looking to
| get out of its stake in Red Lobster...
|
| ---
|
| The bigger question to me is why there are so many entities
| interested in buying up businesses from private equity, when
| this exact pattern has been repeated about a million times. I
| suppose in this game nobody ever thinks they're the sucker.
| After all if you can casually toss around billions of
| dollars, you must clearly have had plenty of financial
| success at some point, and it most certainly was due
| exclusively to your exceptional financial genius.
|
| It reminds one of NFTs in a way. Spending hundreds of
| thousands of dollars on a poorly drawn picture of a cartoon
| ape is either moronic or brilliant dependent exclusively on
| whether you're the one left holding the cartoon.
| bena wrote:
| 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.
| maerF0x0 wrote:
| 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.
| abfan1127 wrote:
| 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.
| singleshot_ wrote:
| It's very interesting that you seem to be making a
| dichotomy between Chinese and American people instead of
| one between rich and poor mindsets.
| maerF0x0 wrote:
| As I understand the gross summarization of Chinese
| culture is that they're extremely family oriented.
| Anecdotally I've heard of grandmas acting like their
| homeless to earn a little money to give to a grandson
| which drives a Ferrari. They do it because they love and
| maximize for the next generation.
| rchaud wrote:
| Plenty of money is being made by taking the short term
| route. Execs move factories to China and Mexico and
| they'll get a fat bonus while the workers will see their
| communities go into decline, and the government starts
| erecting trade barriers to protect what's left.
| khill wrote:
| At some point in my lifetime, the mindset switched from
| "I'm investing because I want to see long-term, steady
| growth and get regular dividends" to "I want to make as
| much money as possible as quickly as possible and damn the
| consequences to others".
|
| The short-sightedness and greed is destroying so much.
| pfdietz wrote:
| Or, the hardnosed focus on economical value over
| sentimentality is freeing resources to be used more
| productively elsewhere.
|
| Schumpeter tells us the market operates by creative
| destruction. Properly killing companies is just as
| important as properly starting them.
| jfengel wrote:
| 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.
| devmor wrote:
| 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.
| johnrgrace wrote:
| The private equity fund who makes the decisions about what to
| do is buying the company with other people's money. They get
| a % of the other peoples money they manage as revenue and
| slice of the profits on success.
|
| Also they often engineer things so the money the fund put
| into the deal comes back very fast. In this case they sold
| the companies real estate which got a big chunk of their
| initial investment back ASAP.
|
| the simplified view - red lobster they bought it for $2.1b -
| they sold off the real estate for $1.5b and 25% of the equity
| for $575m - so the PE fund has $25m of their original
| investment in the deal. They borrowed a bunch of money and
| then paid out dividends on that $25m that were multiples
| times that amount.
| sevagh wrote:
| Can we place blame on the people who sell their firms to
| private equity firms?
| forgetfreeman wrote:
| Nope.
| getwiththeprog wrote:
| Yep.
| rwmj wrote:
| It's understandable if you are a small business owner and
| someone makes an offer which means you can retire
| comfortably. The blame here is not with those owners, but
| with the private equity companies that exploit customers, and
| also the regulators that allow this monopolization &
| destruction of value to happen.
| madaxe_again wrote:
| Not necessarily. I've seen it happen involuntarily several
| times - most recently, a client was acquired by another
| technology company in a mutually beneficial buyout - however,
| a year later, the buyer found themselves undergoing a hostile
| takeover by private equity.
|
| They then gutted everything - all technology teams stripped
| back to nothing, or a single junior to KTLO as best as
| possible, all management fired, although of course kept all
| of sales and marketing. They handle amazingly sensitive data
| for manufacturers across numerous sectors, including the
| likes of Apple and BAE, and no longer have any infosec
| functions.
|
| So in the case of the client, they didn't sell to PE, and
| it's a time bomb I'm quite looking forward to seeing go bang.
|
| In another case, years ago, it was just a straight up hostile
| takeover initiated by a disgruntled investor who wanted out,
| and an asset strip followed by administration - we, their
| main technology partner, got screwed to north of PS100k. One
| of the events that lead to me deciding to quit my previous
| business, as I couldn't put down the murderous rage it
| incited in me. The money was almost immaterial, it was the
| fact that these fuckers essentially burgled a perfectly good
| and profitable business and then robbed their entire supply
| chain, from services to product, and cost several hundred
| people their livelihoods. Fire and ice in lucifer's mouth for
| all eternity for these bastards.
|
| Yeah, a decade on, still haven't quite put that down - but
| again, not initiated by anyone who actually had anything to
| do with the business - I felt terribly sorry for all of them.
| gosub100 wrote:
| "look what they (sellers) made them (PE) do!"
| bonestamp2 wrote:
| 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.
| JackFr wrote:
| I don't have the books of Red Lobster, but the economic
| rationale is that if the enterprise is continuing to
| persistently lose money, it is destroying capital not
| increasing it.
|
| It's likely that the real estate that the Red Lobsters were
| built on was worth more than the entire enterprise. In such
| a case the implication is that the ongoing operation is
| negatively valued. Splitting the real estate off and
| valuing the restaurants at zero is a rational action -- and
| good for the economy.
|
| Put a mom and pop restaurant on the spot. Or a nail salon.
| Or anything that can justify its costs.
| dmurray wrote:
| 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 company.
|
| Here TFA mentions "flagging sales" already in 2014.
|
| The most likely alternative to PE "killing" Red Lobster or
| Sears or Toys R Us wasn't that the businesses restructured with
| the same management and business model but 25% fewer stores. It
| was that they went out of business altogether.
|
| I'm worried by PE buying up successful natural mom-and-pop
| businesses like dentists and vets and worsening the consumer
| experience at those. Not so worried about them managing the
| decline of massive national brands slightly more aggressively
| than another billionaire owner might.
| red_trumpet wrote:
| 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.
| AdamN wrote:
| Because it was a dead man walking by the time PE bought it.
| The underlying assets were worth more than the sale price
| so it was never going to make sense to do anything other
| than what happened.
|
| With that said, the tax code and employee law could be
| improved so there are stronger guardrails to protect some
| stakeholders more.
| red_trumpet wrote:
| > The underlying assets were worth more than the sale
| price
|
| That's not so clear to me. The real estate wouldn't have
| been worth so much without the existing restaurants
| having to pay rent.
| bluGill wrote:
| Sure, but Red Lobster should be able to make ends meet
| paying that rent. Their accountants should run the
| numbers and have numbers for what the restaurant made
| after paying rent, and what the real estate investment
| made from rent. Even though the same entity owns both
| they still need to know where the money is. If a
| restaurant cannot make money except that the real estate
| is paid off and thus rent free (or maybe bought at lower
| than current prices and so payments are artificially low)
| then they should close and rent the real estate out to
| someone else.
|
| The above is something people often fail to think of. If
| you (as is common) have something that could be two
| independent business with one supplying the other, then
| you should have your accountants figure out the numbers
| for each separately. (this is not easy, and eventually
| not worth it)
| SoftTalker wrote:
| Retail property value is mostly about location, not
| whether there is a currently successful business
| operating there.
| swampthinker wrote:
| 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.
| red_trumpet wrote:
| > Gives the primary business (making food profitably) a
| huge cash infusion
|
| What is "stripping for the sake of stripping" of not
| this?
| triceratops wrote:
| McDonald's, possibly the most successful chain of them
| all, doesn't seem to think owning real estate is a
| distraction.
| bombcar wrote:
| Part of this is because of how McDonald's handles
| franchise agreements (for various reasons).
| SoftTalker wrote:
| That's because McDonald's is a real-estate company that
| finances itself by selling hamburgers.
| quickthrowman wrote:
| McDonald's is an REIT that happens to sell hamburgers.
| organsnyder wrote:
| 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.
| bluGill wrote:
| 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.
| rangerelf wrote:
| "Gives the primary business (making food profitably) a
| huge cash infusion, and removes a distraction"
|
| This is so suspiciously MBA-esque: - Owning real estate
| (and responsibilities associated with it) are not
| distractions: they are the cost (and responsibilities)
| associated with running a business. - "a huge cash
| infusion" followed by [correspondingly] huge rent
| payments; the business becomes a prisoner.
|
| There certainly are distractions when running a business,
| but owning the spot of land where it's installed is not
| one of them.
| d0odk wrote:
| Do you think every business owns the land and building it
| operates in? Real estate is expensive. Maintaining a
| building is expensive. There are plenty of businesses
| that rent to avoid the capital requirement and headache
| of property ownership.
| bluGill wrote:
| You are thinking about distraction wrong. Owning real
| estate isn't so difficult/time consuming that the
| managers lose much time/energy deal with it instead of
| running the business.
|
| However it is an accounting distraction. If you own real
| estate you need to figure out which share of your profits
| comes from rent of real estate and which from the
| restaurant. If you cannot make both business profitable
| that means you should get rid of one. (sometimes that
| means sell the real estate and rent, sometimes it means
| close the business and rent the real estate to someone
| else). If both work out profitable, then keep going as
| is. (don't forget about intangibles, if real estate is a
| small loser it might be worth it just because you don't
| have to move and so can get loyal customers - but you
| should be intentionalable about accepting this loss)
| autoexec wrote:
| > The "private equity kills beloved brand" stories are
| usually overcooked, as far as I can tell.
|
| What are some well known examples of "private equity turned
| troubled brand into wild success" where products become
| better than ever and consumers couldn't be happier? It seems
| like all I _ever_ hear are stories where a brand is
| "rescued" only for it to be butchered for parts in a couple
| years time.
| dmurray wrote:
| Maybe Dell? Not exactly a consumer darling, but certainly a
| successful story for a PE LBO.
|
| There was a side plot of "PE partners with charismatic
| former founder", but the main story was PE cost-cutting,
| layoffs and loading the company up with debt.
| mrguyorama wrote:
| That has more to do with Silverlake capital preferring
| steady, regular cash flows. They like to buy up and hold
| and just run things like a normal business, no MBA
| shenanigans.
| saalweachter wrote:
| Barnes & Noble, maybe?
|
| They were taken private a few years back, and after a long
| slow period they're expanding again.
| coldtea wrote:
| > _The PE firm would also prefer to have a nice profitable
| business_
|
| Quotation needed. Usually they put no or little effort in
| this. They want to get their profit by destroying the
| business, either by breaking it down and selling the parts or
| by turning it into a shitty consumer-hostile money-grabbing
| version of its former self
| TheMagicHorsey wrote:
| 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?
| verteu wrote:
| 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.
| devmor wrote:
| 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.
| rendang wrote:
| Presumably because mom n pop businesses are not perfect
| optimizers and end up charging below the profit-maximizing
| price
| bombcar wrote:
| This is exactly it - mom and pop businesses will charge
| enough for a comfortable lifestyle for themselves, but
| not really feel pressure to charge above that.
|
| And if you have a vet, say, who is near the end of his
| career, he's already amortized all the
| training/educational expenses, and so can run out until
| retirement at relatively low rates compared to a brand
| new one.
|
| The companies take advantage of this, but the customers
| also like it, too, because the offices will be fancy and
| feel new and they can schedule an appointment online.
|
| Same thing that Great Clips et al did to barber shops.
| banannaise wrote:
| > If a PE firm can just unilaterally raise prices, then why
| didn't he mom n pop practices do the same?
