Originally published at: https://boingboing.net/2024/05/21/crustacean-corruption-scheme-revealed-in-the-wake-of-red-lobster-bankruptcy.html
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“Crustacean corruption” doesn’t require a scheme. It just happens. Whether you want it to happen or not.
21 Likes
There was a real shell game going on there.
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Per year? Per month? That doesn’t sound like a loss that would sink the company…
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This seems to underplay the PE standard “buy” a company, take out a monstrous loan to cover the cost of the purchase, pay yourself a huge dividend and walk away when the inevitable collapse occurs. One can’t challenge an essential part of the business environment.
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I agree it underplays that part of it, but it’s also an interesting added layer to the grift. “Let’s force the company that we already strip-mined and loaded with debt to buy the product our main business sells to squeeze out every drop before it inevitably goes belly-up?”
I think it also helps to highlight that, rather than being the “sad consequence of mismanagement after private equity acquisition”, bankrupting Red Lobster (and every other brand that’s gone through this) is the goal of the process.
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A bust out. With shrimp.
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Those business practices are not kosher.
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Sounds like a very shellfish thing to do
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While the media is focusing on the shrimp scam (because it produces punny headlines), the majority of value is being extracted by more mundane methods like selling off the restaurant’s real estate to a property management company and then leasing it back to them.
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I thought that was crustacean carcinisation?
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The shrimp must flow?
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And yet people still lend the money to the PE owned company. Given the PE track record why would any commercial bank OK a loan to a PE controlled entity?
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I seem to recall this was the same tactic that brought Sears to its knees.
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The trigger for this wasn’t shrimp, it was PE buying the company, selling the real-estate out from under the restaurants to make the deal happen, requiring them to rent it back, then jacking up the rent until the stores couldn’t afford it. PE then saddled Red Lobster with a (shrimp?) boatload of debt, as they do, followed by selling a quarter-stake to one of it’s suppliers. Its debt was then restructured under a deal financed by an arm of, wait for it, a sister company of that supplier. Red Lobster was then in full-on panic mode and FIVE DIFFERENT CEO’s since 2021 threw anything against the wall to increase revenues, including the shrimp special. It didn’t work, and the music stopped without enough chairs for everybody.
https://www.msn.com/en-us/money/companies/red-lobster-s-demise-was-never-about-the-endless-shrimp/ar-BB1mJhFT
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I’ve never been able to comprehend the appeal of endless shrimp. Honestly, there is no food I would want “endlessly”, but the premium nature that is associated with shrimp is just mind-boggling to me. I don’t dislike shrimp, but there is just nothing that special about it. It’s just freaking shrimp. 
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While sometimes a legacy company goes out of business because of changing markets and consumer preferences, a lot of times it is because of shitty business people fucking companies over for short term gain. Sometimes it is a combination of the two.
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“Shitty business people” implies “people who are bad at running businesses.” These people are unfortunately very good at what they do — which is “extract value” from a thing for their own gain, and then leave the hollowed out corpse for someone else to clean up. (See also: the entire history of colonialism, particularly in Africa)
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Beat me to this.
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