Joann’s Closure
For over 80 years, Joann has been selling fabrics and crafting supplies to Americans. Now, they have filed for bankruptcy and are closing all of their approximately 800 locations nationwide in by the end of May 2025. Aside from the loss of jobs for hundreds of people, Joann has been a place for crafters and sewers to find accessible and affordable products for a long time.
While the impending closure has led to discussions among the cosplay and crafting communities about finding smaller and locally-owned businesses, not everyone has access to such resources. Smaller shops, while sometimes providing higher quality goods, are also often more expensive. Thus, for hobbyists and cosplayers, that up-charge can make their hobbies inaccessible. In Chicago, I am lucky that I know of a local place to get yarn for my knitting and crochet projects, and I know of some local fabric places such as Textile Discount Outlet and New Rainbow Fabrics. However, in many places across the US, smaller, local joints either do not exist or are expensive boutiques.
But how did we get to this point? Why is Joann closing down? A USA Today article from February 13, 2025, lays out a timeline of events that have led us to this point. I suggest reading it if you get the chance, but the key takeaway here is that Joann was bought by a private equity firm called Leonard Green & Partners in 2011 and eventually went private in March 2024.
And that is the key: private equity is gobbling up beloved American businesses left and right.
Private equity: Apex economic predator
Private equity firms are responsible for the closing or near-dissolution of companies such as RadioShack, Payless Shoes, Toys R Us, Red Lobster, and now, Joann.
Per The Atlantic and The New York Times, private equity firms buy up companies, makes them private instead of publicly traded, and in theory allows the firms find ways to boost profits before selling the company for more a big profit later on. However, private firms are not regulated the same as public companies. They are not required to disclose information about their finances, liabilities, operations, and business risks. With about 20 percent of American corporate equity managed by private equity firms as of 2021, this means that over 20 percent of business is done in the dark, unregulated, with no information shared with customers and the government. To quote The Atlantic, “One-fifth of the market has been made effectively invisible to investors, the media, and regulators.” Yikes.
Hiding in a cloud of mystery, companies can make irresponsible and foolish decisions without legal consequences, but the economic consequences can be disastrous to a large degree. Private equity “eats up companies and spits them out” as hollow shells of what the company used to be. Private equity firms repeatedly prioritize short-term gains over long-term value creation. Which is, frankly, poor business practice. The closure of company after company these past few decades has led to massive layoffs, economic disruptions, and limited access to goods and services for the American people.
As Vox reported in 2020, researchers from California Polytechnic State University found that about 20 percent of public companies that go private through buyouts from private equity firms go bankrupt within 10 years. A study from the University of Chicago further found that employment decreases by over four percent two years after buyouts from private equity, and wages fall nearly two percent. As someone pursuing a career in human resources and consulting specifically to prevent the exploitation of workers, this infuriates me to no end. Profit over people is a harmful model, but it’s the bread-and-butter of private equity.
And with private equity’s predatory fee system, even if a company goes belly-up, the firm will end up with more profits, as they still get millions or even billions of dollars during the buyout itself. So, investors in private equity firms can make a pretty penny while employees and consumers are left in the lurch.
Aside from the loss of jobs and reduced access to goods and services, the private and mysterious nature of these firms allows them to take cost-cutting measures which can lead to poor outputs. For example, according to The New York Times, the private equity firm Carlyle Group purchased nursing home chain HCR ManorCare in 2007 for six billion dollars. Most of that money was borrowed, and ManorCare, not Carlyle, would have to pay it back. Carlyle sold ManorCare’s real estate to quickly recoup some money, but it forced ManorCare to pay hundreds of millions of dollars in rent per year to be in buildings it used to own.
The real kicker though, in my opinion, is the fact that ManorCare laid off hundreds of its workers and enacted various cost-cutting programs which led to an increase in health code violations, human suffering, and mistreatment of elderly patients in their care. I cannot imagine the workers who spent their lives dedicated to helping others were particularly delighted by this. I also bet people who had family in these facilities struggled. Either they couldn’t afford to move their family elsewhere, or they had to find an alternative somehow.
By 2018, about 10 years after the initial buyout, ManorCare filed for bankruptcy with over seven billion dollars of debt, more than Carlyle had bought them for. However, Carlyle had already recovered the six billion dollars it had invested and more through fees and scraping from the profits of ManorCare. Carlyle avoided legal liability for its actions and even managed to dodge lawsuits from the families of ManorCare residents who suffered or passed away in the facilities.
What happens next?
Until the government steps in and passes (and enforces) legislation to prevent predatory practices from private equity firms, I expect companies to keep getting consumed by these multi-billion-dollar firms. People will keep losing wages and jobs, customers will keep losing access to goods and services, the economy will keep suffering, but the investors will keep getting richer. Unfortunately, I do not expect any government in the near future, as the current administration has already gutted many regulatory bodies, and the Republican party has a history of supporting private equity (often because the high-ranking execs of these firms are either Republican politicians, their friends and family, or donate massive amounts of money to the politicians).
So, the future is uncertain and rather bleak. I can hope that more companies develop smart and safe business practices to avoid having to sell out to private equity in the future.
References
Joann stores closing: All locations set to shutter after deal approved
Joann stores closing: Why the retailer filed for bankruptcy, again
The Secretive Industry Devouring the U.S. Economy – The Atlantic
Opinion | Private Equity Is Gutting America — and Getting Away With It – The New York Times