Comment by matthewdgreen
2 years ago
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."