Posted on 06/26/2024 4:06:39 PM PDT by Jonty30
Down with capitalism!
That’s what the story is saying. Red Lobster used to own most of its land, but the hedge company bought the company and changed the arrangement so the restaurants had to pay them rent and the rent was the final nail to bankrupt them.
Getting the restaurant out of the way allowed the hedge to then sell the land because the land was valuable enough to make it their worthwhile to lose the restaurants.
https://www.nbcnews.com/business/consumer/private-equity-rolled-red-lobster-rcna153397
Private Equity and preferred supplier deals rolled them .
If you push a philosophy far enough, it can go too far.
Would you like some company to buy up every square inch of the United States and charge everybody an impossible rent to pay?
The hedge fund seemed to me to be somewhat predatory, as they sometimes tend to be.
Romney was a master at buying up businesses and sending the best parts of those businesses to CHina and then sell what could not be sent overseas.
I find that MOST chain restaurants are leased property with the landlords having built them to suit SO the landlords have like a 30 year escalating lease the first four years the lease are really cheap after four years the business should be stable THEN the lease escalates EVERY 2-4 years right now with the cost of food, labor, AND all insurances I am quite sure they are drowning!! Look for Chilis, Applebees, and MOST chain restaurants to be doing the same unless something happens to change their overwhelming costs right now!! Many restaurants that grew very quickly used this build to suit with landlords HOWEVER the increases on the leases are quite substantial AND who knew they would be paying huge increases in insurances, labor, and food is OUT OF CONTROL!!
It’s one thing to buy a business and eliminate the worst parts to make the business lean and competitive, but hedge funds don’t do that. They will buy the business and sell it for parts.
Out here, it's almost impossible to find a meal at a sit-down restaurant for under $20. And with the added 10% tax and 15-20% tip, these meals have become too expensive.
I agree. My point is that to blame Red Lobster VC because the land under the restaurants is more valuable than the restaurants themselves is not a valid argument.
That kind of “Capitalism” is why Revolutions happen. It’s not the kind of Free Enterprise that made this country great.
The best innovation would be better-quality food--like USDA choice meat and real butter on baked potatoes instead of oleo. My local Sizzler hosts patriotic and MAGA events, but the food isn't that great.
I disagree. The land became valuable enough to close the entire chain, so they land could be sold.
If the hedge fund wasn’t so concerned about quick profit they could have explored how the chain could work, but they did not do that. They just closed the chain and sold the land. The land was the reason for buying the chain.
It’s because the dishwasher got a raise from $15/hr to $20/hr. So they had to close. /sarc
The Sizzler here in Grants Pass, Oregon is still open and doing vey well, they’re always crowded.
Pretty good food, too. They also have a great salad bar!
That was recent minimum wage increase. The Red Lobster was sold and gone before that.
I do agree that the high wages for low skills is going to destroy the restaurant industry.
“Out here, it’s almost impossible to find a meal at a sit-down restaurant for under $20. And with the added 10% tax and 15-20% tip, these meals have become too expensive.”
Yep. If you’ve been to a Third World county (like most of Europe, now) and enjoyed eating out there, you may want to ask the locals if they enjoy all the great offerings they have. Most likely the locals will say something like: “They’re really for tourists, we might go to those places for birthdays, etc., but there is NO WAY we can afford going on a regular basis.”
The idea of ‘going out’ for dinner several times a week, or even once a week, is now pretty much over in the US for 95% of the population due to our ‘living wage’ and (expected/demanded) ‘tips’, and so the closure of chain after chain of restaurants should not surprise anyone (and admit it, females, you bought into that propaganda regarding the ‘living wage’).
You apparently missed mine and others previous messages where we said the VC/hedge fund most likely does not own the land. Just about every Red Lobster is in the parking lot of some kind of mall. The land belongs to the Mall owner. Closing the restaurants will yield zero profit for the VC/hedge fund, and could even incur a cost for termination of the lease.
That is the case.
They’re also far from alone.
That equity fund doesn’t have enough capital to own the land.
They most likely have between $10-20 billion in assets under their management, with multiple payouts to multiple parties on those assets.
The reason chain restaurants are getting hammered is they were heavily capitalized which led to over expansion during the cheap money era.
This led to saturation and redundancy at the same time the labor pool was tightening.(Better pay & compensation in other sectors for labor.)
Eventually, we will see the chains invest heavily in robotics and AI.
You already see this in McDonalds.
Applebee's and Chili's will be next. Your waiter will be a 🤖.
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