Developing and executing a successful information technology strategy can be challenging under the best of circumstances, but the IT drill is further complicated when a company acquires or is acquired by another.
Sorting out IT issues is one of several tasks restaurant companies undertake in the wake of an acquisition or merger. In most, if not all, cases, management of the newly combined operations must decide whether to integrate disparate systems or standardize on a single platform. Some companies, such as Real Mex Restaurants Inc. of Cypress, Calif., opt for a combination approach, while others, including Focus Brands Inc. of Atlanta, follow the standardization route.
“It’s all a very subjective process,” said John Koontz, Real Mex’s senior vice president and chief information officer. “There’s no one formula that works for every company, because so many factors figure into the equation.”
Acquired from private-equity firm Bruckmann, Rosser, Sherrill & Co. in 2006 by an affiliate of Boca Raton, Fla.-based Sun Capital Partners Inc., Real Mex operates 158 restaurants in California and 33 additional company-owned restaurants in 13 other states. Its holdings include 69 company-owned El Torito stores, 68 company-owned Chevys Fresh Mex restaurants, 10 units of the upscale El Torito Grill, 35 Acapulco Mex restaurants and LAS Brisas restaurant in Laguna Beach, Calif., as well as regional eateries Who-Song and Larry’s, Casa Gallardo, El Paso Cantina and GuadalaHarry’s.
Real Mex’s most recent move on the acquisition front was its purchase of Chevys Fresh Mex in January 2005. Early in the process, a decision was made to keep a lid on costs and pave the way for smoother operations going forward by consolidating departments at the corporate level, maintaining, for example, a single IT department rather than one at Chevys and another at El Torito.
“We knew that to make this work, standardization was, for the most part, the way to go,” Koontz said.
On the enterprise front, Real Mex had in place the Core2 accounting package from Catalpa Systems Inc. of Chicago, while Chevys was using the Microsoft Great Plains—now Microsoft Dynamics GP—solution. Koontz and his team concluded that because Core2 already was “heavily integrated” with Catalpa’s back-office and distribution modules, Chevys would migrate to that system from Great Plains rather than vice versa. With assistance from third-party contractors, the chain built a series of proprietary integration tools for exporting data from Chevys’ old application and importing it into the Real Mex system.
Koontz said that portion of the transition went off as planned because more than enough time had been allotted for executing it.
“We started working on getting the data out of Chevys’ system a full 60 days before its stores came” under the Real Mex umbrella, he said. “We took over Chevys on a Wednesday and five days later were up and running with the first payroll.”
Far more complicated an endeavor was determining whether to scrap Chevys’ SquirrelOne point-of-sale system or integrate it with Real Mex’s longstanding application from Columbia, Md.-based Micros Systems Inc. Although integrating the two systems would require time and money, Koontz said, replacing the Chevys application with the same technology used elsewhere within the chain obviously would cost more, because Chevys’ original system was 10 years old. As such, it was deemed inadequate to satisfy Real Mex’s IT needs.
“Squirrel offers a great product, but the version Chevys had was about 10 years old and was DOS-based,” Koontz said. “We didn’t think the hardware and software would support our integrated point-of-sale model.”
That model, he explained, enables granular data—for example, at store X, at X time, an order for two margaritas with salt were entered into the point-of-sale system by X employee—to be extracted from the point-of-sale system and imported into other applications. It also automatically adjusts to reflect menu variances.
Other issues came into play as well. Notably, Real Mex has its own help desk.
“We had to ask ourselves whether the desk could really support two platforms and at what cost,” Koontz said. “We figured out that it just wouldn’t work.”
After several months of evaluation, Real Mex executives concluded that phasing out Vancouver, British Columbia-based Squirrel Systems’ SquirrelOne POS system constituted its best course of action. To prepare for the migration to the Micros platform, new data cables had to be installed in many stores and quite a number of units needed entirely new electrical systems.
“These,” said Koontz, “are the things you tend to forget about but shouldn’t.”
Even more importantly, existing and new proprietary homegrown data extraction tools were employed to pull transaction data from the Squirrel application and roll it up into Real Mex’s data warehouse for later use chainwide. The “new” solution was piloted in a limited number of stores beginning in January 2005, with the remainder coming online throughout the year.