|
| Because they have a connection to their community, which
| means both (1) they're more vulnerable to backlash, and (2)
| they don't want to, because it would be taking directly
| from other members of their community.
|
| Mom-and-pop shops tend to price based on what is _fair_. PE
| firms tend to price based on what is _profit-maximizing_.
| underlipton wrote:
| The two groups have very different goals. One wants
| sustainable profit running a sustainable business, the
| other wants short-term profit by any legal means necessary.
| NoMoreNicksLeft wrote:
| The mom and pop, if they raise prices too high, punish
| themselves when they lose business. Perhaps even to the
| point of insolvency and folding.
|
| If the PE firm raises prices too high, they don't punish
| themselves at all, because those customers go elsewhere.
| "Elsewhere" being just another office/practice which they
| also own. Mom and pop couldn't do that themselves. They
| didn't have monopoly-like powers to ensure their success.
|
| > Why is there a barrier to entry that prevents some new
| young doctor or vet
|
| Because the young ones are getting started, and do not have
| the capital to start a practice (or to buy an existing
| one). How much does a dental x-ray machine cost? How much
| do the dental chairs cost? How much does the lawyer that
| fills out the paperwork to get the permits for that retail
| space to be a dental office cost, per hour, and how many
| hours of paperwork?
| threemux wrote:
| 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.
| g_sch wrote:
| > in the last 10 years.
|
| From the article:
|
| > In 2014, amid flagging sales and pressure from investors,
| Darden sold Red Lobster for $2.1 billion to Golden Gate
| Capital, a San Francisco private-equity firm.
| threemux wrote:
| Yeah looking back I don't know why I qualified it - it
| was bad before then too.
| kstrauser wrote:
| > but you'll still have to tip the same amount
|
| Nitpick: You'll have to tip the same amount as another
| restaurant with bad service. If it's awful enough, that
| works out to about a 20% discount on the meal.
| bluGill wrote:
| People who don't know how to tip bad for bad service
| (most of us!) are why tipping is bad. When you get a bill
| you should have a discussion about service quality with
| everyone and then decide what to tip (if you are solo is
| can be just you but still think). If you don't do that
| then you failed to use your tipping power.
| rwmj wrote:
| 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...)
| mindracer wrote:
| A few years ago my cat needed his teeth cleaned my local vet
| charged me PS125. The same vet, now owned by CVS, is now
| going to charge PS250
| madaxe_again wrote:
| That was EUR10 here in Portugal.
| sib wrote:
| How long does the process take? What is the overhead
| (space / equipment / other costs)? And therefore, how
| much is the provider earning per hour?
| madaxe_again wrote:
| About 20 minutes, some disposable gloves, a disposable
| toothbrush head impregnated with toothpaste. So about
| EUR25 an hour. Commercial rents for small spaces are dirt
| cheap here - probably about EUR600/mo. That's probably
| the driving factor in the U.K. - commercial property is
| eyewateringly expensive.
| DiggyJohnson wrote:
| What about labor costs? I'm not GP but I appreciate this
| sort of breakdown. I wouldn't have considered that
| commercial RE for small business is much cheaper in
| Portugal than GB.
| NegativeK wrote:
| Respectfully, that's brushing the teeth, which is a
| subset of dental cleaning.
|
| Dental cleaning requires dental tools and anesthesia.
| floren wrote:
| Here in the Bay Area I've been quoted $800 to clean a dog's
| teeth.
| kstrauser wrote:
| Lucky! Our ancient Maltese has a heart murmur and was
| referred to, I kid you not, a canine cardiologist. The
| estimate _started_ at $10K and went up from there.
|
| The affected teeth got loose. We pulled them. The dog is
| happy and healthy. I would have liked for a professional
| to have done that for us in a more controlled and
| methodical manner, but there's no way I could justify
| spending _at least_ ten thousand freaking dollars on a 13
| year old dog who was at significant risk of dying on the
| table.
| sokoloff wrote:
| That sounds like a "we're not in the teeth cleaning
| business; go away!" price.
|
| I love my dog and spend pretty freely on him, but no way
| is he getting an $800 teeth cleaning. At that point, you
| might as well locate your practice on the airport and
| cater only to people who fly their dog in on a private
| jet.
| JackFr wrote:
| Please. Those folks have a canine dental hygienist on
| staff. They don't go to walk in clinics.
| NegativeK wrote:
| $250 for a cleaning in the US is still a loss leader.
|
| The actual cost to the clinic of a dental cleaning is
| ridiculous for how often it needs to be done.
| zikduruqe wrote:
| 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
| whycome wrote:
| This sounds like something out of Idiocracy
| lupusreal wrote:
| It's a highly prophetic movie. (And my thinking so is
| probably another example of it!)
| stalfosknight wrote:
| Every day it feels like we are getting closer and closer
| to making Idiocracy a reality.
| astura wrote:
| They already own most of the pet food brands, so this
| move actually makes sense.
|
| I still hate it though.
| whartung wrote:
| Out here, they're all being bought up by VCA.
|
| My vet is absolutely considering selling his practice. We
| (selfishly, not seriously) suggested selling his practice
| and then opening a new one closer to where we live. (We
| moved out of the area several years ago, but continue to
| drag the cats in to see him.)
|
| We said it in gest but he said he was already giving it
| serious consideration. When he bought his practice from the
| previous vet, the original owner did exactly that ---
| opening a new practice elsewhere.
| tzs wrote:
| VCA was bought by Mars in 2017 and operates as a
| subsidary.
| TheMagicHorsey wrote:
| 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?
| jethro_tell wrote:
| 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.
| bsder wrote:
| > 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.
| toast0 wrote:
| > 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.
| nekoashide wrote:
| 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.
| mandevil wrote:
| 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.
| duped wrote:
| > 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?
|
| It takes capital to start a business and people don't have
| that.
|
| > There must be some barrier to entry in the market that
| prevents that
|
| People retiring are selling their brick and mortars and the
| next generation don't have the personal wealth to buy them
| because they're saddled with medical/education/credit card
| debt and stuck with bad rent terms that caused low savings.
|
| The only people around to buy the places are private
| equity.
| owlninja wrote:
| 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...
| throwway120385 wrote:
| Optum is doing the same thing here in the US PNW for actual
| doctors' offices. My SO had a mysterious charge suddenly
| appear in her account that nobody would explain and then she
| got fired as a patient and sent to collections by them a few
| years ago. Now that they're buying all of the clinics she
| essentially can't get in to any providers because of it.
| prepend wrote:
| Dentists too.
| globular-toast wrote:
| I wouldn't expect anything to change now. This is essentially
| what we're all doing to Earth: wringing it dry because we know
| we'll be dead before the oil runs out. People stopped dreaming
| of something better a long time ago.
| pif wrote:
| We didn't stop dreaming: it's just that we have not yet found
| non-polluting oil!
| rl3 wrote:
| > _Watching private equity take over and subsequently destroy
| businesses is so frustrating!_
|
| I agree. I uh, hope they don't do the same thing to Olive
| Garden, or Applebee's. That would be tragic..
| coldtea wrote:
| Ah, American classism, where crap like McDonalds is OK, but
| pissing on Olive Garden and Applebees is a signal for "I'm
| not working class, I have taste".
|
| Perhaps because the latter are associated with aspirational
| working class, which is to be mocked.
|
| The upper middle class and higher going to coffee shops and
| restaurants targeting them and dialing the pretentiousness
| and crap fusion food and such to 11 is OK though, that's in
| high taste. And McDonalds is acceptable too, since it's seen
| as neutral.
| Xcelerate wrote:
| > 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 Appalachia and what they
| prepared themselves and ate back then was much tastier and
| fresher than Olive Garden.
| coldtea wrote:
| > _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 class in that context (or the ignorant lower
| middle class), in some "lol, these people think they're
| eating fancy" - usually with stereotypes about their
| appereance and mannerisms to match.
| organsnyder wrote:
| 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.
| edgyquant wrote:
| What world do you live in where Olive Garden is attacked
| for its food quality more than McDonalds
| bluGill wrote:
| McDonalds is constantly mocked for low quality food.
| Olive Garden is much higher prices, but not much better
| in quality.
|
| Note, but quality what we really mean is either health or
| taste. Both McDonalds and Olive Garden are extremely high
| quality in that everything is exactly the same and so you
| can go into any one around the country (and most of the
| world) and order something and be unable to tell the
| difference from any other.
| rl3 wrote:
| 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.
| coldtea wrote:
| > _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 people) is also a problem of
| capitalism.
| rl3 wrote:
| > _That however is a problem of capitalism in general,
| not Olive Garden in particular._
|
| Sure, but the lengths Olive Garden's marketing goes to
| present the facade of a soul is so cringe that they
| deserve to be emblematic of said problem.
|
| > _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 people) is also a problem
| of capitalism._
|
| Not to burst your class snobbism bubble, but as a former
| poor person I have to say the Dollar Menu kicks Olive
| Garden's ass all day long. For one (dollar), it isn't
| reheated cardboard!
|
| I don't think fast food somehow being comparatively
| acceptable is a problem in and of itself, because fast
| food isn't pretentious. If anything, narratives that make
| it seem as if the "lower class" has no choice but to eat
| cardboard at Olive Garden if they want a dining
| experience, and that doing so is just a taste that's
| forced upon them, is laughable.
| HeyLaughingBoy wrote:
| Right. My local non-chain Mexican restaurant charges far
| less than Olive Garden, or any other nearby chain for
| that matter, and manages to put out large quantities of
| very tasty food. Not surprising, the place is usually
| very busy.
| fwip wrote:
| Your McDonald's still has a Dollar Menu? Over here it's
| the "1-2-3 Dollar Menu" and there's nothing on it that
| costs less than $1.79 (a plain hamburger).
| gosub100 wrote:
| Don't conflate class with quality. Chain restaurants
| serve mass-produced, low quality fare. They have to.
| bluGill wrote:
| 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.
| sokoloff wrote:
| Ruth's Chris is a chain. I don't think they're serving
| low quality food.
| SoftTalker wrote:
| > the majority of the profits don't go to the people
| working them
|
| False. A well run restaurant _might_ make 10% profit. But
| they pay double or triple that to the staff and managers.
| OkayPhysicist wrote:
| In-n-Out is cheaper than McDonald's. A preference for
| McDonald's isn't a class issue, it's a taste issue.
|
| The popular disdain for family dining comes from people
| who don't want to sacrifice food quality for table
| service. Olive Garden isn't competing against fine
| dining, it's competing against fast casual restaurants.
| And that's far less of a class divide than a generational
| divide: restaurant dining as widely available phenomenon
| is a relatively new concept, with it being a relatively
| rare luxury for the Greatest Generation. This put a level
| of perceived prestige on being served, which the family
| dining restaurants managed to reduce the cost of
| substantially the latter half of the century.
|
| With ubiquity, though, the novelty wore off. Young people
| who grew up regularly eating restaurant fare aren't
| particularly impressed by table service, and thus for a
| given price point, on average, Millenials and younger
| tend to choose a fast-casual restaurant with better food
| quality over a family dining establishment that has to
| cut into their food quality to pay for table service.
|
| What you're perceiving as a class divide is a urban/rural
| divide, where trends of all sorts (including this one)
| lag a decade or two behind in rural areas relative to
| urban ones.
| ghaff wrote:
| I'm classist I guess but McDonalds is really not OK unless
| I need some fries on a long drive.
