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 Identify Patterns of Theft or Fraud
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.
Typical Employee Fraud Schemes Found in Restaurants
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.
Shift Your Cash Handling Procedures and Track Performance
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.