The Destructive Greed of Private Equity Firms; a California Day With No COVID-19 Deaths–Coachella Valley Independent’s Indy Digest: May 23, 2024

Indy Digest: May 23, 2024

Red Lobster has been in the news a lot as of late. First, there were the stories about how much money the restaurant lost after it made its “endless shrimp” promotion a permanent fixture. Next came closure announcements, and then, finally, a bankruptcy filing. (The Palm Desert location remains open as of this writing.)

Initially, a lot of this news coverage cited the money-losing “endless shrimp” maneuver as the reason for the bankruptcy filing. But thankfully, in recent days, a number of stories have popped up explaining that “endless shrimp” really wasn’t the culprit at all.

Here’s a primer on what really happened. It can all be summed up with two words: 1) Greed. 2) Mismanagement.

Eater’s Amy McCarthy reports:

In 2014, its parent company Darden sold Red Lobster to a private equity firm called Golden Gate Capital for $2.1 billion. That sale helped Darden pay off $100 million in debt and fueled significant growth for its other restaurants, like Olive Garden, in the ensuing years. Even when COVID hit in 2020, the company still managed to maintain positive cash flow as other restaurants floundered. Red Lobster, though, continued to struggle.

But … it wasn’t because of the shrimp. Following the sale of Red Lobster to Golden Gate, the chain’s real estate assets were also sold off, which meant that the restaurants now had to pay rent on these locations to their parent company. As such, the company was stuck in leases for underperforming restaurants that it couldn’t afford. As with other private equity forays into industries like retail and media, Red Lobster’s new private equity owner saddled it with tons of debt.

In August of 2020, Golden Gate Capital sold Red Lobster to Thai Union, a Thailand-based seafood company that owns a number of seafood brands, including canned tuna brand Chicken of the Sea. Once Thai Union took over, Red Lobster insiders say that the company engaged in extreme cost-cutting measures and did not place enough emphasis on innovation … Just four years later, in January 2024, Thai Union was ready to get out of the restaurant business, citing “sustained industry headwinds, higher interest rates and rising material and labor costs.”

We’re seeing the same thing happen in the newspaper business. If the selling-off-real-estate-for-cash maneuver sounds familiar, it’s because Gannett, the parent company of the local daily, has been doing the same thing all over the country … including here.

Private equity firms are great for making money … but that’s the only “good” thing about them. As McCarthy so eloquently writes: “While most diners have fond memories of gorging on endless shrimp—my younger brother and his high school football buddies once (temporarily) closed down an East Texas location after eating 377 shrimp—and snacking on Cheddar Bay biscuits, Red Lobster’s ownership doesn’t doesn’t give a whit about your fond memories there. It also doesn’t seem to care much about the hundreds of people who found themselves without a job when the restaurants suddenly closed their doors. The chain’s current ownership cares only about money and stemming the losses caused by its own poor decision-making. Putting the focus on the shrimp quietly absolves those who were actually involved in its downfall.”

I disagree with McCarthy on one point here: I am not sure if Red Lobster’s various owners, taking the long view, would consider their actions “poor decision-making.” Selling all of that real estate made Golden Gate Capital a lot of money; so what if the actions caused the company to eventually fail? They already have their money in the bank.

—Jimmy Boegle

More News

• We write a lot in the Independent about events happening at the Palm Springs Cultural Center … because there is a LOT going on there. However, the nonprofit venue is in a world of figurative hurt right now; they report that their air conditioning system is broken, and in need of repair or replacement. If you have the means, consider clicking on the link above, please, and helping them out!

• A climate researcher, writing for The Conversation, is saying that the Atlantic hurricane season could be a doozy: “If the National Hurricane Center’s early forecast, released May 23, is right, the North Atlantic could see 17 to 25 named storms, eight to 13 hurricanes, and four to seven major hurricanes by the end of November. That’s the highest number of named storms in any NOAA preseason forecast. Other forecasts for the season have been just as intense. Colorado State University’s early outlook, released in April, predicted an average of 23 named storms, 11 hurricanes and five major hurricanes. The European Centre for Medium-Range Weather Forecasts anticipates 21 named storms.”