|
| But people can eat whatever they like/can afford/find
| convenient.
| bigstrat2003 wrote:
| You keep your hands off Olive Garden.
| rangerelf wrote:
| Olive Garden is garbage, why would I want to put my hands
| on it?
|
| Only Olive Garden and Chipotle have managed to give me a
| stomach ache.
| selimthegrim wrote:
| Someone in New Orleans (a town with a large Italian and
| specifically Sicilian population), left a one-line Yelp
| review of the one Olive Garden in the metro area (by the
| airport). "The 9/11 of Italian food"
| HeyLaughingBoy wrote:
| Too late. How much worse can they get at this point?
| HeyLaughingBoy wrote:
| The really sad thing is that both of those used to be not so
| bad. Not good, mind you, but at least palatable. Now they're
| just nasty.
| nickpp wrote:
| I used to feel the same, but eventually I came to understand
| that they have a tremendously important role in the business
| ecosystem.
|
| Like sharks in the sea or wolves in the wilderness, they
| identify and remove sick and ailing businesses. Additionally
| they offer a convenient exit to tired owners and investors,
| thus incentivizing _further_ business creation. Finally, they
| identify and exploit regulation-created monopolies, enabling
| the government to re-allow competition through deregulation -
| something more and more important in today 's populist and
| regulation-happy climate.
| toast0 wrote:
| 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.
| TheRealDunkirk wrote:
| 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.
| toast0 wrote:
| 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.
| delfinom wrote:
| 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.
| tibbydudeza wrote:
| Shrimp - the cockroaches of the ocean.
|
| I never eat the stuff including lobster (non allergic) but one
| time I was relocated to Germany to help ship a new software
| release (English technical documentation) and was invited to a
| meal with my colleagues and his family.
|
| Out comes a big bowl of shrimp for everybody with the skins and
| feet and antlers on - think we had a language misunderstanding.
|
| Not wanting to offend and send it back - did not even know how to
| disassemble it - ate a few and back at the hotel you know what
| happened :).
| savoytruffle wrote:
| you fondly reminisced about a wonderful meal?
| forgetfreeman wrote:
| Now if you'd said there was no Old Bay on the table I'd say you
| had a serious issue on your hands, but I'm guessing you don't
| know what that is?
| CannisterFlux wrote:
| For future reference, say you are allergic. It's not like they
| would have asked for a doctor's note. Oh it was in Germany?
| They probably would...
| coldtea wrote:
| > _Shrimp - the cockroaches of the ocean_
|
| Ah, culinary wisdom based on internet memes and bro quotes: the
| cockroach of the mind!
|
| > _ate a few and back at the hotel you know what happened :)_
|
| Reverted to the fast-food baseline?
| Broken_Hippo wrote:
| Sorry, but no. I've thought that shrimp and lobsters were
| simply ocean bugs since I was a child in the 80s. It isn't
| quite accurate in science terms, but still holds out as a
| thing in my brain. Even if I happen to eat them (Not
| disgusting, not delicious either)
|
| I'll also mention that folks allergic to shellfish also have
| to be careful with crickets and other land insects. They have
| their similarities.
| MrBuddyCasino wrote:
| ,,Advanced Conflict Avoidance, Vol.1"
| gadders wrote:
| 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.
| rwmj wrote:
| Instant Pot was one ...
| sevagh wrote:
| Travis CI
| m2f2 wrote:
| VMWARE CA (Computer Associates) CITRIX ...
| erikerikson wrote:
| CA was where innovation went to die far before Broadcom. It's
| main business process was buying popular products,
| "enterprising" but mostly selling them, and then selling them
| off as they went out of fashion.
| gosub100 wrote:
| I would like this service but for vet clinics, apartment rental
| forms, and dentists.
| nicolas_t wrote:
| 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.
| technofiend wrote:
| 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.
| bradleyankrom wrote:
| Whataburger :(
| Whatarethese wrote:
| Did this happen to Chipotle?
| erikerikson wrote:
| And then it was reversed, purchased back by the founder for
| less
| JackFr wrote:
| Chipotle took on McDonalds as an early investor, used
| McDonald's investment to quickly expand from 16 to 500
| stores. Chipotle had a tremendously successful IPO, which
| they used to fund further growth. McDonalds, who was always
| a minority investor, divested themselves from Chiptole
| earning $1.5 billion on a $450 million investment. It
| trades on the NYSE as CMG and has a market cap of 88
| billion.
| Zenzero wrote:
| Based on how Chipotle has been the last couple years
| though, I foresee them going down the route of Red
| Lobster within the next 10 years. That kind of valuation
| goes against how bad the food has gotten.
| erikerikson wrote:
| Thanks for stimulating me to update
| ElevenLathe wrote:
| This will work until a PE firm buys _you_ out.
| bradjohnson wrote:
| Tim Hortons
| kevin_thibedeau wrote:
| They're on my lifetime ban list after PE ruined their menu.
| abirch wrote:
| Tim Hortons is part of $RBI [1] and not private equity.
|
| [1] https://en.wikipedia.org/wiki/Tim_Hortons
| bradjohnson wrote:
| They are (were?) 51% owned by Brazilian private equity
| group 3G Capital which in turn owns 1/3 of RBI:
| https://en.wikipedia.org/wiki/3G_Capital
| bradjohnson wrote:
| Ah, here it is:
|
| https://www.rbi.com/English/news/news-
| details/2014/Worlds-Th...
|
| > 3G Capital to own approximately 51% of new company
| aklemm wrote:
| That's an excellent idea. I posted in the thread another angle
| I'd love to see get traction:
|
| https://news.ycombinator.com/item?id=40238807
| pigeons wrote:
| For products it would be good to include a date so people can
| obtain the quality items second-hand.
| happytiger wrote:
| 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 willing to endorse the current
| approach as anything but exploitation with extra steps.
| organsnyder wrote:
| It seems like they keep getting "exposed", yet nothing changes.
| aklemm wrote:
| There's a solution, I posted it in the thread.
|
| https://news.ycombinator.com/item?id=40238807
| TheRealDunkirk wrote:
| 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
| prepend wrote:
| No one can force you to give a deposition during a miscarriage.
|
| I've been through a few depositions and anyone can leave for
| medical reasons. It's not like there are bailiffs there forcing
| you to attend. Even with the most basic of cases, I can just
| walk out and tell my attorney to reschedule. I may have to pay
| other counsel's fees, but I expect with the reason "I'm having
| a miscarriage" no judge is going to uphold their claim.
| phkahler wrote:
| >> 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.
| TheGlav wrote:
| What a short sighted, money grubbing decision by people that
| didn't actually care about the wellbeing of the company.
| Keeping the land the restaurants are on means higher margins of
| profit long term and the ability to weather problems. Selling
| it off and then leasing it back does...exactly what happened
| here.
| DiggyJohnson wrote:
| You're responding as if the person you're replying to wasn't
| asking a question, but stating a fact. Do you know about the
| details or even a general outline of the considerations that
| went into this decision?
| ink_13 wrote:
| Bluntly, they're irrelevant. Selling off the real estate is
| a short-term books-juicer that's tantamount to pillaging
| the contingency fund. Classic corporate raider move.
| pfdietz wrote:
| Why should anyone care about the wellbeing of a company? This
| sounds like an exercise in anthropomorphism.
| Zenzero wrote:
| The people in PE don't concern themselves with the wellbeing
| of a company in any sort of moral or sentimental sense. The
| company's future is dependent on what turns the highest
| profit on their time and investment. Sometimes the most money
| is made in value extraction and crippling the company long
| term. They are the vampires and vultures of the economy.
|
| In fact you could argue that Red Lobster has suffered from a
| long term decline due to poor positioning in the marketplace,
| and the PE shops are accelerating what was likely to happen
| anyway.
| pavovap wrote:
| 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.
| froggertoaster wrote:
| https://archive.is/qarb5
| andrewla wrote:
| These private equity deals are the convergence of a couple of
| phenomena.
|
| The most obvious is low interest rates, which is fortunately
| dying off. The ability to borrow lots of money is something that
| smaller, well-run companies, are reluctant to do. Why bring in a
| bunch of cash to expand and take on debt when you are operating
| at a reasonable profit?
|
| The secondary is the undervaluing of customer goodwill -- what PE
| firms can do is directly monetize that goodwill by squeezing
| those customers. The income stream from a reliable customer can
| be translated into present value, and prices and quality can be
| adjusted to the point where you can drive a customer's goodwill
| down to zero while extracting something that approximates the
| present value of the lifetime income stream from that customer.
|
| Inflation plays a role -- businesses are reluctant to raise
| prices because they don't want to sacrifice goodwill, but the
| supply chain costs keep going up. They have to somehow maintain
| margins, but they do so by raising prices slowly. PE has no such
| scruples.
| asdfman123 wrote:
| Private equity takeovers are often just scams to convert
| customer trust to short-term profits, but labeled as growth.
|
| You can get away with cutting quality for a little while, but
| eventually customers are going to lose trust and you're not
| going to get it back.
| darth_avocado wrote:
| But that is the PE playbook. Take businesses and squeeze as
| many profits out of them before they die.
|
| https://www.nytimes.com/2023/04/28/opinion/private-
| equity.ht...
| wnc3141 wrote:
| the whole point is to flip the business in 5ish years.
| underlipton wrote:
| >but the supply chain costs keep going up.
|
| A good portion of this is cartels that could be squashed.
| Notably, real estate (commercial and otherwise, driving up the
| single biggest cost of business/living). But, then, you'd have
| to deal with the people who rely on cartel-ized pricing power
| for their income, investment collateral, etc. (But _someone_ is
| going to get thrown under the bus, so might as well be them.)
| pwillia7 wrote:
| PVH is the first time I realized this is what everyone was
| doing. I have never been able to put it so succinctly though,
| thank you.
| bruce511 wrote:
| I'd add that it's also a function of revaluing the assets, and
| then determining if the return on asset value is appropriate.
|
| Take a small restaurant. Grandad bought the building 50 years
| ago. That's long since paid off.
|
| The restaurant makes say 10k a month. Good honest business. But
| the building/land is worth say a million.
|
| The owners don't care, it's paid off. The business makes a good
| living.
|
| So I come along and offer 500k for the business. That's
| basically 4 years profit up front. They want to retire soon, so
| that's good deal. But I turn around and sell the land for a
| mil. I've made a big profit, and since rent is now 10k, in only
| a few months the restaurant goes under.
|
| The root problem is that the business is delivering a really
| poor return on asset value. Which opens the door to someone
| buying the _assets_ , not the _business_.
| throwup238 wrote:
| That's what it looks like to me too. All of the Red Lobsters
| I know of in California are in some _very_ high volume
| locations, often in large multi-block shopping malls where
| everyone in a several mile radius goes to shop. They did a
| good job front running the state 's population growth and
| locking in some great locations before they became really
| expensive.
|
| It's pretty much a license to print money as long as the
| restaurant can maintain competitiveness in quality and cost.
| All of the restaurants in the strip mall that holds my
| nearest Red Lobster have been around for over a decade and
| half of them for over twenty years. The turnover is really
| low because everyone rakes it in as long as they don't mess
| it up. Looks like Red Lobster messed it up.
