Theft has unfortunately become a primary concern in the food industry. Most simply ignore it and certainly don’t want to talk about it. The reality though can be quite sobering. By the time theft is detected the damage can be irreparable to your reputation, destroy employee morale, and hurt the bottom line. In fact, according to a Forbes article in 2018, up to 30% of small businesses fail because of theft. The same article discusses the likelihood of theft in smaller companies, types of fraud/theft, and steps for prevention.
Know the Facts of Restaurant Theft
First, it is important to recognize that theft isn’t about you. It’s generally about individual accountability, their personal drives, and the likelihood of being caught. Some employees steal because they feel slighted, unappreciated, and undervalued. Others may steal because they ‘cannot be caught’ and enjoy the thrill of the steal. A lot of articles imply that stealing is just a part of business; however, there are a number of loss prevention practices to minimize the impact of theft.
As with any line of business, restaurants have a variety of common ways that employee theft occurs. It is important to understand it’s not just slipping an occasional $5 bill into a pocket, and can include:
- Giving free or extra food/drinks to customers without authorization. This tends to occur with friends, partners, and family members.
- Providing extra discounts or unnecessary comps. This is used as a way to obtain bigger tips from customers who are grateful for the ‘extra’ provided to them.
- Tips, stealing or fraudulently adjusting bills or payments, such as:
- Customers who don’t want a receipt can become victims through this easy way to revise tips or add an extra side unknown to the customer.
- Customers who don’t write a total on an order ticket or have writing that is easily modified. For example, have you noticed that a ‘3’ can usually be changed into an ‘8’? Blank total lines are always leaving things open for manual changes or creative self-tipping schemes.
- Charging the customer for a higher priced-item then inputting the order as a lower-priced item and pocketing the extra cash at the end of the shift. It is common for this to occur in bars, café’s, or coffee shops. For example, a customer pays for a $10 drink with cash and the barista enters the order as a $5 drink. Over the course of a shift, especially where cash is primarily used for payment, it can add up to hundreds of dollars for a busy café.
- For cash-paying customers, especially during busy shifts and tourist-centered times, a common scam is an employee reporting the customer simply left without paying. Better known as dine’n’dash, which actually does still occur, can easily be flipped into blaming customers who have actually paid.
- Identity theft of customers, especially when staff physically holds/takes a credit/debit card. It is simply too easy these days for a quick photo to occur of a credit card, which can be used for purchasing ‘guest’ checkouts of higher-priced items and ship them to fraudulent addresses.
- Voiding out cash transactions throughout the day or amongst varying days to appear like actual voided transactions. This usually occurs when other staff members are on lunch or breaks, allowing for more time with the register open without being noticed.
- Stealing food/drinks for themselves, either while working or taking it home. Meal allowances are a great benefit, but can easily be abused. Those stealing may simply lie and take a second meal at the end of their shift, especially where there are multiple shifts and staff swapping occurring, flying under the radar for another meal can occur fairly regularly.
- Taking extra breaks or long lunches. Fudging five or ten minutes can eventually lead to extra 20-minute breaks several times a day.
Practical Loss Prevention Tactics
It is unreasonable to expect you or your restaurant manager to watch employees with an eagle eye for potential theft. Not to mention, employees don’t want to feel micro-managed. Thankfully, restaurant POS software has evolved into robust systems to meet the needs of all involved. From orders and inventory to re-fired meals, corrected orders, customer-driven payments, and staff timekeeping/tracking, a strong POS system will provide your restaurant with a number of built-in theft prevention tactics.
Specifics about POS related loss prevention methods and how they work include:
- Robust POS system, which should include personal required logins for timekeeping and ordering, approvals for discounts or comps, and many other functions. Several levels of accessibility to POS modules should be defined and make sense for work performed. Requiring overrides for on-the-spot and unplanned discounts or comps connected to a staff’s login credentials will prevent discount fraud regardless of access available.
- Precise inventory management including inventory changes and shortages, including who is or is not working during shifts with those changes. This will allow you to notice theft earlier and start investigations quickly. Overall, you’ll also be able to control costs associated with waste inventory by reviewing inventory trend reporting.
