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Outsourcing Lends a Helping Hand

Operators of upstart restaurant chains share how they take advantage of outsourcing.

By Maya Norris, Managing Editor -- Chain Leader, 11/1/2008

Small restaurant companies outsource services as a cost-effective way to grow. It gives them the expertise and manpower they need while allowing their executives to concentrate on the restaurants. Chain Leader spoke with operators about the functions they outsource as they expand their upstart chains.

Randy Schoch, founder and CEO, Desert Island Restaurants, Scottsdale, Ariz.

I've always believed in outsourcing [culinary]. When you're looking to make a very diversified, interesting, fun menu, it's pretty hard to find one or two people who do those things correctly and then can also run restaurants. You're much better off to pay someone to give you the recipes and then get the guy that can execute them on a consistent basis as opposed to bringing in a creative person, having them on salary at all time.

Now when you get to 50 restaurants or 100 restaurants, you can have those two different type people, but in the beginning, I think it's better to bring in the culinary expertise from outside and have it executed internally.

Chuck Darrow, president, Indigo Joe's Sports Pub and Restaurant, Laguna Hills, Calif.

The biggest one we outsource [is] field visits. They'll check everything from specs to health department violations. They do at least quarterly visits to each store. The [field visits] costs about $500 to $600 per visit. It's about a three-hour visit, and they do a pretty good job with it. So it's really cut down a lot on our travel expenses. And with the [25] stores that we have open right now, that's well over 100 visits per year we're supposed to make. We have a staff of 10 people at the corporate office. So you're going to be on the road forever then if we did that. The best thing for us is, it frees our time up to go out and spend time in stores that really need help.

Bob Lin, president, Abuelo's, Lubbock, Texas

I know people use brokers or they have internal real-estate departments, but what we did two years ago is, we retained an outside company to do a mathematical site model for us. They actually score your existing locations to find correlations in what are successful or less successful sites. And then what you do is, every time you look at a new market or a new site, they pull from third-party databases having to do with population demographics, retail demographics, restaurant statistics that a third-party compiles. That coupled with the company's own scoring of the site will render a score and a comparison of this site against your existing sites. A minority of restaurant companies do it, but I think you will find a growing larger number of companies do it.

Jim Frye, founder, chairman and CEO, Italian Oven Cafe, West Palm Beach, Fla.

We have outsourced our kitchen and equipment design, site selection, lease negotiations, marketing, public relations, and accounting and auditing. It keeps you focused on what you do best. It keeps me focused on taking care of my customers.

Whenever you've got all of these departments and you have meetings ad nauseum to manage all these departments, all of a sudden you're running a company. Restaurants are really very personal kinds of businesses. When you start treating it like a commodity, that's when it loses its cache.

The most apparent attribute of outsourcing is cost. But the most important reason to do it is so that you keep your eye on the work at hand. You keep your eye on the ball, and the ball is making sure those guests are taken care of and enjoy their experience enough to come back.

Danny York, chairman, Santa Fe Cattle Co., Brentwood, Tenn.

Probably the most important function that we outsource is purchasing. Being a small chain, you don't have the buying leverage of a large chain. We have a guy that handles a number of small chains. He combines our purchasing power with somebody else who has eight or 10 or 15 stores, somebody else that has 20, or whatever. And at the end of the day, a lot of us use the same products. And at the end of the day, he's got a 100-store chain that he's going to a purveyor or manufacturer with saying, “Hey we want to buy 8,000 cases of yeast rolls instead of 400.” And he gets a better price for us.

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