The “Pat” Answer

The “pat” answer is often wrong.

The “pat” answer is that Red Lobster went bankrupt because of its Endless Shrimp promotion. Instagram abounded in clips of ordinary folk consuming more than one hundred shrimp while flashing a $20 (plus tax) receipt. That must have been the reason.

John Oliver (bless him) and the Last Week Tonight crew investigated more deeply. They discovered the true reason for the demise of Red Lobster — hedge fund malfeasance. Six years ago, the restauranteurs who built Red Lobster from the ground up sold it to a hedge fund for about $12 billion The hedge fund did what hedge funds do. They immediately sold Red Lobster’s buildings and land and got more than their $12 billion back. Instead of owning their buildings and land, Red Lobster now paid big-bucks rent on it every month. Not coincidentally, Red Lobster began losing money, but the hedge fund didn’t care. They recouped their original investment and more.

Hedge funds eventually realize that they are better at financial wizardry and screwing employees than at actually running a business. They ran through five CEOs in less than five years. Those CEOs cut costs by eliminating workers. Wait staff now served ten tables instead of five. Kitchen staff was slashed. This resulted in slower service and unhappy customers.

The coup de grace occurred last year when Thai Shrimp Company was hired to operate Red Lobster. Thai Shrimp made themselves the sole shrimp provider to Red Lobster at a significant profit to them. Then Thai Shrimp increased its profits with the Endless Shrimp promotion.

The hedge fund made out great. Thai Shrimp made out great. Instagram folk got a great deal on shrimp. Meanwhile, several thousand Red Lobster employees were screwed. Ain’t capitalism great?

By Ed Dufton