Hello, Yves here. The decline in quality, which many are calling “crapification,” is now infiltrating the burger industry, exemplified by Shake Shack. I vividly recall the early days of Shake Shack, where long lines were a testament to its popularity. Unfortunately, that is no longer the case.
By Lynn Parramore, Senior Research Analyst at the Institute for New Economic Thinking. Originally published at the Institute for New Economic Thinking website
The Heart of American Culture: The Hamburger
Few items embody American culture quite like the hamburger, rivaled only by apple pie.
Simple enough to enjoy with one hand yet cherished by gourmet chefs, this iconic dish shines in diners, drive-ins, roadside stands, and restaurants where customers universally agree: no matter what else they order, they have come for the burger. Be it sliders, cheeseburgers, smashed varieties, or vegetarian options, the burger retains an approachable and democratic quality.
The Financialization of Food
It is disconcerting to realize that, increasingly, burgers are seen as financial assets. While you munched on your sides, those in Wall Street’s C-suites were calculating leverage, margins, additional acquisitions, and exit strategies.
Something feels amiss — a smaller patty, a rushed staff, a restroom in disrepair. The dependable experience that once made these places worth revisiting seems diminished — and so does your burger.
Such changes often indicate that a private equity firm or a group of activist shareholders, intent on maximizing profits, is lurking in the background. The relentless financialization of America, a trend economists like William Lazonick have long cautioned against, is now adversely affecting our dining experiences — shifting the burger industry away from quality food and lasting businesses toward extracting maximum profits from companies that are cornerstones of the American economy.
The Profit-Driven Deterioration
Why do finance professionals seem intent on ruining this cherished emblem of our collective prosperity? The unfortunate truth is that there are few barriers to their predatory practices. Flawed U.S. corporate and securities laws allow them to exploit businesses while transferring costs to everyone else.
Private equity firms are at the forefront of this trend. Brendan Ballou, a former DOJ special counsel for private equity, has labeled these obscure entities as “a perversion of capitalism created by our legal system.” They have sunk their resources into a range of recognizable restaurant brands, from big national chains to regional favorites. The food website Ravenous lists numerous restaurants impacted, featuring major burger names like Burger King, Sonic, Wendy’s, and Whataburger.
Customer Suffering and Quality Decline
Feedback from consumers is far from positive. Reddit hosts a community of Whataburger fans voicing their discontent regarding changes to the Texas-born chain amid its rapid expansion. Complaints about subpar fries, sluggish service, and, ominously, a strange taste in the beef, have become commonplace. Many link the decline to the company’s 2019 acquisition by BDT Capital, which was founded by ex-Goldman Sachs banker Byron Trott. After decades of family control, one Reddit user lamented, “It went to hell when it was sold.”
Similarly, Wendy’s customers are posting online complaints about “paper-thin” burgers, soggy lettuce, and lower-quality ingredients. A fan of Wendy’s acclaimed Baconator described the once-crispy bacon as akin to chewing bubble gum. One frustrated customer remarked, “Something is always cold or wrong or soggy or stale,” while another cryptically mentioned that the company has made poor food decisions for the past 20 years — a timeline that aligns suspiciously with Wall Street’s increasing influence.
The Insatiable Pursuit of Profits
Nelson Peltz’s Trian Fund Management, which has held a significant stake in Wendy’s for nearly two decades, has reportedly considered taking the company private. The other side of this is highlighted by Wendy’s CEO Bob Wright, who recently acknowledged that “cost and efficiency” decisions have impacted food quality. One Reddit comment succinctly advised, “Just reverse everything they’ve done in the last 20 years…”
On a recent visit to a Shake Shack in Midtown Manhattan, I anticipated the usual blend of crispy fries, a cold drink, and a perfect burger. Instead, I encountered a broken ice machine, slow service, cold fries, and a burger that arrived on a bun drenched in someone else’s sauce. My disappointment was palpable. Et tu, Shake Shack? This decline comes amid pressure from activist shareholders such as Starboard Value, which is pushing the company to prioritize shareholder returns.
One manager shared their personal conflict of pouring their heart into the brand, only to watch as staffing cuts made quality service impossible. Another former employee claimed, “They fire and hire based on their stock price” and “make ingredient decisions for the same reasons.”
