Restaurant and bar scams are more common than many business owners realize—ranging from cash skimming and inventory theft to fraudulent voids and unauthorized discounts. These small losses quickly add up, eating into already tight margins and damaging trust within your team. Fortunately, modern solutions like smart POS systems are transforming how restaurants and bars detect and prevent fraud in real-time. In this article, we’ll explore the most common scams in the industry and how smart technology can help protect your business, your revenue, and your reputation.
The most unfortunate part of being a restaurant owner is dealing with employee theft. According to the US Chamber of Commerce, an estimated 75% of employees steal from their employers and make a habit of it.
Training and other corrective actions can be taken to minimize employee theft, like creating a loss prevention (LP) plan. The foundation of a restaurant LP strategy rests on two pillars: integrated POS technology and advanced data reporting. When combined, you have an effective method of identifying high-risk behaviors and suspicious patterns.
Restaurants, as well as other businesses (both online and physical) struggle with fraud every day. Luckily, there are at least several ways to prevent fraudulent activities.
Designing a restaurant and bar loss-prevention strategy is critical to managing a profitable business, regardless of your size or level of success. Whether your restaurant is brand new or an established chain, the smart business owner devises an LP plan. It’s too risky to ignore preventable measures of profit loss.
An LP strategy for the modern restaurant owner requires two practices:
- The technological capability to organize data, like a POS, which allows you to identify the sources of profit loss.
- A comprehensive plan that involves analysis, maintenance, and communication.
Automate Alerts to Detect Restaurant and Bar Scams in Real Time
At the core of your loss-prevention strategy is automated data analysis. This frees up your time, removes human error, and allows you to redistribute resources more effectively.
With an LP strategy in place, you can identify the most common scams and use your POS to set alerts. For example, if you were to detect a transfer scam.
What is a transfer scam?
A transfer scam is when a server opens a check and then transfers order items from cash checks to an open check throughout his or her shift. When he or she is ready to close out, a promotional code or coupon is applied towards the open check.
To eliminate a transfer scam the fast way, set a transfer limit, like allowing just three transfers a shift per employee. This means you won’t have to review video footage or check data manually. To set the right limit, take old data to identify what would be an unusual number of transfer, and decide on an acceptable transfer limit. With the alert system, you will know immediately if any unusual or suspicious employee activity takes place after.
You can always adjust to a more tolerant threshold later.
Common Employee-Driven Restaurant and Bar Scams You must know
Look out for these other common types of types of restaurant and bar fraud scams. Using data analysis and your POS, you target scams and prevent them.
Auto Gratuity Scam
Look for employees with above-average check counts that have auto-gratuities. You can also check for high total-tip-to-sale percentages to detect auto gratuity scams.
Employee/Manager Meal Abuse
This is a partnership scam run by an employee and manager. To identify meal abuse, look at the employee’s manager meal-to-shift percentage. Compare the numbers with other managers to identify unusual activity.
Shell Game Scam (Voids/Discounts/Cancels)
The shell-game scam is easy to identify: Set daily alerts on cashier voids, discounts, and cancellations, and focus on a variation in metrics. If you see a higher-than-usual threshold, you most likely detected suspicious behavior.
Tip Boosting Scam
A server might boost gratuity a few dollars every time—to locate a tip-boosting scam, identify the average tip percentage by server and look for strange variances. One way to hone in on issues it to compare the tips of checks with and without voided items.
Wagon Wheel Scam
The wagon wheel scam is more popular than one might think. To monitor if any fraudulent activity is going on at your restaurant by way of a wagon wheel, review same-item transfers in cash transactions by employees. You can also monitor the overall transfer activity to identify spikes
Analyze same item transfers in cash transactions by employees, or monitor overall transfer activity by employees to see if anyone is above average.
Combat Restaurant and Bar Scams by Improving Cash Handling and Tracking
How is cash handled at your restaurant? Taking cash is the easiest way to steal from a restaurant, again and again, so refine the cash-handling procedures at your restaurant and bar. Clearly defined procedures will reduce employee theft or error. Additionally, they help you to keep track of cash and to know when something is amiss. Implement these strategies to handle cash:
- Organize the drop boxes to be close to the register. Throughout the day, make a cash drop to limit the amount of funds available at the register.
- Encourage honesty among your employees and implement an accountability program.
- Limit the number of employees who handle cash, entrusting specific supervisors and managers only.
- Assign different cash-management duties to create a system of checks and balances, such as one for collecting cash and one for recording receipts.
Be strict in your rules and when pointing out discrepancies. Maintaining an LP strategy requires gravity and diligence.
FAQs:
1. What are the most common restaurant scams to watch out for?
Restaurant scams often involve void fraud, inventory theft, fake refunds, and collusion with vendors. These scams usually go unnoticed without proper oversight. A smart POS system like Lavu can flag suspicious patterns like excessive discounts or canceled orders, helping identify fraud before it becomes a major issue.
2. How can bar owners prevent bar scams and employee theft?
Bar scams such as free-pouring, under-ringing, or pocketing cash are common forms of employee theft in restaurants and bars. Lavu’s POS audit logs and shift-level reporting make it easier to monitor transactions, enforce accountability, and reduce theft risk by automating checks.
3. What role does POS fraud prevention play in restaurant security?
POS fraud prevention is a vital aspect of loss prevention for restaurants. By using features like employee pin access, real-time reporting, and data audit trails, Lavu helps secure operations, catch anomalies, and reduce exposure to internal and external fraud.
4. How do smart POS systems help prevent restaurant scams?
Smart POS loss prevention tools like those in Lavu detect fraudulent activities and generate alerts. Whether it’s detecting altered bills or flagging excessive voids, Lavu ensures restaurants have the tools to prevent restaurant scams before they affect revenue.
5. Can Lavu POS help prevent employee fraud and improve accountability?
Yes, Lavu POS includes features like activity logs, role-based access, and fraud detection alerts that improve staff accountability. These tools help spot employee theft in restaurants and encourage honest operations through visibility and transparency.
