Have you actually read the article ? It tells a different story:

They wanted Darden to liquidate all of Olive Garden's real-estate holdings and declare a one-off dividend that would net investors a billion dollars, while literally yanking the floor out from beneath Olive Garden, converting it from owner to tenant, subject to rent-shocks and other nasty surprises.

They wanted to asset-strip the company, in other words ("asset strip" is what they call it in hedge-fund land; the mafia calls it a "bust-out," famous to anyone who watched the twenty-third episode of The Sopranos)

The giant slide-deck making fun of Olive Garden's food was just a PR campaign to help it sell the bust-out by creating a narrative that they were being activists* to save this badly managed disaster of a restaurant chain

I think that is the point. That is considered mismanagement. If I'm using a gold as the foundation of a hotdog stand, someone will come along and say that the gold is mismanaged, and worth more as jewelry.

They would be right!

Yes, I did.

Sale-leasebacks are common and perfectly reasonable business strategies.

Generally speaking lease liabilities have a lower cost of capital than other types of debt, so making such a deal can help the company.

None of the decisions described in the post are either unusual or unreasonable from a management team trying to save a troubled company. They were just unsuccessful.

>>> from a management team trying to save a troubled company. They were just unsuccessful.

My take is that they were not there to save the company, but to extract all its assets and let it go.

Sometimes that's the best option.

For who? Was that the best option for the employees who relied on the income? Or the customers who enjoyed the food? There are plenty of actions that are rational from an economics standpoint as long as you don't care about any of the externalities such as human dignity.

Employees have a contractual claim, one that is above shareholders and most other creditors, nothing more nothing less.

By all accounts they are being made whole, and can go off and get another job.

Employees have no more of a right to sell their labor to red lobster than any other of their suppliers has a right to sell their products.

Ultimately a company exists, and should exist, solely for it's shareholders. Anything else leads to waste, grift and mismanagement.

The article tells a fairly clear story of business consolidation and monopoly. The chains had buying power, so suppliers consolidated and removed that power. Then the suppliers became so strong (with the help of PE) that they bought and looted the remaining value from the chain. Ultimately the loser at the end of this story will be the consumer, who has no market power, and any new small restaurants that develop to replace RL.

This is the same story that explains why health care is ridiculously expensive in the US, why we’re unable to supply our military at prices comparable to other nations, why we’ve seen so many price increases across the economy in recent years, etc. Consolidation and unchecked market power abuses. It probably ends with a new Depression that triggers reform, if we’re extremely lucky.

I dont think it is as one dimensional as that. You are also watching the breakup of a vertically integrated megacorp that owned many restaurants, and underlying real-estate.

It doesn't have to be one-dimensional, but some dimensions should concern us more than others. Businesses fail all the time for loads of reasons and we shouldn't necessarily try to prevent that. But the structural reasons behind this one are driven by market power and consolidation, and the result of the takeover will be an increase in those measures: these are the effects that generalize beyond "Red Lobster is a complex one-off."

> I'm continually amazed by how much outrage normal and perfectly reasonable business strategies generate in the general public.

The general public doesn't give a rat's ass about business strategies and nor should they.

If you really enjoyed patronizing a particular business and then they go out of business or change in such a way as to remove what you enjoyed, you're going to be a bit upset about that regardless of how sound the business decision was.

> None of this is unusual or in any way wrong.

You're completely correct. Everything described in the article was completely legal.

The things that are illegal, like overfishing protected waters, the company doesn't do. Instead, they lobby to make it legal, then do it.

See, all above board. It's all legal. Why would anyone get upset about a company that isn't breaking the law? If it were wrong it would be illegal, right?

While maybe not illegal (yet), there is a lot of deception of retail investors throughout the process:

* astroturf campaign against the company

* fake boost in profits from massive asset liquidation

Once the stock is run up, equity cashed out leaving morons who only had access to financials and not “the plan” holding the bag. It smells like a combination of fraud and insider trading, but perhaps the SEC can name it something more appropriate.

> perhaps the SEC can name it something more appropriate

They can name it "what half of our employees did before working here".

I'm just following the logic in the original comment. To wit:

All of that is (barely, probably) not illegal, and because it is not illegal, it therefore is normal, perfectly reasonable, and not in any way wrong. The law wasn't broken, therefore nothing untoward happened.

If they managed to touch their toe over the line of illegal, then it was fraud and bad and they're criminals who should be prosecuted. But since what they did might be barely not quite fraud, it's perfectly normal and acceptable, right?

/s

Did you read the article? The mismanagement was the supplier buying the purchaser with the most negotiating power and bankrupt them (by extracting as much equity as possible). This leaves purchasers with less negotiating power and the ability to raise prices. It was intentional.

While I can’t vouch for the accuracy of the strategy, the comparison with there health industry jives with my own experiences. Insurance companies buying up hospital chains to compete against pharma and gutting them in the process. When it’s hospitals shutting down instead of Red Lobster maybe people will understand.

No, I think Doctorow is explicitly arguing the opposite? He is saying that it wasn't Thai Union that killed the chain, but the previous (PE) owners. Even the title says that.

It's funny because I just got out of a professional training session where the instructor told us sale-leaseback agreements are a common business practice and helped a few companies he worked for secure long term growth.

Let's use a metaphor HN might understand: sale-leasebacks are a bit like migrating to the public cloud from an on-prem setting, and in some cases the government pays you for migrating to the cloud. It helps you balance capital expenditure among other things.