On The Money: Sharing the Load

Outsourcing can save time and money, but define expectations upfront.

By David Farkas, Senior Editor -- Chain Leader, 1/1/2007

Ramey Millet, CFO for Flat Rock Grille, a six-unit casual-dining chain based in Charlotte, N.C., discovered outsourcing saved her from some menial tasks but not from learning a hard lesson about how to go about it wisely.

How and why did you decide on outsourcing?

We’re currently at six units but developing an infrastructure to support 40 or more Flat Rock Grilles. Part of that process was a cost-benefit analysis of outsourcing accounting, payroll, IT and marketing. In each case there were clear economic and quality advantages.

How much are you saving?

It would cost us an additional $35,000 to $40,000 annually per store to keep these four functions in-house. This includes not only salary and benefits for staff but also software, hardware, tech support, office space, etc.

Was there an immediate advantage to management besides cost?

Yes. It allowed us to become a flatter and more collaborative team-managed company.

You mention "more collaborative" management. How do you fit in?

Without outsourcing, I’d be spending lots more time making sure the transactional accounting functions were happening as they should. Also, without the labor specialists at our [professional employer organization] to turn to for advice, we’d spend a lot more time dealing with those issues internally. The main advantages it gives you are the ability to focus on the needs of our restaurant operators and to do more strategic planning.

Sounds great, but how do you make sure you’re getting what you pay for?

Here’s what’s most important: Define expectations clearly upfront before you sign the contract. Be very specific about time lines, deadlines and deliverables. Address what happens to pricing and expectations as more restaurants are added. Evaluate the expertise—we wanted labor attorneys on staff at our PEO and CPAs at our accounting provider.

You had problems with your first outsourcing firm. In hindsight, could you have avoided that?

We and they could have done a better job predicting how challenging it would be for them to shift from providing QSR accounting services to servicing full-service restaurants. We could have also asked better questions about the possibility that our provider would begin to use overseas staff. Once the overseas plans were implemented, service quality dropped. Time zones, language, terminology and other challenges made the relationship untenable.

Lessons learned from that experience?

Understand your provider’s plans for growth, their current and anticipated staffing levels, and how that will impact how they service your account. In our new outsourcing relationship, we addressed these issues on the front end.

Finally, does having six units make it easier to outsource so many tasks?

It’s definitely an advantage to begin with six units and grow the relationship going forward as opposed to implementing it in a larger organization. We’ll grow over time with our providers, and they will grow with us.