- Real-time reporting such as accurate reporting of staff’s timecards, table service, orders, and tip ratios. Such reports can show which employees are regularly turning tables in a timely manner, and which price points, dishes, or trends there may be with orders and tips. Additionally, when staff has to clock-in/out and know their orders are tracked, lunches and breaks tend to become adhered to more regularly.
- Cash register balances and reports through POS input, rather than hand-counted receipts at the end of a shift. No more claims of ‘lost receipts’, common with legacy systems, and no transactional reports showing odd trends. When something looks off, a history report can be run and reviewed, which could be realized as a true mistake or potential fraud for further investigation.
- Cash register notices, such as if the cash drawer is open without a transaction occurring, and who opened it, sent as a message or text to the manager or owner. This can indicate potential theft which can be remedied nearly immediately.
- Use a percentage rate scale for tips, such as 10, 15, 20, 25 percent. Your customers are likely to increase their tips when automatically calculated for them. The added benefit is loss prevention because staff well-tipped are likelier happier and feel more appreciated.
- Use transaction reports to see if any transactions have been removed or modified after the transaction was finalized. Most POS systems can be set so that this can only occur with administrator rights, and all changes can be reviewed through a transaction audit report.
- Tracking of employee meal benefits with an allowance per shift. The employee must enter their code into the system to ‘pay’ for the meal, and the meals are subsequently tracked.
- Need some additional ideas? Read more about getting the most out of your restaurant’s POS.
Technology can definitely be used as a tool for loss prevention as described above. Another important factor is active restaurant management. Trusting employees to do their best while you are away is a goal of most managers. This will involve spending time actively engaging with employees and your customers, and refining processes.
The best practical methods include:
- Show up early and/or stay late, and take time to do some of the work your staff is responsible for. This will create the unspoken understanding in employees that you are actively involved, that you care about your employees and that you are not just showing up for your scheduled time for your paycheck.
- Recognize the good staff do, correct things that aren’t going well, and properly address the bad in a timely manner and on a consistent basis. Good employees will stay longer and have higher morale, poor employees will leave (or be fired), and your restaurant’s reputation will reap the benefits.
- Provide employees the opportunity to have ownership of how their service affects the bottom line. Let them know when profits are up, or down. Show them how prices are determined for items; explain the restaurant’s budget on a bird’s eye view level, or which items on the menu are most profitable. The more they understand how the restaurant business actually works, the more connected they will feel to you and the restaurant. In turn, this changes an employee’s mentality from “me versus them” to “us.”
Also, be sure to ask for their input (and using the truly good ideas) to improve service to customers. The more ownership staff have in their place of employment, the more likely they are to be honest, productive, focused, and will inform you of anything sketchy.
- Control your food costs through training, inventory, order and ticket systems, portion control guidelines, waste log, and additional ideas detailed in this Restaurant.org article.
- Make simple conversation and connections with staff, find ways to personally connect such as their goals, school, pets, or hobbies. The more connected staff are to owners and managers, the less likely they are to steal.
- A spin on conversations is to take time to conduct a ‘stay interview’ with each employee. You will gain insight into your business, customers, and other employees, along with individual employee needs, suggestions, and expectations. These interviews are specifically meant for connection on an individual level without focusing on their performance.
- Review your cash handling processes and create a written procedure for how much cash is kept in the drawer to how staff count back change. Ensure staff are personally trained with the procedure and have practiced before they sue their own methods and potentially bad cash handling habits.
- Little morale boosters at any time can do a great deal of good for your staff and the bottom line. While monetary things such as a coffee card or $20 cash are not always feasible, try other things like recognizing staff for their contribution (and hard work) that help your restaurant succeed. Have a comment box for customers (or look into what reviews are being written on google, yelp, and TripAdvisor), then read the good comments out loud. Share the negative comments as a group or individually for performance management, as and when appropriate. Provide ‘extras’ for staff, such as samples of new menu items, or discounts for friends and family of employees.
Through technology and practical methods, it is important to address loss prevention, and, in fact, necessary to maintain your successful restaurant. Since the last thing you should worry about is the potential for theft, your diligence, awareness, appropriate restaurant loss prevention measures and implementation of a strong POS system like Lavu will protect your good employees and your bottom line!