Q &A with Sam Borgese, president of the Catalina Restaurant Group.

by Jeff Bizzack

The Catalina Restaurant Group (CRG) serves breakfast, lunch, and dinner to more than 32 million people a year. With two brands—Carrow’s and Coco’s—Catalina has 190 units covering several western and southwestern states. It is a special success story and outpaces industry growth year after year. The group is frequently recognized for the quality of food at its Coco’s units, the family environment at its Carrow’s brand, and service excellence throughout all units. CRG is also known for its innovative use of technology driving operations. In this interview, Sam Borgese discusses the strategic issues driving vendor selection and service-provider relationships.

JB: When did you begin your relationship with your service provider? Which back-office processes did you outsource?

SB: The Catalina Restaurant Group has outsourced F&A as well as payroll for several years. We selected our service provider when we purchased both Coco’s and Carrow restaurants from Denny’s. We needed a quick-deployment resource that could seamlessly assume responsibility for F&A and payroll. This enabled us to focus on transitioning restaurant operations to our new company and maintain a high level of customer service.

JB: In addition to ensuring a smooth transition of services, was there a strong business case for outsourcing?

SB: The business case for outsourcing F&A and payroll is compelling. It’s an easy choice for management when you consider the cost of hiring staff for an internal HR and F&A department, as well as the cost and risk of implementing an ERP platform with financial applications to process information and facilitate transactions. This would be very costly and involve a high level of risk, especially when you need to quickly build these capabilities and ensure a smooth transition of services.

JB: When you select an outsourcing service provider, what criteria do you use?

SB: We use similar criteria for selecting outsourcing providers across several service areas. First and foremost, the outsourcer must be fully compliant and embrace all the best practices of an industry or governing agency like ISO 9000. This indicates that the outsourcer has made a strong commitment, beyond the words of their business plan, to fully adopt key practices like continuous improvement or Six Sigma-quality initiatives. You need to feel comfortable that the outsourcer is implementing best practices on an ongoing basis to ensure their service levels and technical competence exceed what you could have achieved internally. Second, you need to take the time to analyze how applicable outsourcing is to your business. The outsourcing of certain functions is not necessarily the best solution. You need to evaluate the solution that works best for your organization over the long term.

JB: In selecting and working with a BPO provider, how important is the management team?

SB: Before becoming the president of Catalina Restaurants, I was CEO of two technology companies. I knew how important it was to have service providers with a deep management team and strong leadership. I knew first hand how the leadership team could influence and drive the decision-making process. In the F&A and payroll areas, CRG’s service provider has a very strong leadership team. I don’t think there is a better management team in the industry.

JB: If you look back over the last several years, what kind of benefits have you received from your outsourcing relationship?

SB: The HR component really jumps out and is a huge differentiator. By using our service provider, we didn’t need to build a finance and accounting or payroll department. Instead, we leverage the expertise of our service provider, who is used to delivering service excellence. We don’t have the administrative issues related to running our own operation, and as we expand the number of restaurant units we own, it becomes even more essential. It enables us to expand without worrying about adding administrative staff. What also is important to us is the constant communication between our service provider and our firm. It’s a transparent connection between our strategic finance group, our CFO, our controller, and treasury person. I see everyone working as one team.

JB: How important is the technology capability of your outsourcer in delivering strategic benefits to you?

SB: Our service provider recently implemented a new ERP system that significantly expands their ability to provide cost effective and comprehensive services. That is so important to us. It is huge. In our highly competitive marketplace I would not want to be served by an outsourcer relying on a legacy application.