Comment by muyuu

I assume Red Lobster preemptively lowered the food grade and the service labour costs to avoid raising the prices in their menu drastically. We've had a wave of very strong inflation pretty much worldwide - or at least wherever there have been covid lock-downs and huge government payment schemes - and for many businesses, especially those that already operated at the margin of profitability, this has been their death knell.

I'm not so sure that Red Lobster would have survived if instead of lowering the quality of the product they'd have just raised the prices by say 80% overnight. I mention 80% because that's how much many hospitality businesses have raised prices in my area in London since the pandemic.

I've seen businesses go bust here that have tried both things:

- lowering quality and raising the prices by less than the average

- maintaining roughly the same quality and service but raising prices drastically

Plenty of examples in my area of businesses just collapsing with either strategy. People simply would not accept the new prices in many cases.

A business that is sort-of a luxury business like those specialised in oysters, shellfish in general, high-end cuisine etc only a very select few have survived. Those that are large chains have suffered the most, because they are not seen as so much of a special expenditure and people would just stop going.

Red Lobster perhaps would have fared better by not reacting and simply raising prices. Who knows, it's easy to make the counterfactual scenario in the abstract.