• Speaking of hurricanes … why has there been so much dust in the Coachella Valley air? Our friends at the Palm Springs Post report that one culprit is previous flooding: “Have the winds gotten measurably stronger? No, said Alex Tardy, warning coordination meteorologist for the National Weather Service out of San Diego. But other factors are at play to make windy days seem worse for everyone. According to Tardy, the frequency of recent winds is due primarily to the weather pattern over the last year that has extended into spring. That typically means rain along the coast but winds on our side of the mountains. He said that though the frequency or intensity of the winds hasn’t increased, it might be more disruptive. … ‘The reason for some of the increased dust is the historical August 2023 flooding in the north end of the valley,’ he said via email, referring to the storm that hit the desert after Tropical Storm Hilary made landfall further south.”

• The federal government is accusing Live Nation/Ticketmaster of violating anti-trust laws. NBC News has the details: “The Justice Department filed a lawsuit Thursday seeking to break up Live Nation, the parent company of Ticketmaster, alleging it has hurt consumers and violated antitrust laws by exercising outsize control over the live events industry. The suit, filed in the Southern District of New York and backed by attorneys general for 29 states plus Washington, D.C., alleges that Live Nation has engaged in practices that harm the entire live entertainment industry—from artists and fans to venues and startups seeking to break into the business. It says Live Nation directly manages more than 400 musical artists, controls 60% of concert promotions at major venues and, through Ticketmaster, controls roughly 80% or more of major concert venues’ ticketing—plus a growing share of the resale market. ‘Live Nation relies on unlawful, anticompetitive conduct to exercise its monopolistic control over the live events industry in the United States at the cost of fans, artists, smaller promoters, and venue operators,’ Attorney General Merrick Garland said in a news release.”

• Wired magazine reports that fixes to make it harder to steal modern cars haven’t really fixed anything at all: “For at least a decade, a car theft trick known as a ‘relay attack’ has been the modern equivalent of hot-wiring: a cheap and relatively easy technique to steal hundreds of models of vehicles. A more recent upgrade to the radio protocol in cars’ keyless entry systems known as ultra-wideband communications, rolled out to some high-end cars including the latest Tesla Model 3, has been heralded as the fix for that ubiquitous form of grand theft auto. But when one group of Chinese researchers actually checked whether it’s still possible to perform relay attacks against the latest Tesla and a collection of other cars that support that next-gen radio protocol, they found that they’re as stealable as ever. In a video shared with WIRED, researchers at the Beijing-based automotive cybersecurity firm GoGoByte demonstrated that they could carry out a relay attack against the latest Tesla Model 3 despite its upgrade to an ultra-wideband keyless entry system, instantly unlocking it with less than a $100 worth of radio equipment.”

• And finally … the San Jose Mercury News reports the state just had a major positive COVID-19 milestone—although the milestone reveals that the disease is far from gone: “It was a regular Tuesday in spring, sunny and warm, and a little foggy at the coast. But as April 2, 2024 came to a close, a silent victory emerged: The day had passed without a single Californian dying from COVID. Over the next several weeks, as death certificates were filed and processed, it would become the first day without an official COVID death since March 18, 2020, the day before Gov. Gavin Newsom announced a statewide stay-at-home order. ‘That’s quite a notable day,’ said Dr. Monica Gandhi, a UCSF infectious disease expert whose passion for working with HIV patients brought her to the Bay Area at the height of the AIDS epidemic. It reminded her of another time, decades ago, when the Bay Area Reporter declared that there were ‘no obits’ to run for victims of HIV for the first time in 17 years. ‘It was just such a beautiful significant day for us in history.’”

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