Understanding the Impact of Private Equity: The Case of Jersey Mike's

0:00 Blackstone Buys Jersey Mike's for $8B

Jersey Mike's, a popular sandwich chain founded in 1956, has been acquired by Blackstone Group for $8 billion. While it has a strong reputation, the acquisition raises concerns about how private equity firms operate and profit, even when companies underperform.

0:57 History of Private Equity

Private equity began in the mid-20th century, gaining prominence in the 1980s due to aggressive financial strategies. Firms like Blackstone use borrowed money to acquire companies, often saddling them with debt. This tactic has led to the downfall of several well-known brands, as private equity firms prioritize extracting value over long-term success.

2:44 How Private Equity Destroyed Red Lobster

Red Lobster's acquisition by Golden Gate Capital for $2.1 billion exemplifies the destructive tactics of private equity. The firm stripped valuable assets and forced the company to lease its properties at inflated rates, ultimately leading to bankruptcy. This pattern shows how private equity can extract profits at the expense of the business and its employees.

4:48 Private Equity's Dirty Playbook EXPOSED

The video outlines the steps private equity firms take to ensure profits:

• Leverage: Using borrowed money, with the acquired company responsible for repayment.
• Collect Fees: Charging management fees regardless of performance.
• Strip Assets: Selling valuable assets for quick cash instead of reinvesting in the company.
• Cost-Cutting: Reducing workforce and product quality to boost short-term profits.
• Exit Strategy: Selling the company or taking it public, profiting even if the business fails.

9:22 Fighting Back Against Wall Street

Despite the challenges posed by private equity, individuals can support local businesses and ask critical questions about ownership. Awareness and community support are essential for countering the influence of large private equity firms like Blackstone.