| OkayPhysicist wrote:
| Even without private equity's meddling, Red Lobster would have
| been in a rough spot. Family dining as a segment (lower end
| restaurants, but with table service) is being squeezed
| aggressively. Compared to Gen X and before, Millennials on
| average are valuing food quality over service experience,
| ballooning the fast casual (order at the counter, but nicer than
| fast food) segment. This is squeezing family dining from below,
| meanwhile their branding as ubiquitous and affordable prevents
| them from raising prices too much without bumping up against the
| fine dining segment (and who wants to bring a date to Olive
| Garden?).
| SoftTalker wrote:
| And speaking of food quality, restaurants like Olive Garden and
| Red Lobster are just terrible. I'd rather get a fast-food fish
| sandwich, or fish and chips at the local brewpub, than eat
| anything at Red Lobster.
| FireBeyond wrote:
| And it's not a secret. Fettucine Alfredo? They open the
| plastic packet from Sysco, microwave for the appropriate
| amount of time, same with the sauce, put it on a plate...
| $18.
| Zenzero wrote:
| You're spot on. I haven't been to any sort of Red Lobster
| owned property in years. The last time I went to Olive
| garden it was completely transparent how the microwaved
| Sysco food is the norm now. I sat there thinking how AI
| could have just bought the same thing from the frozen aisle
| at half the price and not had to deal with sitting in a
| dirty Olive garden.
| cityofdelusion wrote:
| It's not limited to these big chains at all -- the vast,
| vast majority of restaurants in the States are at the
| mercy of Sysco. The restaurant industry is absolutely
| brutal right now. They are barely profitable and the best
| restaurants survive from underpaid family labor or under-
| the-table undocumented immigrants. Rent costs are
| insanely high, labor isn't there and is bottom of the
| barrel, and non Sysco food costs too much. The average
| person still expects a $8 burger and fries when the cost
| to make it is $10 minimum.
|
| The whole industry is on the verge of collapse, and we've
| had a ton of restaurant closures over in my neck of the
| woods since Covid. These aren't Red Lobsters closing but
| beloved local places.
|
| Anyone that has worked food in the last couple years
| knows how bad it really is.
| Zenzero wrote:
| I believe it. It seems to be a natural consequence of the
| wealth imbalance in the US. There is an obscene amount of
| money looking to be placed at the top, but nowhere great
| to put it. At the bottom all of the industries that
| relied on disposable income are struggling. The bottom
| will continue to fall out piece by piece until we reach a
| new equilibrium.
| ghaff wrote:
| To be fair, Sysco can provide a lot of different levels
| of food. Yes, they're most associated in the public eye
| with the microwaved and boiled examples. But they can
| also deliver many fresh ingredients or just staples like
| rice or flour.
| toomuchtodo wrote:
| What are Sysco alternatives for sourcing?
| vundercind wrote:
| There are frozen bags of heat-in-a-pan Italian dishes in
| the grocery store that cost half what Olive Garden does
| (so, the slightly-fancy frozen meals--there are even
| cheaper ones) and also taste quite a bit better (though
| still not great).
|
| They used to at least be better than high-side-of-mid-
| tier frozen grocery store meals. Not anymore. Their
| continued existence confuses me.
| babypuncher wrote:
| There's a local italian restaurant that I frequent which is
| 30% cheaper than Olive Garden and way, way tastier. There are
| dozens of other local restaurants that are also cheaper, and
| tastier, than Olive Garden.
|
| I don't understand why these huge restaurant companies have
| such a hard time with the "make good food" part of their
| business model. It clearly can't be _that_ hard if so many
| small businesses are able to do do it better.
| OkayPhysicist wrote:
| The entire schtick of chain restaurants is consistency. For
| nationwide chains, that means that the same ingredients end
| up being used in relatively remote places without cheap
| access to fresh produce as in, say, California, where fresh
| produce is far more affordable.
|
| The big chains also tend to aim for excessive variety on
| their menus, which again leads to food needing to be
| designed to be less perishable.
|
| And then there's the chunk of profits that are going to run
| the national presence, ad spend, and line the pockets of
| shareholders.
| babypuncher wrote:
| All of this just doesn't seem like it flies with
| consumers in 2024.
|
| I think people value quality over consistency when it
| comes to their leisure spending, especially when small
| restaurants can still be _consistently_ good. Why do I
| care that the pancakes at an IHOP in Tampa taste the same
| as the IHOP in my neighborhood when the local diner
| across the street makes better pancakes than _either_ of
| them?
|
| Having lots of options doesn't mean a whole lot if all of
| them suck.
|
| The national presence I think works to their detriment.
| Being able to buy ad spots during the superbowl makes a
| restaurant categorically un-cool. The number of times "I
| don't want to eat at a chain restaurant" comes up when
| discussing places to eat with my friends has practically
| turned the sentiment into a meme.
|
| I imagine social media has played a huge role in this
| shift. People posting actual pictures of the food they
| got somewhere does a lot to undercut deceptive
| advertising and elevates meals that actually get people
| excited.
| beedeebeedee wrote:
| > I don't understand why these huge restaurant companies
| have such a hard time with the "make good food" part of
| their business model. It clearly can't be that hard if so
| many small businesses are able to do do it better.
|
| They would need to have people in the restaurant, tasting
| the food, observing the business, etc, and empowered to
| make decisions based upon the evidence. These companies are
| the opposite of that, and take away that power from the
| people actually conducting the operation. Even if they
| could get great cooks, waiters, hosts, managers, etc, to
| work at these restaurants, the value that they bring would
| be stifled.
| mrWiz wrote:
| I imagine the logistics of sourcing enough ingredients to
| supply a nationwide chain are much more complicated than a
| single local establishment, which pushes the nationwide
| chains towards more-consistent but lower-quality solutions
| like just buying from Sysco.
| babypuncher wrote:
| At that point you would think they would pivot to using
| their economies of scale to compete on price. But they're
| still more expensive than better local alternatives.
|
| My best guess is that the price is inflated by the huge
| amount of money they spend on national ad campaigns,
| which I'm convinced at this point do not even work. Any
| restaurant big enough to buy ad spots during the
| superbowl is by definition "not cool" to the under-40
| crowd. None of the most popular restaurants among my
| peer-group where I live even run local TV ads, and they
| don't need to.
| asdfman123 wrote:
| It's not even about quality. Honestly, much of it is just that
| megachains aren't cool. I'm not above eating at Red Lobster but
| if I have to pick where I'm going to spend my money it's hardly
| going to be the first choice.
| kube-system wrote:
| I don't even really think it's food quality alone that is the
| issue. It's the total package doesn't match preferences.
|
| I think many millennials would be fine with Red Lobster quality
| food, if it were quick enough for lunch. But the format is
| slow, sit-down service. And the atmosphere in these restaurants
| is not what millennials are looking for to relax or entertain.
| ghaff wrote:
| That's actually sort of been a sort of a revolution with
| things like fast casual burgers and a lot of food in airports
| (at least those that serve upscale cities). A lot of people
| don't really want at least somewhat extended sitdown. They
| want fairly decent food that's served quickly.
|
| Individual preferences vary obviously but I'll basically
| never eat at McDonalds but some of the burger places like
| Shake Shack and In-and-Out hit the spot now and then.
| kube-system wrote:
| There's multiple reasons why people visit a restaurant and
| with different needs.
|
| I think the rise of fast casual is coincident with the rise
| in people visiting a restaurant when it _isn 't_ a treat.
| When someone is looking to just grab a quick bowl, they
| don't care as much about atmosphere or service, their
| priority is something quick, easy, and good value.
|
| But then when these same people go out to dinner when it
| _is_ a special occasion, they 're looking for something
| measurably better quality and better experience than the
| fast casual they had three times for lunch that week.
|
| It's the mediocre sit-down places that are caught in the
| middle. In the 90s these types of places were good enough
| to be considered a friday night treat. Because people
| weren't eating out during the middle of the week as much.
| ghaff wrote:
| >quick, easy, and good value
|
| And for many, especially perhaps people out of their
| twenties, they want something at a level above the
| traditional fast food chains.
|
| But I basically agree. If I have to I'll go to a standard
| dinner chain either because there aren't other options
| where I am or I'm dragged there by friends. But I'd never
| do it around home and would try to do my best to find
| other options when traveling--although, on the road, some
| brand recognition of this isn't awful may be a trigger.
| underlipton wrote:
| Millennials don't have families and can barely afford the
| transportation to get to these places, let alone the cost of a
| decent meal there. The ones that _can_ aren 't satisfied with a
| cookie-cutter franchise experience.
|
| But, that's assuming that the more well-off generations aren't
| going. I dunno if that's the case; things other than revenue
| can be squeezing RL.
| OkayPhysicist wrote:
| Damn near everybody who has a family right now is a
| Millennial. Millennials are 30-45 years old
| underlipton wrote:
| Sorry. What I meant to imply was, "Millennials don't have
| families [at a rate relative to preceding generations.]"
| Millennial families are less numerous and smaller.
| wil421 wrote:
| Am I reading /Millennial or HN? Not sure we need to beat
| the horse to death about societal problems again.
|
| I just came for the cheddar biscuit talk.
| tonymet wrote:
| Can someone help explain restaurant industry economics?
|
| when the business starts out, it's high risk and low margin. Tons
| of capital investment. Labor intensive and hard to staff. If you
| are lucky you are pulling 15% margins
|
| Besides some exceptions, if you are lucky you may get some growth
| for 5-10 years. Then your brand falls out of favor (trends) and
| you spiral into bankruptcy.
|
| Who invests in this stuff?
| tempsy wrote:
| You should look at Chipotle's stock.
| tonymet wrote:
| an exception that proves the rule
| tonymet wrote:
| also, stock prices aren't economics. In aggregate they can be
| useful indicators, but they are not a measure of a business'
| results (due to derivative factors)
| mason55 wrote:
| Option a, you stay small, don't chase trends, and you bring in
| decent profits year after year. Eventually maybe you close but
| not after paying back the investments plus more.
|
| Option b, you grow super fast, you have a lot locations, each
| one barely profitable, but you make it up on scale. You scale
| quickly enough that you make a lot of money before trends
| change. They key is that you accept that you're chasing a trend
| and move as quickly as possible to extract as much as you can.
|
| Option c, you come up with the core concept, and you create a
| franchise program. You make your money off franchise fees &
| shadier stuff like making the franchisers use suppliers that
| you own. The franchises die when trends change but some made a
| profit, and your capital outlays were never very high, so you
| make a lot of profit.
| duped wrote:
| More than half close within a year and it's closer to 80% after
| five years, but the ones that make it past that point are a lot
| more likely to thrive. Kinda like turtles going out to sea.
|
| > Tons of capital investment
|
| I mean it's not that much capital, compared to most businesses.
| You need way more money to start a software shop than a
| restaurant.
| tonymet wrote:
| Well thankfully restaurant & AI startup aren't the only two
| industries worthy of investing in.
|
| Jokes aside, I get mom & pops. But I'm dubious on the
| "growth" chains like a Shake Shack or Chick Fil A.
|
| My current theory is that they are effectively MLMs with
| different structures: private equity MLM, owner-operator
| (franchisee) MLM.
|
| See Subway for the end result
| javagram wrote:
| Chick fil A is privately held and their franchise operator
| model doesn't require a large infusion of cash from the
| franchisee. Only 10k cash, so it's more like a manager job
| with profit sharing and I don't see how it could be a MLM.
