Red Lobster, overbaked and stuffed with shareholder value - my dish olive garden darden restaurants

Editor's note: A year later-
Steven pilstein's business and economics column is back today.
It will appear every other week in business on Sunday.
Pierce Stein is also a professor of Public and International Affairs at George Mason University.
I went to Red Lobster for the first time last week.
I ate lobster at the bar.
To better understand the financial plot drama that is being played on Wall Street and the company's board of directors.
This is a case study of all the mistakes of the current version of "shareholder capitalism.
"The Red Lobster, along with the Olive Garden, the Long Horn Steakhouse and The Capital Grille, is part of the country's leading leisure restaurant operator, Dutton restaurant
Restaurant.
Last spring, Barington Capital, a small activist hedge fund, bought a 2% stake in Denton, as these funds have been doing, submitted a restructuring plan to Darton Management to raise the stock price by 65%.
The plan calls for a further three of Denton.
Focus on efficient listed companies
A mature, slow
Brands such as Red Lobster and Olive Garden are growing, and the other is younger and faster
Growing brands, as well as real estate investment trusts that own and manage a broad portfolio of Darton.
Darden's management hired Goldman Sachs to help it consider how to deal with the challenge and finally announced a week before Christmas that it would spin off Red Lobster as an independent company, buy back shares with debt, slow expansion of other brands and extra cash --
All of this is to provide "enhanced shareholder value", which is a polite euphemism for raising the stock price.
The focus has failed to satisfy Barrington or other aggressive hedge funds that tend to make a profit at the same quarry.
Second, Starboard Value, which now owns a 5% stake in Denton, has come up with a more aggressive plan that includes "monetizing" by selling existing restaurants to franchisees ".
Starboard made it clear that Barrington merely hinted at a threat: it would launch a campaign to expel directors and management of the company if it did not succeed.
In order to taste the delicious irony of this situation, a little bit of Darton history is needed.
It began in 1970, when General Mills, which produced a mixture of cereal, pearlesbury flour and Betty Crocker brownie, decided, if it diversify into other industries with different cycles, cost pressures and risks, it can bring more growth and greater stock price stability to investors.
In the next decade, it acquired the toy company (
Creator of the game
And monopoly)
Clothing Company (
Eddie ball and Talbot
The idea is that access to cheap capital and advanced management will enable it to build them into a new big sector.
William Darton's red crayfish chain was acquired by General Mills in 1970 and continues to serve as an executive as the company expands its restaurant division.
Wall Street likes such a joint venture.
Until they realize that they have a knack for acceptance --
Run the company, expand too fast, and there is too much bureaucracy to hold them back. So by the mid-
In the post-80 s, Wall Street began to ask companies to focus on core products where they dominated and sold all the other products.
Many departments are sold to the private sector at discounted prices
An equity company that quickly reversed the situation and re-listed with high profits.
Other companies are spun off to shareholders as independent listed companies.
The reason is once again "to increase shareholder value ".
"When the Darton restaurant split up in 1995, it had successfully launched the Family Italian restaurant Olive Garden, and everything went well on the way to the major shopping malls in the suburbs of the United States. Using well-
The tested operation formula provides a good value for the budget.
Conscious suburban residents who rely on national TV commercials and price promotions to drive traffic.
Wall Street loves the Darton story.
Until it realized that the market for red lobsters and olive groves was saturated.
The kind of desire to win the valuation of stock prices (
Incentive Pay)
Only growth companies can do this, and Darton has begun to implement a strategy to acquire smaller, potentially nationwide chain restaurants.
In 2007, it bought the Long Horn Steak House and Capital Grille for $1. 4billion.
At 2011, it's Eddie V's, higher-
End fish restaurant worth 59 million dollars.
In 2012, it was a house in the yard, an American bar.
Style chain, priced at $55 million.
In each case, Darton executives promoted the acquisition as a way to achieve sales and revenue growth, expand the company's customer base and leverage operational synergies, this is all about enhancing shareholder value.
Unfortunately, synergy and efficiency have never been achieved for Darton (they rarely do)
Although the growth of new brands is not enough to offset the decline in sales and profitability of mature brands whose size is much larger.
So Darton found himself on Wall Street.
In this land, it cannot be neatly classified as a pure growth company or as a mature dividend --paying stock.
It is only a matter of time for analysts to downgrade the stock, and the radical hedge fund has stormed, and the company will be forced to carry out another round of financial engineering to "release" the unconfirmed value of its assets, and "increase shareholder value ".
The press release announcing Darton's new strategy, as well as the minutes of the management's conference call with Wall Street analysts, reads like a parody of financial mumbo --
Nowadays, management buzzwords and public relations communication have become part of corporate communication.
During the conference call, executives were privately excited about what they thought was unfair public criticism, which was brought to them by activist hedge funds, they lined up to announce how "excited" and structured they were about the new strategy.
While "shareholder value" is mentioned in almost every paragraph, there is little or no mention of improving customers' food or services or sharing any benefits of restructuring with the front line --
The minimum income for 20% of front-line employees is $2.
30 hours before tip
The first thing to know about these never
The end of the contest between buying and splitting is that they create a long term with little (if any)
Economic value.
If running slowly
Red Lobster is very different from fast food.
More and more LongHorn steaks, there is really no reason that Darton can't be organized, so that each brand or similar brand, self-management, centralized technology, procurement, provide marketing and real estate services to brand managers who want to take advantage of any benefits or efficiencies they may offer.
While there are indeed some investors who want to buy growth stocks, there are also some who like the stock to offer stability and dividends, and there are many investors who are looking for a combination of growth and income that should be smart enough, ability to assign different valuations to different departments of the company.
These endless reorganisation is nothing more than a scam made up to generate short-term benefits.
Regular trading profits and investment bank fees by Wall Street wise men, as well as overpaid executives.
It has little to do with providing good value to customers.
This has nothing to do with providing workers with good jobs.
Ironically, it doesn't even produce a better long-term return.
Long-term shareholders.
This is the last refuge for weak and unimaginative business leaders who are unwilling or unable to succeedfashioned way —
By recruiting and motivating loyal employees to provide quality products and services at competitive prices.
As for the lobster baking, the portions are large and the taste is fresher than I thought, but a little bland. The freshly-
Grilled cheese rolls are very popular.