‘Out of the woods’ is an expression referring to the fact that woods are dangerous places to be. In Hansel and Gretel, two siblings enter the woods and are menaced by an elderly cannibal. In Little Red Riding Hood, a wolf enters the woods and is menaced by a rude little girl. In Walden, a poet enters the woods and is menaced by revelations that we should abandon civilization and live by a pond. It is for that reason that ‘out of the woods’ has come to mean "a return to safety, away from menace and disturbing revelations”.—Lemony Snicket
Following an unpleasant ride on a truck bed, the orphans arrive at the Lucky Smells Lumber Mill, which they saw in the photo of their parents and the secret society. As they arrive, however, they notice that the mill seems to have suffered from a fire.
The trio are brought to the owner of the mill, who calls himself Sir and makes them work at the mill. Upon mentioning their last name, Sir flinches and starts to tell them that their parents were the reason that the town burned down. Unbeknownst to the children, Uncle Olaf is on his way to the mill.
The siblings start to notice that the workers are being maltreated. The workers live in very small quarters, are given very short breaks, are allowed to eat only gum, and are not paid in cash but in coupons. Despite these, the workers seem okay with their situation. While working, Klaus’s glasses are broken, and he goes into town to visit an optometrist named Dr. Georgina Orwell. They notice that the doctor works in a building that carries the same symbol as the one on Count Olaf’s ankle tattoo. Later on, it is revealed that the doctor is Count Olaf’s ex-girlfriend, and she wants the orphans destroyed as much as he did. Orwell later hypnotizes Klaus.
Klaus returns to the mill slightly dazed. Violet notices, and though she wants to do something about it, she tells Klaus to sleep it off. Klaus is no better the next day because he doesn’t react when the foreman (a disguised member of Olaf’s troupe) orders him to use the wood chipper while holding Sunny. Violet manages to say something before anything harms Sunny.
Their work is interrupted when the children are told that they have visitors. At the door is Dr. Orwell and a poorly disguised receptionist named Shirley (who is clearly Count Olaf).
At this point, it is also revealed that the “parents” whose trials have been shown since the beginning of the season are not the Baudelaires.
Despite arguments and the obvious flaws, Sir refuses to see that Shirley is, in fact, Count Olaf. This has been a pattern with most adults whom the Baudelaires have encountered, so they drop the argument and get on with their work. Orwell offers to give the workers free checkups, which allows her to hypnotize them as well. The foreman says a word, and Klaus is back in the trance placed by Orwell. He is made to operate a stamping machine and uses it on one of the workers.
Further investigations lead the Baudelaires into Orwell’s office, where they find out that she has also hypnotized the workers. Violet and Sunny are now more determined to break the trances on the workers and Klaus. Unfortunately, Orwell reaches and hypnotizes Charles, the only adult left who has any sympathy for them.
The Baudelaires manage to clear their parents’ names. As for the other “parents,” they are revealed to be the Quagmires. Later on, a mysterious figure uses the society’s spyglass to set a fire in their home.
That night, Klaus is put back under the spell and is ordered to saw Charles in half. Violet decides that it’s time to move and manages to break Klaus and the workers from their trances. Orwell breaks up with Olaf yet again.
The workers, who now feel all the labor they were put under without fair compensation, force their way back into the mill. Orwell now reveals that she hypnotizes people out of revenge. She attempts to put Sunny in the incinerator, but she trips, and Sunny is caught by Violet just in time. Olaf escapes with the foreman yet again.
The next day, the fire incident is reported, and Mr. Poe comes to collect the children yet again. Now they are transferred to a boarding school named Prufrock. While there, the Baudelaires receive a package, the spyglass of their parents, delivered by Mr. Poe’s secretary.
Where then are the Baudelaires’ parents?
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