| pwillia7 wrote:
| Because you have to pay for the job
| 01100011 wrote:
| Speculators hoping to catch the next Chipotle. Tons of activity
| in this space right now. I got burned trying to short one of
| them. These are, many times, low-float or institutionally owned
| and prone to heavy manipulation as well.
|
| $CAVA, $WING, $SG, $SHAK, $TXRH... lots of names that will
| either be the next $CMG or crash back to earth when the next
| trendy restaurant catches the attention of social media.
|
| I think a lot of young people are abandoning older brands like
| McDonalds in favor of these trendier options, so there's a lot
| of business there if a new brand can capture it. But like you
| say, nothing lasts long in that industry.
| tonymet wrote:
| i hear that. but how about the actual economics of the
| businesses. e.g. return on capital .
|
| Obviously a handfull of stocks have spiked with speculation.
| but every town has hundreds to thousands of restaurants. And
| regions have dozens of growth chains all receiving
| investment.
|
| I get why mom & pop's invest, even if it's high risk low
| reward. But everything in the middle that takes on millions
| in capital makes no sense
| achow wrote:
| PepsiCo acquired Pizza Hut, Taco Bell, and KFC to increase its
| soda fountain sales of Pepsi products.
| asdfman123 wrote:
| Fundamentally they're a sickness-as-a-service company
| kube-system wrote:
| Don't give CVS Health Corporation any ideas.
| mortenjorck wrote:
| Now _that_ would be capturing the full value chain.
| tithe wrote:
| > Who invests in this stuff?
|
| Bill Ackman (founder of Pershing Square Capital Management),
| for one: https://lexfridman.com/bill-ackman-
| transcript#chapter4_inves...
| laweijfmvo wrote:
| Maybe not fast food / fast casual, but at least in a trendy
| area (NYC, SF, LA, etc.) if a restaurant catches on, they're
| making way more than 15% margins because they can charge
| whatever they want and people will go because it's cool...
|
| this would include coffee shops and other relatively low cost
| establishments
| MrFantastic wrote:
| If I ever get rich, I would totally open a ghost pizza
| restaurant.
|
| Margins are good. Spoilage is a non-issue.
|
| Orders are pickup or delivery.
|
| I can bring 10 pizzas to every party.
| bachmeier wrote:
| To me this is not even slightly surprising. Red Lobster used to
| be at the top of our list of restaurants. Then in recent years
| the quality of both the food and service deteriorated. One visit
| the food was so bad I couldn't even eat it. That was compounded
| by not having a server to talk to. Took our order and never
| returned - even had someone else bring out the order.
|
| The thing about a restaurant is that you'll always have business
| if the food and service are good. You can talk about how the
| market changed or whatever, but no restaurant can survive at that
| price point while offering so little.
|
| We had a chain BBQ restaurant in town that had a booming business
| for more than a decade. Then the quality of the food went
| downhill and they shut down, citing lack of a market. They had a
| market for years but there's no market for crap. Red Lobster's
| situation is no different.
| asdfman123 wrote:
| Increasingly I think the financialization of everything makes
| us less capable of understanding the world.
|
| "Red Lobster failed because of X corporate restructuring," "Red
| Lobster succeeded due to Y ad campaign." People go to
| restaurants for reasons completely unrelated to things like
| that. Those things are important, but just constitute the small
| slice of reality that can easily be measured.
|
| I saw a Twitter thread arguing how the video game Stardew
| Valley succeeded due to the way it was marketed. Marketing is
| important, but maybe the game succeeded because it was _cute_
| and _had a soul_ and _is fun to play._ You can 't measure that.
| jncfhnb wrote:
| But a lot of games are cute and fun to play that do not
| succeed
| chiefalchemist wrote:
| Sometimes it's just timing and/or luck. Think of some TV
| show that was big say 10 years ago, would it do the same
| today? Maybe. Maybe not.
|
| Product + Marketing + Timing + Luck = Maybe Successful
|
| The thing is, there's no VP of Timing. There's also no VP
| of Luck. These factors are ignored because there's no one
| to champion them. Yet they are very real.
|
| Unsuccessful Product !== Bad Product or Bad Marketing
| tensor wrote:
| I'm not convinced that is actually true. Can you think of
| an example? A game that has near universally good reviews
| but is not successful?
| georgeecollins wrote:
| I understand why you think that, because when I started
| out making video games I thought the same thing. The
| reason why is that if I had heard of a video game in a
| review or recommendation it sold really well, but if I
| tried a game at random it was usually terrible. That is
| because there are thousands of games and most that aren't
| that good.
|
| The other thing that happens is you point out a really
| good game and then someone will say, yeah but that's not
| a good game because of the art style or it's too similar
| to something else etc. Everyone can always come up with a
| quality reason why a game didn't sell. Someone has a
| reason not to like every game ever made. The problem with
| that is you can come up with the same complaints for well
| reviewed games. Often the review will say something like
| : this has been done before, or that style is a little
| annoying, but.. it's a great game.
|
| Final nail in the coffin of this theory for me is having
| talked to many game review editors and having worked with
| a few, they will often tell you that they don't always
| expect to shape opinion as much as parrot it back. As one
| person used to tell me, most people read our reviews to
| validate their purchase or get our take on what they are
| playing.
|
| And then to your challenge. Good games that didn't
| succeed. How about Midnight Suns, Lock's Quest, Space
| Marine, Company of Heroes II, Maquette.. that's just off
| the top of my head. If I thought about it I could make a
| really long list of game you've never hear of. This is
| probably the same for everything: music, novels, etc.
| Der_Einzige wrote:
| That's easy dude.
|
| System Shock 2
|
| Psychonauts
|
| Shenmue
|
| Okami
|
| Conkers bad fur day
| AlotOfReading wrote:
| I can give you an entire studio:
| https://www.spiderwebsoftware.com/
|
| They make extremely niche RPGs that routinely rate >90%
| in positive reviews on Steam and they've never had an
| actual hit. Pretty much the definition of cult classics.
| yifanl wrote:
| Arguably the best game of 2023, Alan Wake 2:
| https://wccftech.com/alan-wake-ii-recoup-expenses-tencent
| jncfhnb wrote:
| Hard to argue that game was not successful. It was merely
| expensive to produce.
| weard_beard wrote:
| I don't think you're thinking of this in the right way.
| Crafting media and creative products of all kinds is like
| playing poker. You can go all in or you can make little
| bets where you think you can win.
|
| You're making the assumption that the way to win is to GO
| ALL IN.
|
| When in reality whether you're making AAA games or a
| small indie digital artist like Darius Kazemi...
| https://www.youtube.com/watch?v=l_F9jxsfGCw (Went to high
| school with him. Amazing guy. His senior project in the
| electronics lab was a teddy bear that could detect
| seizures.)
|
| You are just buying lottery tickets.
| underlipton wrote:
| Bit of a rant:
|
| Luck. Word of mouth. Anyway, things you can't _control_
| (and can barely _influence_ ) as a developer/publisher. So,
| we face the notion that, perhaps, if we want people to take
| the _risk_ of creating and sustaining a business for
| reasons other than simple profit (say, to provide a needed
| or pleasant service), the proposition might need to be
| better than, "Succeed or die (sometimes literally)."
| Because none of it's a sure thing, and it can't be, but
| sane people generally aren't going to bet their life or
| livelihood on a risky venture (assuming that irrational
| passion is a form of insanity).
| banannaise wrote:
| Which doesn't mean they aren't _necessary_ conditions. It
| just means they aren 't _sufficient_ conditions. A game
| needs other things too, one of which may be luck, and
| others of which may be incompatible with the private equity
| model.
| yoyohello13 wrote:
| I think Stardew filled a niche that wasn't being catered
| to. There were no Farm Sims that weren't a cash grab
| released since Farmville. Stardew caught all the people who
| remembered Harvest Moon fondly.
| jncfhnb wrote:
| Harvest moon was actively releasing games at that time
| yoyohello13 wrote:
| Yeah, but they were shit.
| throwway120385 wrote:
| This is what people mean when they use the term _soulless
| capitalism_. The increasing financialization of everyone
| leads us to optimize for the things we can measure assuming
| those are the things that matter, and in the end the
| optimizations erase everything good.
| chiefalchemist wrote:
| It's not the optimization per se, it's taking it too far,
| over-playing it to the point of removing the magic, the
| special sauce, etc.
| RunSet wrote:
| > The founder of Costco told a CEO who wanted to raise
| the prices on Costco's hot dogs: "If you raise the effing
| hot dog, I will kill you. Figure it out."
|
| https://www.snopes.com/fact-check/costco-founder-kill-
| hotdog...
| prepend wrote:
| I'm still waiting for a story 20 years from now when they
| finally raise the hotdog price and the old CEO is 90 and
| kills the CEO who raised the price.
|
| Or maybe it's not the CEO he threatened, but a new one.
| selimthegrim wrote:
| This sounds like a pitch for a Timecop sequel.
| cultofmetatron wrote:
| > because it was cute and had a soul and is fun to play.
|
| I'm a full on stardew addict. I was waiting for a game to
| rekindle the feeling I had playing the original harvest moon
| on snes. natsume just made a ton of crap sequals focused on
| making it all 3d.
|
| concernedape, distilled the snes version down to what made it
| fun and built it up fron there. it scratched the itch better
| than any of natsume's sequals ever could.
| wvenable wrote:
| We live in a time where almost everything is getting worse.
| Products are getting smaller, service is getting worse,
| businesses are closing, quality is going down. I don't think
| I've ever experienced such an obvious decline in commercial
| society in my entire life.
|
| Is it the financialization of everything? Is that we reached
| peak growth and profit _increases_ are only possibly through
| extreme optimization? Is it financial inequality?
| Animats wrote:
| Sometimes it's monopoly. Not this time, though; Red Lobster
| was a minor player. Red Lobster was a leveraged buyout.
| (Most "private equity" is leveraged buyouts. The buyer
| seldom puts up full cash.) Plus the equity to debt
| conversion.
|
| Tax law favors debt too much.
| emptysongglass wrote:
| Oh man I FEEL this deeply.
|
| I was just wondering if it's just me feeling like
| everything is on a highway to terrible.
|
| - Prices in my city, just this year, have felt like they've
| jumped 10 or 15 percent.
|
| - I've been working in tech for a decade now and for the
| first time a new company simply refused to negotiate
| salary.
|
| - I feel financially worse off than 5 years ago making a
| third of what I make now.
|
| - Housing prices have exploded. I worry I will never own a
| home.
|
| - Denmark has started deleting public holidays to save our
| social welfare state.
|
| - Health care is the worst it's ever been. You can not get
| basic health diagnostics for most things in Denmark without
| screaming.
|
| - Europe has a literal war at our doorstep.
|
| - Public transit prices have jumped in the last year.
|
| - Good quality grocery stores have closed and been replaced
| with discount chains. The quality of the produce is
| terrible.
|
| - Democracy feels increasingly shittier and hijacked by two
| extremist poles of very-online meme-thought.
|
| - Gen Z is looking like the most garbage generation of the
| last two centuries with more mental illness than any
| generation in history.
|
| - Everything has become a political lightning rod.
|
| I feel exploited by invisible forces I can't see or touch
| or name. I feel as if I have no mastery over my own life. I
| no longer know why I continue to contribute to a society
| that does not give anything back to me for my labor and
| exploits the best years of my life for taxes that do not
| improve my lot in life.
|
| Can someone tell me everything is going to get better?
