Restaurant Industry Insights

Employee Theft Targets Restaurant Loyalty Program

According to recent theft statistics, employee theft costs businesses $50 billion every year, takes an average of 18 months to detect, and about 37% involve managers or executives. Unfortunately, a recent case with the manager of two pizzerias in Michigan bears this out. 

James Lake, a GM at Mancino’s Pizza & Grinders, was recently convicted of embezzling $130,000 from the restaurant’s loyalty program. According to Restaurant Business, Lake had been with the company since it first opened its doors 30 years ago, and the scam had been going on for four years.

Is there a way to protect your restaurant from this type of theft? Fortunately, knowing the signs to look for can help detect this type of loss before it escalates. 

Keep a Watchful Eye on Your Loyalty Program

In the case of Lake, he was taking money from the restaurant’s loyalty program by reclassifying for-cash transactions as product giveaways earned by guests in the rewards program. Then, he would take the money customers had paid for the item and pocket it. 

The owners noticed a significant difference between the reward program utilization at each of their stores, which led them to notify the police. A two-month investigation led the police to Lake. He’s since been sentenced to 15 months in prison and fined $134,000.

The key in this case was keeping a watchful eye on their loyalty program. Unfortunately, it wasn’t detected soon enough to limit the damage. Part of the problem is human nature. You don’t want to believe that an employee that’s almost part of the family is capable of turning on you. And, yet, it happens every day.

Signs to Watch For

Common signs that suggest an employee may have ulterior motives include unusual behavior during inventory checks, a change in their financial situation, a change in their personality, and limiting vacation time in fear of being discovered.

According to the National Restaurant Association, 75% of inventory shortages are due to employee theft. If your perishables are continually “going bad” quicker than they should, or your food costs are rising despite costs actually declining, it’s time to take a closer look.

Other signs include an unusual number of promotion ring-ups, cancels, and re-rings. If you notice servers with significantly higher tips than their peers, it may be a sign they’re doing an excellent job or a sign of employee theft.

Common employee theft in restaurants includes under-ringing sales. In this instance, they may enter a $10 glass of wine in the POS while charging a customer $15. If a customer pays in cash, they can also pocket it without ringing up their order. Another red flag is a manager that regularly voids sales after closing.  

Preventative Measures

As with all security, preventative measures offer much greater protection than acting after a breach in security or theft has occurred. These measures center around internal controls, including auditing financial records, regular inventory management, and randomly checking cash drawers.

Today’s POS systems make it easier than ever to audit financial transactions. View reports that show deleted or modified transactions and follow up with staff. Reports also show voids and discounts and who opened the cash drawers at what time. 

Controlling inventory includes monitoring portion control, supplies, and food waste. And bar inventory is even more prone to theft, whether through overpours or a few free drinks during each shift. These losses can amount to as much as 25% of your bottom line. As with your food, create standards using measurements when pouring. Some establishments go so far as to weigh the bottles.

By checking cash drawers at random times, you put your staff on notice that they could be audited at any time. To help limit opportunities, consider regularly using drop boxes placed next to each register. It’s also a good idea to train multiple employees in cash management duties so no one staff member is able to mess with sales figures.

As employees are often the first to spot suspicious activity by members of your team, it’s also important to give them a way to report the activity in an anonymous manner. Then, with an open mind, you can investigate to determine if there is any justification for their concerns.

Creating a Positive Culture

If an employee is hungry, it can be very difficult to be around food during an entire shift without grabbing a bite here and there. Creating an employee policy that includes free or discounted staff meals can discourage theft, boost team spirit, and help educate your staff on your products. Additionally, promoting an environment that instills open communication channels can ensure staff come to you if they need help instead of helping themselves to your cash or products. 

FAQS

How can restaurants reduce theft?

A few employee theft prevention tips include discounted or free employee meal policies, well-documented cash handling practices, and reviewing POS system reports regularly. Additionally, it’s important to have a robust inventory tracking system in place and pay your employees well so they don’t feel jilted. 

How do you handle employees stealing food?

As with most issues in life, good communication is the key. Once discovered, a calm discussion is in order (i.e.: the opposite of Hell’s Kitchen). Let them know your policy, issue a warning, and discuss the possible consequences, like losing their job. It’s always a good idea to ask about their unique situation. If they’re experiencing financial trouble that’s causing them or their family members to go hungry, perhaps you could provide them with food that would normally go unused. In the restaurant industry, over 84% of unused food is thrown away, while only 1.4% is donated.

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