Theft is an issue for many small businesses, but nowhere is the problem worse than at restaurants. In addition to managing the natural shrinkage that comes from running a business, restaurants face the unique problem that nearly everything is easily consumable.
A survey uncovered that internal employee theft is responsible for 75% of inventory shortages and about 4% of restaurant sales. That totals between between $3 and $6 billion annually. Lest you think that employee theft at restaurants is isolated to a few bad apples (pun intended), it’s actually a widespread problem. About 75% of employees steal from their workplace at least once, if not repeatedly.
Theft at restaurants is a big problem, but there are ways to cut down on the impact employee theft has on your bottom line. Likewise, how you respond to theft when you catch an employee in the act has a big effect on that repeat-offender statistic. Here are some of the most prevalent types of employee theft, ways to prevent theft in your restaurants, and some tactics to take if it happens again.
Food and Inventory Theft
This is one of the most common ways employees are taking from your business. This kind of theft includes:
- snacking on your supplies (outside their allotted shift meal),
- giving (unauthorized) free meals to friends and family,
- taking food home, or
- straight up stealing supplies off the delivery truck
It all adds up, one peanut at a time. A big red flag? If your alcohol stores are consistently low. Many restaurants miss alcohol theft, but booze can be a big-ticket item if you’re running through your supplies quickly.
How do you combat food theft? Invest in an inventory management tool. Clover POS comes with a powerful inventory tracking system, and you can add an app from the Clover App Market to customize your system to your needs. Try the Avero App, Shopventory, or Orca Inventory Management for an app customized for restaurants. To cut down on all those free lunches, try using Clover Rewards for more oversight on who is being rewarded for their loyalty.
Likewise, if you’re tracking your inventory management and able to identify the root of the problem, consider locking your freezer, offering a bigger pre-shift meal, or picking up some treats outside your inventory for your team to snack on.
Though second to food theft, point-of-sale theft is more common than you may think. Checkout theft includes
- taking cash from the register,
- voiding ordered items,
- improperly ringing up items,
- inflating tips, or
- dropping sales.
For example, a bartender may be ringing up premium drinks and charging customers for well drinks (and pocketing the difference). A digital POS like Clover can help you identify where receipts do not match the sales, but other red flags include low morale or managers making a lot of voids at the end of a shift.
Checkout theft can be largely prevented with automated POS systems. A good way to keep everyone honest is to give each of your servers a checkout system on the go that sends data back into the central POS kiosk. Clover Go lets servers cash out tableside, letting the customer add a tip directly into the system. In addition, use Clover integrations like Ping Me If, Bottle Keeper, and Cash Track to trigger alerts when certain events happen. This lets you monitor cash in and cash out, keep an eye on a certain item, and even track your liquid stock so you don’t have to count bottles each day.
If your system is already running like a finely tuned machine, there are other signals to watch for surrounding checkout theft. Look for changes in employee behavior: defensiveness or being secretive around their tips and transactions are bad signs. Keep an eye on your customer reviews, as complaints about price increases can alert you to price inflation.
Accounting theft goes hand-in-hand with checkout theft. This more long-term and insidious form of theft is harder to spot. When left unchecked, it can have serious impact on your business. Forms of accounting fraud include
- manipulating voids,
- canceling checks,
- skimming cash,
- underreporting earnings on the balance sheet,
- or setting up fake accounts payable.
Clover can help prevent accounting fraud by giving you a clear picture of your payments and receipts. Clover Payments Plus surfaces your business metrics to show you cash in and cash out, sales, employee management and scheduling, and inventory tracking, all in one dashboard. Discover trends and deeper insight insights you might not usually see each day to keep track of your managers.
Because this type of theft is so intentional, there’s more you can do as a business owners to prevent accounting fraud. If you’re generous, transparent, and fair with your people, you’ll attract like-minded employees who frown on bad actors. Evaluate the employee perks you already offer (are you being needlessly cheap?), but also the tone you set at work. If people feel empowered and are treated like grownups, they usually rise to the occasion.
Intellectual Property Theft
There’s a reason why grandma’s secret recipe was kept secret—it’s so no one else steals your menu items and runs you out of business! Of course, when you hire a chef, you want to let their talent shine, but you need to protect your intellectual property? Think about how to protect things like:
- proprietary recipes,
- ingredients lists,
- cooking processes,
- and branding
The restaurant industry is a lot smaller than you might think, and you might see the same staff, servers, and chefs working in different restaurants seasonally or part-time. It’s hard to protect your secret ingredients from becoming public knowledge. You may want to have your kitchen staff sign a nondisclosure agreement, or keep your recipes under lock and key when not in use. Again, this is where being a great boss can really work to your advantage. Give your staff trust and respect, and they’ll usually repay you in kind.
Time theft is especially common (and sometime inadvertent) with employees who clock-in and clock-out. When they’re on a shift, you expect them to be present and working—after all, that’s what you’re paying them for! But unscheduled breaks or wasted time both damages your restaurant’s efficiency (and profit) and causes you to lose money and time. Time theft includes:
- unscheduled breaks,
- doctored timesheets,
- lateness or leaving early,
- phone breaks.
There are some handy Clover apps that help employees check in and check out with ease. Timeclock for Restaurants is customized for the hospitality industry, but you should also try 7Punches and Shifts.
Trying to cut down on unscheduled breaks? Start by setting forth a phone policy that lets your workers know when and where they can stop to check their phones. Ideally, phone time is outside of the busiest moments in your restaurant. Acknowledging that your staff needs time to check in on social media or text for a ride home is is a good first step. Of course, you don’t want to spy on or micromanage your employees. That wouldn’t be fun for anyone! But you can install cameras in your restaurant to try to discover if your phone policy is working. Likewise, have a set break policy and let employees know the specifics. Breaks are crucial in this industry, so be generous but clear with your break policy.
Future Theft Prevention: Last Words
There are plenty of tools you can use to identify the source of theft in your restaurant. But, the best way to prevent theft comes from you, the business owner. Employees need to realize that your response sends a strong message.
Determine the severity of the theft: obviously not all infractions are created equally. Time theft and fraud are two different things. Whatever disciplinary measures you take against the employee, do so discreetly. Being forceful, aggressive, or embarrassing a staff member will only lead to other workers sympathizing with the culprit. After you’ve dealt directly with the scenario, hold a staff meeting to explain what happened, what actions you take, and what you’re prepared to do if it ever happens again. Theft happens, but dealing with it appropriately is up to you!
Clover is sold by leading U.S. banks including Bank of America, BBVA, Citi, PNC, SunTrust and Wells Fargo. You’ll also find Clover at our trusted partners including CardConnect, Restaurant Depot, and Sam’s Club. For more information, visit us at clover.com.