| onemoresoop wrote:
| >Can someone tell me everything is going to get better?
|
| Yes but only after it will get much worse.
| yoyohello13 wrote:
| Yeah, seems like we are just in the same cycle of
| boom/bust as every other human civilization in history.
| mikrl wrote:
| > Gen Z is looking like the most garbage generation of
| the last two centuries
|
| Have you ever met a millennial?
|
| t. 1992 cusper
| mattgreenrocks wrote:
| > Gen Z is looking like the most garbage generation of
| the last two centuries with more mental illness than any
| generation in history.
|
| I'm not at all Gen Z (late Gen X), but you can't put all
| of that on them. They've had many formative years during
| a lot of the points you've listed.
|
| > Can someone tell me everything is going to get better?
|
| That's never guaranteed. You can only control what you
| take in, how you cognitively frame it, and how you react
| to it.
| graycat wrote:
| You are in Denmark? WOW!! From here in the US, my
| impression of Denmark is a small country of really smart
| people with gorgeous women having really good lives!!!
| Your post questions that impression ....
|
| Here in the US, there are what seem to be related issues.
| Opinions about what is wrong and why differ. It can seem
| that we don't address the issues or what is wrong, for
| example, it can appear that the media believes that
| making clear the issues and faults are too deep for the
| audience of the media. For example, so far I've yet to
| see good engineering style graphs of even the basic
| measures from the economy, health, education, happiness,
| etc. In simple terms, the birth rate is so low we are
| going extinct -- some graphs over time might provide some
| insight. To avoid going extinct should be worth some
| graphs of related data?
|
| Here is one guess: Some people want more government
| involvement, activity, services, ..., at the national
| level. Involved are money and power, money collected from
| taxes and/or borrowed and then spent and the people
| spending the money getting power. Then for the money the
| guess is that the spending is too inefficient, that is,
| too often wasted. For the power, it can stop what might
| be solutions. So, with the waste, we are throwing away
| our efforts, and with the power we are blocked from
| better approaches.
|
| For this view, the US has some old images, from history,
| the movies, some parts of education, and even from some
| of recent history: So, the old images are from, say, the
| movie _The Big Sky_ from the 1830s of 20 or so men and
| one Native Indian woman leaving Saint Louis on the
| Mississippi River (major US river from the north east
| going south and dumping into the Gulf of Mexico) and the
| Missouri River (from the northwest of the US close to the
| Pacific Ocean and flowing ~2000 miles to the Mississippi)
| to trade with the Blackfoot tribe to give them woven
| blankets, guns, tools and get beaver pelts.
|
| The whole effort was lawless, that is, no government,
| laws, police, political power, regulations. So there was
| fighting, killing. No medical care, so there was
| suffering. There were lots of injuries from struggles
| with the river. It was all highly risky with lots of
| struggles and losses but in the end successful.
|
| There were more such movies about the US, people on their
| own, risking everything, fighting, struggling, having
| failures, in the end being successful. There was Henry
| Ford, the Wright Brothers (had a bicycle shop), etc.
|
| To the present, there were two guys at Stanford
| University in a project for indexing the contents of
| libraries. They thought of indexing the Web sites on the
| Internet and were offered ~$1 million for their work and
| Web site. They turned down the $1 million, started a
| company, and had success. It was all risky. It's now
| worth ~$1 trillion, called Google. Other successes,
| risky, one or a few founders, include Microsoft, Walmart,
| FedEx, Facebook, Amazon, Burger King, McDonald's. One
| guy, sole, solo founder, used some old Dell computers, an
| early version of Microsoft's Windows and Web software
| ASP.NET, built a romantic matchmaking service, grew it,
| ..., and sold out for ~$550 million.
|
| Mostly these successes are examples of significant
| increases in _economic productivity_ , that is, how much
| utility get from each hour of work. Personal computers?
| Killed off the typewriters with just astounding increases
| in productivity; same for email; Zoom, .... In cars,
| using digital electronics to get fuel mixture and spark
| timing a lot better resulted in the engines lasting much
| longer -- if looked carefully into what was going on with
| the old carburetors and breaker point ignitions and the
| huge ways they were wrong (unburned gasoline diluted the
| engine oil and, thus, wore out the main engine parts) can
| understand. Tires -- progress in the synthetic rubber
| chemistry made the tires last much longer, maybe 5 times
| as long.
|
| The theme is, as in the movie, leave individuals with a
| minimum of taxes and government power and let them try
| and take the risks. The victories can generate massive
| increases in productivity, wealth, and a better life.
|
| Heck, I like music, A. Vivaldi, J. Bach, ..., S. Barber.
| Used to be, had to go to live performances. Then we got
| audio tapes, vinyl records, CDs, DVDs, and the Internet.
| So, now just from a few keystrokes I can get terrific
| performances of Vivaldi's _The Four Seasons_ , Bach's
| _Chaconne_ , ... Barber's _Adagio for Strings_.
|
| Those are some of the ideas that have floated around.
| Money and power: The idea that just these two are the
| main causes of all of society's problems is tough to
| accept. But, for the problems in Denmark, maybe these two
| should get some attention.
| chankstein38 wrote:
| I've been thinking about this a lot too. It just feels like
| all ends of the spectrum, for a consumer, are crashing
| down. Everything is harvesting and selling data, stock at
| stores is low and usually favors the generic (and sometimes
| lesser) option over the higher quality names... Apps like
| facebook, twitter, IG, tiktok, reddit, and youtube are
| making life worse for their users. Overall, it is kind of a
| depressing time to observe.
| mattgreenrocks wrote:
| It is usually from the wreckage that the next big things
| emerge.
|
| Just how these things work.
| nickpsecurity wrote:
| Most people used to believe in Jesus Christ with values
| built on the Bible. That was true from lay people to Ivy
| League colleges to even folks in prison. His blessings with
| His accountability both made many good things happen and
| limited lots of damage we'd cause. America was prosperous
| as the Bible said it would be.
|
| Over the decades, people turned away from God and those
| values to chase new ones: money first, pleasure first,
| self/ego first, atheism, subjectivism, Marxism. These by
| themselves, if increasing enough, guarantee massive amounts
| of suffering for people. Whereas, the fruit of the Spirit
| in Galatians only does good for people when you increase
| it. Society made their choice.
|
| As in Romans 1, God handed us over to our depraved minds
| and sins to let us feel the full consequences of selfish,
| godless, subjective societies. Everything has gotten worse.
| The solution is to repent and turn back to what God gave
| that worked before. Then, gradually improve ourselves in
| any weak areas. Wr must bake righteous values back into our
| families, businesses, and government. Inward change creates
| positive, outward results.
| quantified wrote:
| When and where did that really ever work? Evidence
| please. The bible says nothing about America. I assume
| that abolishing slavery was where we turned away from
| biblical principles.
| nickpsecurity wrote:
| You don't even really need it. You can go right to the
| roots.
|
| Let's compare two sets of things on a basic level.
|
| 1. You know God will judge what good or evil you did at
| the end of your life. You factor that into your
| decisions.
|
| 2. You think we're an accident, nothing matters, people
| are just over animals, actually just chemical reactions,
| universe itself disappears in enough time, nothing
| matters in the long term unless you say so, and no
| accountability for any horrible thing you did.
|
| Which is more likely to lead to righteous behavior? Which
| is more likely to lead to destructive behavior?
|
| Next set are Christ's basic commandments vs the world's:
|
| 1. Love and obey God first. That means truth, justice,
| avoiding self-destructive behavior, family, and good work
| ethic. From there, love others as you would yourself in
| all your interactions with them.
|
| 2. Do whatever you want to whoever you want. It might be
| limited by whatever is popular at the time which will
| change. The Devil has most media focusing on
| individualism over family, squeezing max profit out of
| everything, and chasing pleasures with reckless abandon.
|
| Which of these logically creates more good? Which leads
| to more damage?
|
| I think we could stop there. The consequences of just
| those differences in believes are tremendous. Those in
| set 2 are currently doing the most damage in all areas of
| life. They include people who identify as Christian but
| don't live like it. Lip service.
|
| Whereas, my first-hand experience with hundreds of people
| following Christ and Biblical teaching is that it's
| working. Their problems often come from sin, not
| obedience.
| bittercynic wrote:
| I haven't observed any correlation between belief in God
| and righteous or destructive behavior. Seems like most
| theists and most atheists try to live the virtues you've
| described as best they can.
|
| I'm an atheist, and I do my best to live those virtues
| because it's just the right thing to do, and because it
| feels better than the alternatives. I don't think I'm
| exceptional in not needing a final judgement to make me
| want to be kind, honest, work for justice, live with
| integrity, etc.
|
| Much respect to my theist brothers and sisters, and
| please consider that your atheist brothers and sisters
| are worthy of respect as well.
| wvenable wrote:
| There is nothing less moral to me than the idea of people
| only doing good because they fear punishment.
| CobaltFire wrote:
| The number of wars and genocides that have resulted from
| arguing over whose god is the right one dwarfs all other
| ills.
|
| Get that fixed and then maybe I'll listen.
| jazzyjackson wrote:
| the disagreement over holy matters is not typically the
| cause of violence, just a convenient uniform to wear to
| tell ally from enemy
| silverquiet wrote:
| As an American Millennial, all my life I've seen
| Christians who talk about love and charity on Sunday, and
| then work the rest of the week to lower taxes on the
| rich, shame women, and get as many guns into as many
| American hands as possible. Ultimately, they found their
| political apotheosis in Donald Trump, who seems to be the
| physical manifestation of the deadly sins. If he was
| created in a lab by Atheists to prove that Christians are
| hypocrites above all else, they could not have done a
| better job.
|
| I'd suggest that if they want more Americans to live the
| values preached by Jesus, they should try starting with
| themselves. I don't know how many people they have turned
| into Atheists with this behavior, but I can say for sure
| they did for me, and I suspect they have alienated many
| others as well.
| matteoraso wrote:
| >America was prosperous as the Bible said it would be.
|
| The book of Job was written specifically to denounce the
| idea that morality means that you'll prosper.
| alfalfasprout wrote:
| This is the reason I've always been a detractor of purely
| relying on "data driven decision making". Being data driven
| is great... if paired with intuition and common sense.
|
| But what ends up often happening is data-driven myopia. You
| see some statistic that doesn't seem optimal and you end up
| optimizing for that instead of figuring out how it fits into
| the big picture.
|
| Restaurants, at the end of the day boil down to food. You
| serve food. People either like the food or they don't. How
| many customers you get is a function of how much people like
| the food, how competitive the pricing on the food is, and the
| market you're in.
|
| Red lobster at the end of the day suffered from people not
| wanting to pay what they were charging for low quality,
| uninspiring seafood dishes.
|
| People nowadays are struggling more (spare me the CPI data,
| hedonics and other basket adjustments mean the situation for
| most people is quite a bit worse than it was a few years ago)
| and there needs to be a value prop for dining out.
| kiba wrote:
| It's all about information. Some information can be boiled
| down to statistics and numbers, and that's great!
|
| Some cannot be.
|
| The executives who sits in their office are not going to be
| able to smell and taste or care about the food.
| giantrobot wrote:
| > Restaurants, at the end of the day boil down to food. You
| serve food.
|
| To expand on this a little, restaurants serve food _in a
| building_ brought to your table _by people_. If the
| building /table/environment is dirty or just uncomfortable
| people don't want to be in it. If the people preparing and
| serving the food are doing a bad job people won't want them
| doing it. If a restaurant drops the quality of the food,
| environment, or personnel they are going to lose business.