“We certainly didn’t expect to flip on a switch and make things go, and that didn’t happen,” Koontz said.
But neither did the company entirely eradicate Chevys original IT infrastructure. The chain retained its labor management module, TMx from Time Management Inc. of Minneapolis.
“We felt Chevys was getting a lot of value from that system, and keeping it involved a relatively simple change of interface to our enterprise systems,” Koontz said. “Had there been a major investment involved, we may not have thought that way, but you really have to look at every system individually in deciding on a path to take.”
Meanwhile, Focus Brands took a different path.
Following a comprehensive plan for the future in the wake of acquisitions, rather than simply considering the technology capabilities of its various holdings, Focus Brands decided to replace human resources and payroll software. Focus Brands is an affiliate of Roark Capital and the operator and franchisor of 2,100 Carvel ice cream, Cinnabon bakery, Schlotzsky’s sandwich shop and Moe’s Southwest Grill restaurants in the United States, Puerto Rico and 32 foreign countries.
In 2004 Focus acquired Cinnabon and a portion of the Seattle’s Best Coffee business from AFC Enterprises of Atlanta. At the time, the company already had formulated its “Focus 5” vision to grow the chain to encompass five different brands, with a total of 5,000 units, in five years.
Carvel was using the MAS 510 enterprise solution from Sage Software of Ft. Lauderdale, Fla. Cinnabon had several years before implemented Lawson Financials, an enterprise package from Lawson Software of St. Paul, Minn.
“What was certain from the beginning was that in line with the ‘Focus 5’ objectives, running disparate systems was the wrong answer for us,” said Focus acting chief information officer, Rob Hough.
What was uncertain at the outset, added Hough, who is also a principal of IT consulting firm and service provider Technisource, was whether either system was right for Focus’ individual brands.
“It wasn’t about deploying a system that would be the best fit for Carvel and Cinnabon,” Hough said. “It was about installing one that in light of Focus 5 would scale to supporting multiple brands and locations and be sufficiently flexible for us to plug and unplug operating companies. We did not want to reinvent the wheel every year.”
Technisource, which Focus had hired to explore its technology options and tender recommendations, evaluated several packages from several vendors against these criteria. Eventually, Lawson Financials was deemed the most appropriate choice for its flexibility and ability to more easily integrate data from different departments. The system’s franchise management component was another selling point.
Despite such flexibility, Focus was compelled to hire Technisource to build interfaces to a wide range of back-office systems used by Carvel and Cinnabon. The consulting firm also was paid to create financial, reporting and business process templates that could be used by Carvel and Cinnabon and other concepts acquired later. Deployment at Carvel and Cinnabon took four months.
“Had we not placed emphasis on flexibility in the evaluation process, it would have taken longer,” Hough said. “The average ERP implementation lasts nine months to a year.”
The company since has encountered the need to build other interfaces and tools to facilitate standardization across its brands. For instance, when Schlotzsky’s was acquired late last year, it was necessary to build a tool that would permit that chain’s general ledger history to be mapped into Lawson Financials. Similar initiatives will be undertaken with Moe’s, which Focus agreed to acquire from Raving Brands this past April.
Both Hough and Koontz acknowledged that the biggest challenges they faced in the wake of such technology upheaval centered not on IT itself, but on change management.
“Every restaurant operation has its own corporate culture, and that extends to technology,” Koontz said. “You can write interfaces to get disparate platforms to work with each other, but you can’t automatically re-program people who have been doing things one way for a long time using a particular application to blindly make the switch.”
To ease the transition to the Micros POS platform, Real Mex operating managers put on a “road show” at each store and conducted on-site training classes for all store employees in partnership with the vendor. For a week following each implementation, personnel from Real Mex and Micros remained on hand at individual locations to provide additional assistance and support.
Similarly, while Focus cannot, under terms of its franchising agreements, mandate that its franchisees migrate to a particular POS system, it is actively providing in-store support for its preferred technology platform. That platform, from Radiant Systems of Alpharetta, Ga., comprises Aloha Enterprise reporting and Aloha QuickService software running on Radiant P1220 terminals.
“We’ve been working with our franchisees to demonstrate the benefits of this particular system and break down their resistance to change,” Hough said.
He said strategy appears to be effective, as that conversion activity is “picking up.”