Financial Engineering and the Burger Landscape
The overall trend signals a troubling convergence of disgruntled consumers, unhappy workers, and corporate cost management that leads to a compromise of quality.
Burgers attract financial engineers due to their low ingredient costs, standardized recipes, and broad customer appeal. A successful burger establishment can easily be distilled into a model of greater locations, franchises, and resulting profits without any groundbreaking innovations. The strategy for financial firms revolves around reducing menus, monetizing real estate, pressuring suppliers, and using clever pricing tactics, all aimed at enhancing revenue by mere cents. To Wall Street, the burger is a cash-generating machine — customer loyalty becomes a valuable economic asset.
And it’s not just the major chains; regional favorites are also facing this trend. For example, Killer Burger, known for its elaborate Peanut Butter Pickle Bacon Burger, got a new financial partner in 2020 when Village Family Capital stepped in, claiming to pursue aggressive growth strategies. Private equity has also made inroads into beloved local establishments like Austin’s Hopdoddy, Southern California’s Burger Lounge, and Texas’s MOOYAH.
When Customers Leave
What happens if fed-up customers simply stop patronizing these establishments? Wall Street has a contingency plan for that. By the time consumer dissatisfaction peaks, firms may have divested their stakes, refinanced their investments, or moved on to their next acquisition.
A Historic Perspective on Burger Entrepreneurship
Historically, entrepreneurs would thrive by genuinely building restaurant businesses. Consider Herbert N. Slotnick, who expanded his family’s drive-ins into successful hamburger operations in New York. By the mid-1970s, Slotnick had established a regional chain with over 150 locations, which eventually transformed into Burger King franchises. He was known as a hands-on leader with genuine respect for his employees. However, as Wall Street’s influence grew, the ethos of longevity and quality began to wane, replaced by a focus on rapid profits.
Enter Matt Perelman and Alex Sloane, two ambitious Harvard Business School alumni eager to join the restaurant industry without any operational background. In 2013, they launched Garnett Station Partners, a private equity firm targeting the acquisition and growth of franchise businesses. Despite facing challenges in their early endeavors, they eventually partnered with veteran franchisee Ray Meeks to build Cambridge Franchise Holdings, which they later sold for shares instead of cash. This deal signaled a shift in the operational landscape, showcasing a trend of rapidly scaling businesses followed by a strategic liquidation.
Wall Street’s Allure and Customer Discontent
As Wall Street tightened its grip on Burger King and other chains, complaints from customers grew regarding inconsistent quality and poor service. In response, Burger King outlined plans for improvements, including revitalizing its classic Whopper. Unfortunately, when it came to the ingredients, particularly the beef, improvements were less likely.
The situation worsened as Wall Street began leveraging AI for profit maximization. Wendy’s made headlines with plans to explore AI-driven menu changes that led to consumer fears of surge pricing and manipulation. Although the CEO later clarified intentions, a lack of transparency regarding the plan left many customers uneasy.
Hope Amidst the Decline
However, not every burger chain is succumbing to these pressures. In-N-Out Burger, noted for its commitment to fresh ingredients and never-frozen beef, has resisted private equity’s pull in favor of gradual growth and maintaining quality. President Lynsi Snyder-Ellingson has emphasized that outside investments don’t align with her vision for the company.
A few politicians are also beginning to address these issues. Senator Elizabeth Warren recently gained attention for her video titled “Why Food Chains Taste Worse and Cost More,” in which she attributes declining quality to private equity’s profit-driven approach. Her initiative to revive the Stop Wall Street Looting Act aims to hold private equity firms accountable for their incurred debts and practices.
Taking Back Control of Quality
Americans do not have to give up their love for burgers. However, reclaiming power over who profits from them is crucial. While Wall Street relies on a passive consumer base, consider supporting independently-owned establishments that prioritize quality and employee satisfaction over financial gains. If you notice a decline in your favorite burger joint’s quality, investigate whether private equity or shareholders are involved. Most importantly, advocate for legislative changes that prevent these firms from burdening businesses with debt while reaping profits, all while leaving consumers with burgers that lack substance.