|
| As you say it's the value proposition. I go to a restaurant
| because I want to just pick a food, eat it, and leave. The
| "hard" parts of cooking and cleaning are someone else's
| job. All restaurant patrons are willing to pay _some_
| premium over the cost of the raw ingredients to save their
| time and effort. But as the experience gets worse that
| value proposition starts to erode.
|
| For me and I imagine many people the experience doesn't
| need to be mind blowing. It just needs to be not shitty.
| hooverd wrote:
| What I don't understand is the value people place on
| waitstaff being enthusiastic to serve you. I don't care,
| as long as you they take my order and check on my drinks.
| _DeadFred_ wrote:
| That value proposition is typically that the experience
| be enjoyable. What makes it that varies, hence a variety
| of restaurants to choose from. If I am inconvenienced and
| have to chase down wait staff then that nudges the
| experience to the 'non-enjoyable'. If I run out of
| something to drink while I am eating, that nudges the
| experience. If we are sitting and having after dinner
| drinks/coffee and talking, and are surrounded by dirty
| plates, that nudges. If we just boated to a restaurant
| after a day on the water enthusiastic comes to play (we
| want a happy fun experience). If it's a business dinner,
| enthusiastic could be a detriment.
|
| Glad to be of assistance my friend.
| devilbunny wrote:
| > and are surrounded by dirty plates
|
| AHA! IT'S YOU!
|
| You're the person who has encouraged this bizarre
| behavior where waitstaff come to pull away my plate the
| second they think I'm done. No! Leave it unless it's
| completely empty, I've asked you to take it, or the next
| course is about to arrive.
| Dalewyn wrote:
| But you clearly care about the staff's enthusiasm to
| serve you?
| anon23908203 wrote:
| I feel uncomfortable when people make me feel like a jerk
| for consuming their service, and I would rather opt out
| of the entire dining experience.
| Arubis wrote:
| Data-driven X is a semantic trick to absolve people from
| owning their X and being accountable for it; decisions just
| happen to be the most damaging usage. Let data _inform_
| you.
| papashell wrote:
| I call this metric fetishism
| 1propionyl wrote:
| The catch-22 is that being data-driven means being driven
| by _what data you can measure_. And that is an absolutely
| gobsmackingly fatal flaw.
|
| For a 1000+ page exposition on why this is such a fatal
| flaw see James C. Scott's 1990s tome "Seeing Like a State"
| which addresses precisely this issue with receipts brought
| from fields ranging from agriculture, urban planning,
| politics, family naming systems, and more across at least 4
| or 5 continents and a century.
|
| It's an essential non-partisan read that manages to piss
| everyone off by being a peon to left anarchism in many ways
| while saying "actually yes Hayek was right about
| sensitivity to local conditions" and "actually the NHS and
| NWS are good and sometimes centralized planning isn't the
| worst solution".
|
| I've not seen any direct link between them but I feel like
| you can draw a very firm line between it and Piketty's
| Capital and Ideology. You might think "wait isn't Piketty
| the guy who's completely data driven and publishes stupidly
| large amounts of xlsx files as appendices" and you'd be
| right except in his second book he's leaning far more
| heavily on sociology and just using financial data (much
| imputed from tax records) as support for sociological
| arguments that align very closely in many respects.
| banannaise wrote:
| The problem is that executives will ask "what makes Stardew
| Valley successful?" and never make it to this answer:
|
| A developer who genuinely cares about the quality of the
| game, interacts positively with the community around it, and
| makes decisions that demonstrate his caring for the game and
| the community. Specifically, decisions that often leave
| revenue on the table, particularly in the short term but
| arguably in the long term as well.
|
| That sort of _caring_ is largely impossible for private
| equity, and it 's really hard to successfully fake.
| pradn wrote:
| That's because caring and liquidity/fungibility are at
| opposing poles. People sell cattle but not their pet cows.
| Something like that.
| Terr_ wrote:
| I think there's an even more-overlooked factor that most
| people never get to: Good-old random chance in timing and
| markets and events.
|
| We humans are hardwired to _hate_ that idea, we always want
| an understandable story with distinct causes and effects...
| So much so that we will _invent_ one even for random coin
| flips: "Okay, based on what happened the next one is
| almost certainly heads..."
| outop wrote:
| I think this is naive. When (for example) a private equity
| fund buys a casual dining chain, they will go through how the
| business is run in painstaking detail and try to understand
| exactly what makes the experience 'work' and what changes are
| possible or advisable.
|
| If the olives in the salad don't taste as good or there are
| fewer breadsticks or the lighting makes it feel more relaxed
| or the greeters have more time or the menu gets shorter or
| the desserts arrive quicker or the pasta is less salty,
| that's because someone involved in that decision decided it
| was worth paying more for or not worth paying what they were
| currently paying, taking into account what factors will make
| people change their mind about eating there. There isn't just
| a random dude who sits in a room somewhere and says "let's
| make the food worse" based on his own whim.
|
| If the food gets worse and it just doesn't have that same
| vibe anymore and you don't want to go there next time, it's
| because an expert in marketing or restaurant management or
| food design made an error in their judgement about what they
| could cut, what they should improve, and what they needed to
| keep the same. That, or the change which turned you off
| attracted more customers or more desirable customers who have
| different preferences to you.
|
| Your restaurant changed because its corporate policy changed.
| But the capital structure is totally relevant in
| understanding why _that_ changed.
| ImPostingOnHN wrote:
| _> There isn 't just a random dude who sits in a room
| somewhere and says "let's make the food worse" based on his
| own whim._
|
| Not directly, but only 1 step removed. The dude is saying
| _" let's charge the same or more for cheaper, lower-quality
| food, to make a higher margin so our PE firm makes more
| money"_.
| quantified wrote:
| > that's because someone involved in that decision
| decided it was worth paying more for or not worth paying
| what they were currently paying, taking into account what
| factors will make people change their mind about eating
| there.
|
| Evidently not really taking the factors into account.
| Would the limited partners eat there? More than once?
| outop wrote:
| I don't see the relevance of this. No one eats at Red
| Lobster thinking "this is the exact dinner experience
| that billionaires would design for themselves".
|
| Walmart is a family owned business. Do you think that the
| Walton family buy groceries and home furnishings there?
| McDonald's is a public company. Do you think that its CEO
| and the fund managers who hold the biggest stakes in it
| regularly eat there?
| outop wrote:
| What makes you think that PE equity owners have any
| different incentives to any other chain restaurant owners
| to cut costs and improve margins??
|
| Why would you think that private equity owners would ever
| make things worse to improve margins _without giving
| careful consideration to whether or not the changes will
| make people less likely to spend money at their
| restaurants_??
| ImPostingOnHN wrote:
| Because PE equity owners DO have different incentives.
| It's reasonable to think things that are true.
|
| PE is incentivised to squeeze the business and extract
| the value built up over time, to get large, quick
| returns, even if it destroys the business (they can sell
| the corpse after). A restaurant which delivers regular,
| single-digit restaurant margins indefinitely would be
| considered a PE investment failure.
|
| So, the answer your 2nd question is _also_ "because it's
| true". I'm happy to be convinced otherwise on either
| count, if you think differently.
| outop wrote:
| You've just repeated and rephrased the claim that I
| challenged without providing any evidence or argument at
| all. Your actual answer to both questions is "because I
| believe this".
|
| Can you explain how the math works that PE owners make
| money from discouraging people from going to a
| restaurant, and other owners don't have the same
| incentives?
| ImPostingOnHN wrote:
| I explained the difference in incentives: Restaurant
| margins are a PE failure _[0]_ , that alone would explain
| it. Your framing of the scenario as _" discouraging
| people from going to a restaurant"_ is... less than
| charitable. A better description would be _" extracting
| the value of customer goodwill from the business and
| moving it into their pockets"_. They're PE, they
| prioritize big, fast returns over long-term customer
| value and small, slow returns.
|
| Add to that, the leveraged buyout mechanism that Red
| Lobster went through is famous for siphoning value off
| the target in the form of fees and other schemes, and
| then leaving the empty husk to die under crippling debt
| _[1]_. A clue here is that the 2nd paragraph of the
| article we 're discussing is, "In mid-April, Bloomberg
| reported the _debt-laden_ seafood chain... ", and it
| sounded like they had trouble paying it in part because
| of the rent payments that started when the PE firm sold
| their real estate to pay for the buyout.
|
| Can you explain why you think anything I've said so far
| is untrue? After all, we can't assume a PE LBO executor
| and a small business owner have the same incentives
| unless we have sufficiently convincing evidence to
| support that assumption.
|
| _0:https://www.indeed.com/hire/c/info/restaurant-profit-
| margins..._
|
| _1:https://www.investopedia.com/articles/stocks/09/corpo
| rate-kl..._
| outop wrote:
| You've replied with the same trivial urban myths that are
| endlessly repeated about private equity.
|
| You've compared the incentives of private equity and _a
| small business owner_. Do you think that Red Lobster was
| previously a small business?
|
| Why can't you answer the question on the different
| incentives that apply to different owners of large
| businesses? If a private equity fund can make a profit by
| buying a successful business, discouraging all its
| customers and then "selling the corpse", why can't other
| owners do the same thing?
|
| Why does the company having a large amount of debt change
| the decision a restaurant chain's management makes
| between selling cheap and good food, or cheap and bad
| food, or expensive and bad food, or expensive and good
| food?
|
| Literally everything that you've said about this has been
| handwaving and rumours. Explain the decisions based on
| where the money comes from and where it has to go to, if
| you can (you clearly can't).
|
| You citing Nabisco as the best example of what you
| believe is comical since it's from 40 years ago (and
| famously fraudulent).
| stainforth wrote:
| Do you think private equity funds could have other end
| goals when buying a company?
| outop wrote:
| Other end goals _than what_?
|
| Other end goals than making people happy by serving good
| quality shrimps for a reasonable price? Obviously they
| do.
|
| Other end goals than making money? Of course they don't.
| But neither did Ray Kroc, who was extremely upfront about
| how McDonald's is a business whose strategy is to acquire
| real estate, funded by burger sales. Neither do the
| Waltons, who aggressively cut margins on all their
| products and compete to drive other retailers out of
| business. (Neither does General Mills, who used to own
| Red Lobster, nor Darden Restaurants, the public spin-off
| that owned Olive Garden and Red Lobster, nor Starboard
| Value, the activist investor that pushed for Red Lobster
| to be sold.) None of these companies exists because of a
| high-minded commitment to customer service, or fair play,
| or delicious food.
|
| If turning a viable restaurant chain into a chain that no
| one wants to go to and then selling it is an attractive
| business proposition for private equity, than it should
| be for McDonald's and Walmart too. Unless you can point
| to some specific causal connection between the ownership
| structure and the decision about whether or not a
| restaurant should serve stuff that people actually want
| to eat?
| ImPostingOnHN wrote:
| The example of McDonald's acquiring value through real
| estate, funded by the business, is pretty poingnant,
| considering the PE firm here did the exact opposite: sold
| all the valuable real estate and rented it back from the
| buyer under crippling rent payments, funded by the
| business.
|
| Why did the PE firm do that when McDonald's didn't?
