Fraud is common in restaurants. Why? Large staffs with multiple people who have access to multiple systems and registers. Combine this with multiple shifts and high employee turnover, puts dishonest employees in a position to make poor choices resulting in your restaurant business paying the price.
Statistically, internal fraud accounts for the vast majority of fraud in business, all industries included. The National Restaurant Association estimates that internal employee theft is responsible for 75% of inventory shortages and about 4% of restaurant sales. Also, about 75% of employees steal from their workplace at least once, if not repeatedly.
No matter how much you trust your employees (managers included), you can’t be there every second of the day to prevent restaurant fraud. Here, FoodTec’s Daniel Flaherty runs through 3 types fraud that you should be aware of that some of our clients have experienced in their restaurants recently.
- Delivery Drivers Who Pocket Cash
Dan: “It is not uncommon for in-house delivery drivers to assist in food production and phone answering in between their deliveries. One of the most mischievous stories we have heard is when a delivery driver employee answers the phone to take and place a customer’s order for delivery. The usual process for any restaurant is to ask the customer whether they would like to pay via cash or credit? If the customer chooses cash, this provides the dishonest employee with a way to help themselves to your business’s profits and to your customer’s cash and loyalty.
They assist in making the order and route it to themselves. What no one catches, is that instead of sending it through for today, they defer the order into the future as far as they can i.e. “route” the order to themselves, deliver it and get handed the cash. But since the order was not really for today, they are not held accountable for the order’s payment. This house of cards eventually crumbles when the day they scheduled the order for pops up and the customer informs the store they didn’t order anything. If this has gone on for a couple of weeks, the losses could sub substantial.”
- Bogus Loyalty Points
Dan: “Any business would agree that a loyalty program can assist in driving repeat business and increase the bottom line of a store. However, for a dishonest employee, it can also have some undesired effects for your business.
An example we have come across is where an employee ‘registers’ the store’s phone number in the system creating a bogus loyalty account. An unsuspecting customer who either does not have an account or other credentials with them at the time of their order, allows the employee to enter the store number instead, earning points on the bogus account. Over time, the fake account(s) can add up to a lot of points. What might look like a really frequent customer is in fact your employee shrewdly awarding themselves with points that can be used to lower cash orders and take the value of the coupon/cash.”
- The Credit Card Thief Disguised as a Consumer
Dan: “This scam is not related to an employee looking to profit from your business but external fraud i.e. the store is operating normally and a guest walks in with what might seem as a misfortunate story of their car breaking down and asks to use the phone. Pizzerias are especially susceptible to this as the phone is often on the front counter. An unsuspecting and empathic employee says yes, and the walk-in is left with the phone. While feigning to make a call regarding their “broken down car” what they are actually doing is forwarding the store’s phone number to an alternate party. Once done, they thank the store for their assistance and leave quickly.
What the store does not realize is legitimate customers calls for orders are no longer being answered by the store but instead are being directed to this other third party. Similar to our first scam, the usual process for delivery calls is for the restaurant to ask the customer whether they would like to pay via cash or credit? In this instance the scammers are hoping that customer choose credit. The consumer, not knowing they are speaking to a scammer, willingly give their credit card number to the fraudster. From there, they fraud begins almost immediately making purchases that the customer never authorized.
While the store’s profits do not take a hit per se, loyalty and trust in your business certainly can as customer are often left with a sour taste in their mouth as to them it was ‘the store’s’ fault for not protecting them against this type of fraud.“
The key to stopping theft at your restaurant is understanding how it happens in the first place and then focusing on the most important areas to detect and reduce potential fraud and theft. With the right POS system in place, businesses are in a better position to track, monitor and review inventory, employee interactions, profits and expenses to ensure that no actions similar to what we have mentioned are occurring. When it comes to external fraud, businesses need to be vigilant and ensure they have robust policies in place that all employees are aware of and adhere to.
Similarly, being present and actively working alongside your staff, nurturing and encouraging a positive working environment also decreases the likelihood of widespread employee theft. When staff members feel like you care about your business, they do too. Be present and involved. Pitch in when you’re there, and drop by unannounced often.