How To Enhance Your Restaurant Loss Prevention Strategies
Just before the pandemic, the average restaurant industry profit margins ran between 3-6%. For comparison, recent research indicates that the average net profit margin in the U.S. is 7.71% across all industries. Since the pandemic, the restaurant industry fell $240b short of their pre-pandemic expectations, making the potential for profit that much leaner. With margins already low and industry profits continuing to face pandemic-related challenges, remaining attentive and prudent to costs is imperative to long-term financial success. The National Restaurant Association (NRA) reports that quick-service restaurants alone lose a reported 7% of sales to employee theft. Considering that stat is for one restaurant segment facing only internal larceny, diligence in managing restaurant loss prevention has never been more critical than now.
What is Loss Prevention
Irrespective of the venue, restaurant loss prevention is any means that an operation takes to mitigate lost revenues from theft, waste, breakage, or fraud. Restaurant theft manifests itself in a variety of ways from employee-related theft to external customer theft. An astounding 75% of restaurant workers admit to workplace theft, at least once during their careers, whether that’s taking food, drink, or money. Likewise, around 5% of guests have admitted to dining and dashing at least once. Before we dig into the specifics, let’s examine what to look for to mitigate loss.
What To Look For
Given the breadth of the topic, there are a few signs to look for to improve your restaurant loss prevention strategies. Since lost revenues can come from employees or guests, it’s hard to know what to keep an eye out for. Still, there are a few telltale signs that someone might have dubious intentions.
- Over ordering – Suppose you have a table of two, but they order multiple appetizers or entrees per person. That isn’t necessarily an indication of ill intent but could signal that your guests are trying to get the most bang for their dine and dash buck.
- Too good to be true – Fraud is an aspect of loss prevention, so if a vendor —or someone claiming to be a vendor— has a deal that might seem a little too great, you might want to stay extra attentive.
- Shrinking inventory – Does your inventory count match your sales? That’s kind of math may seem tedious on the day-to-day, but can save you a bundle.
- Visible signs of intoxication – Alcohol sales can account for between 20-25% of restaurant earnings, making it a revenue stream. In addition to monitoring your revenue, watch or employees that may show signs of drinking on their shift. That’s dangerous and could very well indicate that they are taking drinks at their leisure.
There isn’t a single profile to watch or method here, beyond staying alert. Still, you can’t be everywhere all at one time, so let’s look at some methods you can employ to help.
External Restaurant Loss Prevention
From guests to outside vendors, there are several potential opportunities for nefarious minds to exploit. Let’s look at a few of these examples and the interventions you can take to maximize your restaurant loss prevention efforts.
Dine and Dash
As we’ve mentioned a few times, restaurant dine and dashes can cut into your overall profits, while in turn directly impacting your staff. It should go without saying, but the first order of business is that if you’ve identified someone who might do this, remain vigilant. Post staff to keep an eye on any potential suspect discreetly; misidentification here can create lead to upset customers who are less likely to come back. Make sure your staff is positioned at a door if possible, although your staff should at no point physically confront anyone. Keep in mind that you could be held liable for any physical confrontations, whether that’s if your employee or a customer are hurt in this process; any lost wages are not worth that price.
Consult your local laws. While dining and dashing is a crime, in the U.S. the severity of that crime is dependent on the state, with many places considering it a petty crime. Likewise, some states require servers to pay for those lost meals if more than one dine and dash occurs on a shift. This is likely to mitigate the potential for servers to operate as collaborators with potential thieves, so you might want to address this possibility up front.
Lying To Get Comps
Suppose a guest makes up an excuse to get a comp. What do you do? If we could tell you how to spot a liar with any certainty, our business would be elsewhere still, some technological interventions can help owners and operators in their restaurant loss prevention measures.
First, provide them with the appropriate point of sale technologies, which digitally submits orders between the front and back of the house, thus eliminating the potential for lost or tickets. After the order is taken, make sure that your waitstaff carefully read back every order to ensure accuracy. With a robust kitchen display system (KDS), you can increase your quality control efforts exponentially. A KDS is a logistical tool designed to cut ticket times and improve your back-of-house (BOH) efficiencies. You might look for a few of the following features to help prevent sending out wrong orders:
- Delayed Routing/Coursing – These features are comparable, but not quite identical. Delayed routing uses preprogrammed menu item cook times to ensure that every aspect of the meal is prepared in the right order, so that guest orders are filled simultaneously without sacrificing quality. Where delayed routing focuses on entrees, coursing takes the whole meal into account, from appetizers to drinks and desserts.
- Tag-on-Touch – This feature allows staff to remove individual items off of the total order, without inadvertently erasing everything. This allows BOH staff to check each order before they send it out, providing one more element of quality control.
