Which is how they run the business for short term profit. This is confusing, but itโs a thing. It being confusing is half the point, because if all the average Joes out there understood how it all really worked, theyโd demand reforms so fast your head would spin. Itโs essentially a paper vehicle for transferring non fungible value into money in the bank, and then using chapter 11 protections to bilk the other creditors (sometimes including employees with bounced paychecks). They can then sell the Red Lobster business again (probably at what looks like a huge loss, which they can then write off their taxes, to offset profits from other entities they own). Then they can lease the land to the new business owners. Or they can restructure Red Lobster in some other way that allows them to keep squeezing profit out of it (converting to franchising, then finding suckers to buy the individual locations, for instance).
In this whole process, theyโre probably raising food prices while lowering quality of both ingredients and service and deferring essential business expenses (like maintenance and equipment upgrades). Because the money is disappearing into rent and the business looks like itโs struggling.
Source: I used to be a business analyst for a VC company.
So, Iโm curious: do you feel soiled?
I once worked for a company that I, in retrospect, wish I hadnโt. It wasnโt as bad as a VC firm (in my opinion), but it did leave me feelingโฆ dirty. not so bad that Iโve committed my life to charity, but it certainly has changed and drastically limited the kinds of companies at which Iโm willing to apply for jobs.
It was a long time ago and yes.
They actually hired me away from college. I was like 21, it was during the first .com boom. They offered me $76k a year, which seemed like so much money, plus commissions (I got a bounty essentially, if I found them a good opportunity). One of the partners had encountered me in another context and was like โI donโt need people with skills man, I need smart people who wanna learn.โ At first I did it part time, for $30 an hour, 'cause I was going to school, but after a month they were like โWe need you full time man, youโre gonna make so much money, you donโt need a degree.โ They said I was gonna make 5 times my salary off commissions, but I didnโt even come close to that. Some guys I worked with there did, but I didnโt have the predatory instinct for it.
The worst part was the blatant misogyny. It was like some Wolf of Wallstreet shit. Me and the other analysts would be working and the partners would be looking at Russian mail order bride websites or talking about how the senior partner was โgonna hire a bunch of hookers and take 'em out on his speed boat.โ No women worked there, and the partners would talk about how โWomenโs brains are smaller, and we canโt hire them cause they take longer in the bathroom, so we miss opportunities.โ
The next worse part was the enforced caffeination. This job ruined coffee for me to this day. First thing in the morning, the boss would stop by your desk and if you didnโt have a big cup of coffee from the cafe in the lobby, heโd just quietly set caffeine pills in a paper cup by your mouse. This would continue throughout the dayโฆ the message was โif youโre not heavily caffeinated during work hours, youโre not sharp enough and weโre gonna miss opportunities.โ โMissing opportunitiesโ was an unforgivable sin. There was even one time one of the partners told me he was โkeeping my commission from one thing Iโd done, to make up for this other opportunity that Iโd missed.โ I was too young and unconfident to stick up for myself. In retrospect, I think that was a test, and I failed.
Everything was a $$$ dick measuring contest. The partners had a whole pecking order of who was worth more and who was making more money. Iโm not sure how they divided income amongst themselves, but there was a lot of โYou keep what you killโ going on, but they also had a lot of joint venture entities too. Each partner had their own LLC, then there were two other LLCs, one of which was the entity my paychecks came from, but we ended up doing work on all kinds of stuff. They were into stocks, bonds, derivatives, tech startups, medical startups, real estate and they would create new entities all the time. Who my commissions came from depended on which entity was benefiting off whatever work I was doing.
Iโve been vague about what the work was, because the work was of different varieties, but it was all some variety of research. Like โWatch the financial news and see if thereโs day trading opportunities?โ or โAre there any new companies doing IPOs this week that we should invest in?โ or โRead these 10 startup business plans and tell the partners which ONE they should look at more closelyโ or โCome with us to this party this medical device company we invested in pre IPO is throwing, to celebrate their IPO. Donโt drink, donโt do the cocaine, donโt bother the strippers (thatโs what the partners are there to do), your job is to stay sober, talk to people and โfind opportunitiesโ for us.โ or โGo to this startup pitch and see tell us if itโs a company you think we should look into.โ or โGo out and check out some of these different start ups, take a look at their operations, meet their executives, tell us if you think WE should talk to their executives.โ There was also โHereโs a new entity weโre thinking of setting up, to do X thing. Read through the plan and think about ways to isolate risk and maximize profit.โ
I was there for about 14 months, and I did all of the above.
If youโve seen โEnron: The smartest guys in the room.โ youโre gonna have a good idea of the kind of culture Iโm talking about.
In the end, I got let go because I โmissed too many opportunities, so we canโt keep you aboard. You understand.โ I think they could also tell I was really unhappy. I was NOT one of the golden boy analysts who went on to become junior partners. I never got rich. Now I do IT consulting and software development. Iโm much happier.
In fact, this experience really turned me into much more of an angry socialist than I might have been otherwise. The fact that our society not only lets those guys get away with being who they are and doing what they doโฆ but rewards them for it? Some of the BIGGEST rewards around? Thatโs a major failing of us as a culture and as a civilization.
The exact details are complicated but the general idea is simple. Three different things tend to happen in setups like this.
First, one company can own multiple shell companies, it can borrow in one of the shell companies and funnel that to one of the other shell companies, and walk away with money after declaring bankruptcy.
Second, a company can take out a large loan and then pay some of the bosses, promising to pay back the loan knowing that they never will.
Third, a company can use multiple shell companies to create just the right tax setup such that most of those companies donโt have any taxable income even though combined they definitely would.