Fast-growing restaurant chain Grill Concepts outsourced its accounting functions to feed the needs of shareholders and customers.

by FAOT Staff

With expansion at the top of its goal wish list, the family of Grill Concepts restaurants faced the challenge of a growth mandate, while controlling costs and avoiding any degrading of the quality cuisine the chain was known for. To that end, CEO Philip Gay started evaluating every aspect of the company to determine best processes that would act as the foundation from which it would grow.

Because Grill Concepts wanted to align actual and theoretical costs—which would, for example, enable the company to know exactly how many pounds and dollars of filet mignon or potatoes are in a menu item—one of the first areas Gay looked at was the accounts payable (AP) function. He knew that companies that have successfully done this have lowered food costs without affecting the quality, a move that would not only increase shareholder value, but also help the company more effectively manage its cash and streamline accounting processes.

At that time, the company had three full-time AP staff in the corporate office and bookkeepers at each individual restaurant managing 75,000 line items a month and 4,200 vendors. Beyond the data consistency issues, invoices were being paid multiple times, and tracking invoice status was a cumbersome task. In addition, the company was light years away from its ultimate goal of aligning actual and theoretical costs. “When growing a company, you need data to help you make calculated decisions. Two years ago, we primarily relied on a paper filing system,” said Gay.

Having tried to build an internal AP team with sub-optimal results, the company decided to look to outsourcing. Initially, the goal was to outsource only the payroll function; however, when IQ BackOffice offered a complete accounts payable solution that included payroll processing, invoice payment and tracking, and a solution to manage costs, the company jumped on the provider’s offering in 2005.

Seamless Support
IQ BackOffice implemented a new accounts payable process and web-based technology across the entire chain in less than six months—all while the company was experiencing a 20 to 25 percent year-over-year growth rate.

Best practices were developed to ensure that retrieval of data was just a click away. Invoices are all faxed and automatically scanned into the system, eliminating the company’s massive physical files. In addition, IQ BackOffice ensured that the new AP function was Sarbanes Oxley-compliant, significantly reducing the time and costs associated with managing this government mandate.

“Now, if a vendor calls up and says they have not been paid, we can give immediate status on the invoice,” said Gay. “The IQ BackOffice system enables us to protect our supplier relationships, manage cash flow and remain compliant—feats that were impossible with our previous approach.”

The next step was to align actual and theoretical costs. With 75,000 line items and 4,200 vendors entered into the system, each individual restaurant now has access to detailed data that help them lower foods costs without affecting quality. The company can now quickly determine the root cause of inefficiencies—whether it’s incorrect portions, over-ordering, or some other internal issue. The end result is higher margins without letting the quality suffer.
To measure its success rate, Grill Concepts used that quality as its key metric. By using IQ BackOffice for its AP functions, the company improved data entry to 99.9 percent accuracy on a line-item basis, a significant increase from when the function was done in-house.

Heading Overseas
Grill Concepts is looking to IQ BackOffice to continue to support its rapid growth in the U.S., as well as help a possible expansion into other markets such as Europe.

“With IQ BackOffice on our team, we are able to support our growth goals, while protecting our reputation for quality. The end result is the ability to please shareholders with better profits and our customers with continued quality food— two goals that would normally conflict,” said Gay.