John Bayley, CFO of Sizzler USA, explains why, like a steak on the grill, you must give an FAO deal your full attention or risk getting burned.

by Jeff Bizzack

In the casual dining market where new restaurant concepts come and go, Sizzler is one of the great brands with a heritage of serving families across the globe. Founded in 1958, it will celebrate its 50th anniversary next January. While the restaurant chain has modified its menu over time to meet market desires, its “best value” focus has never changed. During the fall of 2005, the company outsourced to a single provider. John Bayley discusses lessons learned and the value to be generated from an outsourcing partnership.

JMB: What led Sizzler USA to outsource finance and accounting, HR, and payroll?

JB: At the time we selected our service provider and began the transition process, Worldwide Restaurant Concepts (WRC) was negotiating the sale of Sizzler and other restaurant properties to Pacific Equity Partners. We had already outsourced our payroll to another service provider, so we had experience with the outsourcing process. Our new service provider proposed that we expand our outsourcing program to include HR and finance and accounting, and bundle these services with payroll to generate additional cost savings and operational efficiencies. The cost savings related to outsourcing all three functions in an integrated manner were significant.

JMB: What do you need to do when selecting an outsourcing service provider?

JB: You need to dig down much further than just review slide decks. You need to have your own internal processes well documented. This will be of great benefit as you spend time evaluating their systems and getting to know the people the outsourcing provider proposes to handle your business. Allocate time for a demo, and play with it as you model different scenarios. Challenge the outsourcing provider to develop a detailed transition plan with realistic milestones and sufficient time to ensure a smooth transition.

JMB:: Is there something inherently more difficult in the F&A process that would make it a more complex transition?

JB: I think so. The finance and accounting function is not as clearly defined as payroll. Payroll is more of a standardized process that does not vary much by company size or industry. Payroll also has a sense of immediacy as no business can afford the damage of a missed payroll or a payroll that is messed up. We have 1,500 employees, and if there is even the smallest problem with the payroll, all 1,500 employees can turn into CPAs and expect us to immediately address and solve their problems. Your outsourcer knows this and builds the process flows and system back-ups to ensure quality control and service excellence.

JMB: How important is it to have specific industry experience?

JB: I don’t expect the client service team to know how to cook a steak, but industry knowledge is very important. When I talk to the controller at the outsourcing provider, I know he understands our business and the key issues that drive our financial performance. He knows things like the property tax calendar and how you should deal with local agencies. This is the kind of information you have to know to be able to complete a valid account analysis.

JMB: Over time, do you expect to achieve more than cost savings benefits?

JB: Yes, we do. For example, in the HR function, our outsourcing provider has a lot of expertise in system maintenance, so we do not have to worry about maintaining our payroll system. They have deep domain expertise and know all the taxes and regulations. They have designed a process that gives us flexible reporting and, importantly, they work well with our outside vendors.

JMB: What would you say to your peers considering outsourcing?
 
JB: Look at the implementation. Make sure that the non-accounting users, like your operations people, understand the transition plan and know the timetable. Communicate to the staff, and give everyone a roadmap so they understand the on-boarding process. Determine the time you would need in your worst-case scenario, double it, and plan accordingly. Recognize that it can be a big event in an organization, so don’t stretch or extend the staff with other strategic initiatives or projects at the same time.

We tried to close the financial transaction, complete the company restructure, and start an outsourcing program at the same time. I wouldn’t suggest anyone try to do that. You need to give the implementation of your outsourcing program the focus it needs to make the transition and implementation less complicated. When you develop your project plan, think about the whole first year, including the year-end audit, and what you will need to complete it. Spend additional time with the staff that will remain in your group, so you can clearly define their new roles. Most importantly, don’t be in a hurry to capture all the savings at first. Make the necessary investment to ensure that you are building a long-term platform that is flexible and can meet your business goals.