| mattgreenrocks wrote:
| > I saw a Twitter thread arguing how the video game Stardew
| Valley succeeded due to the way it was marketed. Marketing is
| important, but maybe the game succeeded because it was cute
| and had a soul and is fun to play. You can't measure that.
|
| Thought leaders seem to know everything except when to keep
| their mouth shut for once. But I digress...
|
| If firms are being punished for poor quality, then the system
| is working, even with enshittification becoming more
| commonplace. All of the Very Important Business People can
| sit around and scratch their heads about why the market seems
| to change on them when they screw up their offering, and they
| can consult overpriced business fortune tellers to reassure
| them that it was that pesky market's fault, but that doesn't
| change the outcome.
|
| I'll miss Red Lobster's cheesy biscuits, but if they've
| dropped the ball on quality they had this coming to them.
| duxup wrote:
| Quality control and management ... seem to be the secret sauce
| to restaurants and are amusingly unrelated to the actual food /
| recipes and etc.
|
| I too have a few local places that despite being busy and great
| food for ages, suddenly couldn't keep good people working
| there. They were doing great then just fell on their face.
|
| I suspect that they just couldn't adapt to it being more
| difficult to retain / keep good people and everything else
| suffered.
|
| Dominoes Pizza (US national pizza chain), seems to be the
| alternate story, long time bargain pizza chain with poor
| quality.... got better quality pizza and reportedly took off
| again.
| kraquepype wrote:
| This happened to a local sports-bar chain around us. It was
| always decent and our first choice for family nights out, but
| after Covid it went downhill, locations closed, and the last
| location close by just started falling flat... empty even at
| busy periods, no wait staff, declining quality, etc. It just
| up and closed shortly after.
|
| Lately for pizza I've only been ordering from Dominoes,
| mostly because it's sort of cheap but also consistent.
|
| Not fantastic, not bad, but always pretty good.
|
| I hope they keep up with it, whenever I go in they always
| appear fully staffed and in good spirits.
| _DeadFred_ wrote:
| For my poor friends the whole 'emergency pizza' thing was
| amazing marketing. Every other company is actively screwing
| them, increasing rates to unaffordable, shrinking sizes.
| Domino's not only stayed affordable, but said, hey, times are
| though, if you get in a crunch, here's an emergency pizza to
| fill the gap. Friggen' overdraft protection on food for their
| kids. The amount of good will that corporate marketing
| campaign brought in that group I can't even tell you. I'm
| talking about the single dad's working two jobs, moved back
| home with their parents segment. They now feel like Dominoes
| is the only company that hasn't f'd them. They actively talk
| about Dominoes randomly (we guys don't have much to talk
| about but still it doesn't normally fall to discount pizza
| discussion).
| snarfy wrote:
| Yep, it's the food. There are many famous 'food destinations'
| around the world. Usually the line goes around the block. You
| always have to wait, either in line, for a reservation, etc.
| People wait because it's worth it. The food is good.
| ghaff wrote:
| Well, it's could also have become a meme or whatever the
| right term is. There's a lobster roll place in a Maine
| coastal town that always has lines around the block with
| maybe hour waits. There's a place right across the street
| that IMO is just as good--as are a bunch of other Maine
| coastal places you've never heard of.
| partiallypro wrote:
| I used to really like Red Lobster, for the money they were
| quite good. Their cheese rolls are still great. That being
| said, I haven't been in years. Just the other day I went to a
| Chili's, I remember going to Chili's all the time in high
| school and college. Hadn't been in a while. The food quality
| was just so off from what it used to be. I was really
| disappointed. I honestly am not sure what these restaurants are
| thinking. Menu restructuring to cut back portions and also
| quality control is a significant problem. The only "fast
| casual" restaurant I can think of at the moment that has
| maintained its relative quality is Outback.
| 3minus1 wrote:
| > The thing about a restaurant is that you'll always have
| business if the food and service are good.
|
| This is just demonstrably false. Good food and service is no
| guarantee of product-market fit.
| aklemm wrote:
| I'd like to see business schools codify "brand value extraction"
| or "enshittification" as explicitly unethical. Any activity that
| degrades a brand for short-term cashflow--and is reasonably know
| to decrease future business--is necessarily fraudulent.
|
| If that is codified and taught, then journalists can point to
| that in all cases (of which we are overrun). It's pathetic.
| tqi wrote:
| What do you think "enshittification" means, exactly?
| aklemm wrote:
| https://en.wikipedia.org/wiki/Enshittification
|
| In this context (the idea of making this unethical), a brand
| is built on investor money (not profits) and then later
| profits are achieved by cashing out the brand value.
|
| But I'm guessing you knew that and disagree. Care to be more
| forthright?
| munificent wrote:
| I look at private equity as sort of like a bacterial infection.
| The infection may be the thing that kills its host by sucking of
| all of its energy, but the reason the host was infected in the
| first place was because of some other problem that led to a
| weakened immune system.
|
| Private equity firms prey on companies that are already
| struggling. Yes, they take a struggling company and hasten its
| demise. But healthy companies don't end up getting bought by
| private equity in the first place.
|
| In this case, I think dining culture has just changed in a way
| that's incompatible with Red Lobster's brand. It used to be
| considered higher-class fare, but drifted down market like almost
| every large restaurant chain does (see also: Friday's,
| Applebee's, etc.). For a while, it survived on the unusual
| combination of being a nice-seeming sit-down seafood restaurant,
| but not actually that expensive or close to the sea.
|
| But, of course, the way they were able to do that was by cutting
| every possible corner (for example, calling langostino
| "lobster"). Diners today care more about their health and where
| their food is coming from. The post-WWII culture of "we can trust
| big companies because they're successful business" has been
| replaced by "we can't trust big companies because they must have
| grown by doing shady shit".
|
| Frankly, a cheap restaurant in the midwest that lets you eat
| unlimited lobster no longer seems a delightful treat and a hell
| of a lot more like a suspicious food poisoning trap.
| asdfman123 wrote:
| Seems like they exist to basically sell off a brand.
|
| People thinking that Red Lobster is a good place to eat is a
| valuable asset, which can be traded for short-term profits
| until they catch onto what's actually going on.
| JumpCrisscross wrote:
| > _look at private equity as sort of like a bacterial
| infection_
|
| This is honestly fair given bacteria's ecological role as
| digesters/recyclers. There are probably better things to do
| with Red Lobster's locations and people than serving terrible
| seafood.
| banannaise wrote:
| And what's more likely, that they do that or that they leave
| a bunch more dead real estate for at least several years
| while they hold out for more money?
| pfdietz wrote:
| If Red Lobster can't pay their rents then the market is
| saying they should be dead. Presumably the owners of the
| properties wouldn't ask for those rents if that wasn't what
| the market would bear. Of course some properties sit idle
| for a while; there's going to be an optimal rate of that
| that isn't zero.
| braza wrote:
| > Private equity firms prey on companies that are already
| struggling. Yes, they take a struggling company and hasten its
| demise. But healthy companies don't end up getting bought by
| private equity in the first place.
|
| From the finance/economics perspective, what should be the
| ideal replacement for Private Equity?
|
| At least for me they seem like a part of the ecosystem
| responsible for extending the lifespan of some companies and
| eventually maximizing revenue in those that has success, and
| this premium is used to cover the losses in other bets.
| kagakuninja wrote:
| I've been at 2 companies acquired by private equity firms. In
| one case, the company was totally healthy in the niche market
| of software for libraries. The company was sold because the
| owner wanted to retire.
|
| The vampire capitalists did the standard playbook:
| leveraged buyout. transfer debt to the once healthy
| company. extract yearly management fees. fire
| and/or encourage many employees to leave. shift
| maintenance to low cost foreign outsourcing company.
| skimp on R&D and customer support.
|
| In the short term, profits go up. Long term, the once healthy
| company slowly dies, as customers get pissed to the point they
| are willing to incur the cost of transitioning to a new vendor.
|
| Not only was this company once healthy, it had astonishing
| employee retention. We are talking many programmers and support
| people with 20+ years of specialized knowledge. People seem to
| forget how much productivity is lost with high turnover.
| wwarner wrote:
| They keep saying all-you-can-eat shrimp was a bad idea and I
| don't understand how that's possible.
| FuriouslyAdrift wrote:
| We'll always have Long John Silver's. All hail the hush puppy!
| WesleyJohnson wrote:
| LJS was always an extravagant treat when I was a kid as it was
| seemingly more expensive than McDonald's or Taco Bell, and
| further away from where we lived.
|
| When I started making my own money, it was one of my regular
| indulgences.
|
| As an adult, I rarely ever see them anymore. And when I do go
| (it's been years), I'm always left feeling sick to my stomach,
| and yet still hungry. The portions sizes have shrunk
| considerably, even more shrinkflation. The greasiness, while
| expected with that kind of food, it so much worse. The fries
| are soggy, and you hardly ever get any crunchies anymore!
|
| I missed the late 90's LJS something terrible. :)
| quercusa wrote:
| "The food is so bad and the portions are so small!" - Woody
| Allen
| gwbas1c wrote:
| Maybe your standards are refined now that you're older?
|
| My kids _love_ crap food, and I sometimes have to sigh and go
| to places I 'd rather not go because my kids think it's the
| best thing since sliced bread.
|
| Granted, my only experience with LJS are stories from
| https://en.wikipedia.org/wiki/Wayne_Coyne (2nd paragraph,
| "Early Life" section.)
| asow92 wrote:
| Company Man on YouTube did a great job breaking this down about a
| week ago:
| https://www.youtube.com/watch?v=I17aERAQPfc&pp=ygUXY29tcGFue...
| syngrog66 wrote:
| both Red Lobster and McDonald's are on the front page of Hacker
| News currently
|
| ownersip here should wake up before it worsens further
| pfdietz wrote:
| One can blame the private equity investors buying it, but every
| sale requires not just a buyer, but also a seller. The owner of
| RL sold it to this private equity firm for an amount they felt
| was proper. The PE firm got more money out than they put in, so
| they increased the value of the assets. If this meant (in effect)
| shutting down RL in slow motion, then so be it. Sometimes it's
| best to just put a pillow over a company's face and say that's
| it.
| hammock wrote:
| Red Lobster did not go bankrupt because of Endless Shrimp. On the
| revenue side, customers generally have been turning away in favor
| of competing dining options. On the expenses side, the company
| has to deal with high labor costs, expensive restaurant leases -
| and meddlesome PE investors that have led to high leadership
| turnover.
|
| Going into bankruptcy might actually allow them to address their
| debt and operational losses
| heisgone wrote:
| "The thing that private equity does is just unload assets and
| monetize assets. And so they effectively paid for the purchase of
| Red Lobster by selling the real estate,"
|
| They did the same thing with Sears and many others.They short
| sell the company, buy it, sell anything valuable and destroy it.
| RockyMcNuts wrote:
| https://prospect.org/health/2023-05-23-quackonomics-medical-...
|
| Interesting story of how some private equity guys would
|
| - buy hospitals
|
| - sell the real estate for more than they paid for the hospital,
| signing a long-term lease at a high rent
|
| - pay themselves an immediate huge profit. the higher the rent
| the hospital promised, the bigger the sale/leaseback deal, so the
| bigger the profit.
|
| - default, hospital goes bankrupt, the community and the dumb
| patsy who bought the hospital gets left holding the bag.
|
| classic bustout from Goodfellas or The Sopranos, but mobsters get
| investigated, PE guys don't.
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