Dental cleaning requires dental tools and anesthesia.
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.
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.
The actual cost to the clinic of a dental cleaning is ridiculous for how often it needs to be done.
I still hate it though.
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.
https://freakonomics.com/podcast/do-you-know-who-owns-your-v...
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?
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.
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.
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.
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.
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.
https://www.theatlantic.com/ideas/archive/2024/04/vet-privat...
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 £100k. 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.
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.
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.
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.
> 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.
With that said, the tax code and employee law could be improved so there are stronger guardrails to protect some stakeholders more.
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.
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)
Obviously deal terms are important, but that action on its own isn't stripping for the sake of stripping.
What is "stripping for the sake of stripping" of not this?
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.
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.
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)
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
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.
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.
They were taken private a few years back, and after a long slow period they're expanding again.
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.
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.
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.
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.
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?
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.
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.
If it's a normal night and I see our waiter playing with their phone or chatting with the bartender while I unsuccessfully try to wave them down for a drink refill, I'll remember that when I'm paying the bill.
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.
I agree. I uh, hope they don't do the same thing to Olive Garden, or Applebee's. That would be tragic..
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.
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.
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.
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.
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.
False. A well run restaurant might make 10% profit. But they pay double or triple that to the staff and managers.
Business profits, if any, accrue to owners.
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.
But people can eat whatever they like/can afford/find convenient.
Only Olive Garden and Chipotle have managed to give me a stomach ache.
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?
(What %age of eastern european enterprises got long term investment in the 1990s?)
It's not obviously bad from a finance point, it's just significantly shorter term thinking than the original owner.
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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...
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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.
All reward, no risk.
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.
The short-sightedness and greed is destroying so much.
Schumpeter tells us the market operates by creative destruction. Properly killing companies is just as important as properly starting them.
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.
Short term gains over a long, steady market is the current driving mentality of Western capital.
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.
https://www.theguardian.com/business/2023/jul/10/as-thames-w...
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.
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.
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.