Last year, the international restaurant chain Jamba Juice partnered with Capgemini to leverage business process outsourcing (BPO) functions such as administration, finance and accounting support and IT maintenance. The partnership developed after pressure from an activist investor called for the company to reduce costs and seek opportunities to advance growth. While this approach becomes more and more prevalent, Jamba Juice saw the opportunity through this unique partnership to cut the company’s administrative expenses substantially. These outcomes will drive the advancement of the group’s growth as it seeks to add another 500 locations over the next five years.
Jamba is not the only chain to recognize the benefits of BPO. In fact, the whole sector is starting to view outsourcing a stack of internal functions as a source of cost savings efficiencies, and competitive advantages. There are several drivers behind this quick turn to BPO:
Although overall spend continues to grow, there are considerable pressures to reduce costs. Quick Service Restaurants (QSR) is a highly competitive and innovative business: there is also constant disruption, acquisition and diversification. Customer loyalty is not a given, as enticing new offerings are appearing all the time (2015 is supposed to be the year of ‘restless palate syndrome!’); if a brand stands still, a competitor will literally have its lunch. There are also a number of rising or unpredictable costs such as fluctuations in core food expenses, real estate in growth markets, and labor (particularly with new healthcare legislation in the US).
The challenge for QSR chains is to manage these pressures, while ensuring they do not get pushed to the “front of house” either in the form of higher prices or a reduction in quality or quantity which will send customers elsewhere. Thus, it makes sense to leverage the advantages in the back office via BPO.
Because restaurant chains often grow very quickly, either organically, grocery chain developed products, or through franchising, fairly large organizations often have a back office that was originally designed for a much smaller business. The systems they will have in place may come from multiple contractors and have grown up in a very ad hoc way. For these reasons, the back office function may not be suited to agility and innovation and can make gaining efficiency and streamlined productivity difficult for franchisees and new employees.
The top line savings – often around 30% of back office costs – are just the most obvious benefit. Outsourcing can also cut risks, improve compliance, reduce IT downtime and give clients greater insight into their business via visualized analytics. BPO solutions are also highly scalable and mean customers only buy what they need. A fairly simple process of leveraging what already exists in a BPO provider’s solutions with a proven record of increasing shareholder value.
Smaller companies or sub-divisions can discover an affordable way of gaining access to the kind of back office only large organizations can afford to run in house. For restaurants that want to combine the agility and innovation of a start-up with the reporting and compliance demands of a large centralized organization, Capgemini has developed the Virtual Company. This squares the circle of agility and innovation and is particularly useful for companies which are moving into new countries, setting up new divisions or experimenting with sub-brands.
Perhaps the greatest benefit of BPO though is the access to thought leadership which solves the Target Operating Model and systems inhibitors as a flexible domain expert long term. It also makes sense to leverage a partner who has the proven ability to automate, innovate and deliver readily available infrastructure from across hundreds of outsourcing engagements – a powerful marriage of sector and process expertise. This means that rather than worrying about their back office functions, QSR chains can concentrate on what makes them succeed - providing great service and products to a growing and hungry customer base.