- Sticky Printers – With a sticky printer, BOH or expo staff can print a sticky label off to affix accordingly to each order. This helps waitstaff quickly identify who has ordered what, while simultaneously serving as an additional set of checks and balances.
These solutions are designed to mitigate mispacks and wrong orders without sacrificing freshness or speed. With each feature, the staff is allowed to check and recheck each order to satisfy guest needs.
Chargebacks have become an increasingly common form of theft. A chargeback involves a customer placing an order online, receiving their meal, and then contesting their charge under the pretense that they were the victim of fraud. Chargebacks exist as part of the Fair Credit Billing Act, which protects consumers from fraud.
As such, it’s useful protection for cardholders, albeit one that has become exploited by opportunists. As part of your restaurant loss prevention plan, look for a POS that can feature digital receipts. Businesses require receipts to contest the fraud charges, and digital receipts make finding your receipt that much easier.
Vendor fraud is yet another unfortunate grift that cuts into already tight profit margins. With vendor fraud, operatives outside of your organization may attempt to exploit weaknesses in your supply chain by exaggerating costs or giving you less than promised. This is one of many instances where inventory management becomes critical to your restaurant loss prevention plans, as you can use real-time data analytics to account for your product.
Internal Restaurant Loss Prevention
As we mentioned above, employee theft is an incredibly common occurrence in any strata of business. In your restaurant, that might look like one of the following, which we can get into a little more below:
- Skimming – In smaller operations that don’t pay close attention to their books, cashiers can simply take a little off the top.
- Short Ringing – Short ringing is the process where a cashier enters an undercharge for an item and takes the difference. For example, if a guest orders a $10 meal, the cashier might only ring up an $8 meal, pocketing the missing $2.
- Voids – Voiding is the process where untrustworthy managers can erase some transactions from the day in their POS, and keep the difference.
- Comps – Comps occur when an employee either gives out a free item or partakes in one on their own.
Let’s look at these a little more in-depth below, to better determine how to gird your restaurant loss prevention methods.
Credit Card Fraud
Before we move on, let’s examine a different kind of fraud. Credit card fraud involves using electronic skimmers or comparable devices to steal private data from cardholders. From there, that information can be used to steal money directly from the consumer, or at least from the credit card industry. In that way, this is a bit of an outlier in terms of internal or external theft, because technically anyone can commit this crime. Still, waitstaff has served as accomplices to this crime in the past, compromising multiple identities before getting caught.
As stated above, alcohol can provide a rich revenue stream to any restaurant operation. Between access and addiction, alcohol also represents a commonly stolen item in any operation and one critical to track in your restaurant loss prevention efforts. Spotting signs of intoxication is job number one at any bar and keeps you in line with Dram Shop Laws, so look for any obvious signs that something might be afoot.
Mitigate losses through the use of shot pourers and jiggers for spirits and standardized pints and glasses for alcohol and wine. Because you know the volume of each container of alcohol, you can technically account for every drop. While it might be difficult to eyeball if you suspect alcohol theft, use your inventory management and your receipts to determine if there is a substantial enough difference to act.
Analyzing Restaurant Theft
As we’ve gone through the various means examples of theft to look out for, we’ve tried to provide easy solutions. Still, not every scam or theft has a quick or simple fix. Let’s look at a few opportunities you have to curb theft before it happens or to monitor it before it does again.
The Value of Staff Retention
Finding and keeping great staff is increasingly difficult, although fortunately there are some technical and practical solutions. In each of the above-mentioned examples of employee theft shares in common one unifying theme: desperation. That doesn’t justify a crime committed against you or your establishment, but it can inform how you progress going forward. Still, while these aren’t one-size-fits-all examples, many of these scams can be mitigated by addressing the root problem or problems, including wage disparities. If you notice employees eating or drinking on the clock, allow them one comp per shift. If theft is a recurring problem, consider raising employee wages, which is proven to minimize turnover and lower crime.
Data analytics are a fantastic way to monitor your operations from top-to-bottom. These metrics can inform everything from your purchasing to staffing needs. As it relates to restaurant loss prevention, data analytics can help you understand what you have, so you know exactly what to expect. That means that every item is accounted for, making it easier to spot financial or stock-oriented losses quicker and more efficiently.
Restaurant Loss Prevention Conclusion
With crimes of any sort, where there is a will there is a way. There are wagon wheel schemes, fake injuries, and so much more to look out for. Unfortunately, you can’t be everywhere at once, and even if something looks like fraud, it might not be, so you have to remain vigilant. Altogether though, the objective is someone that wants or needs something. By doing what you can to address that ahead of time and through the use of the right restaurant technology platform, you can help maximize your restaurant loss prevention efforts.
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About the Author
Syd is a content marketing specialist, which are fancy words for writing pretty to tell a good story. He likes writing things about food, drinks, and music. He’s a musician himself, a father of two, and loves his wife a whole lot.