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Behind the Line: To catch a thief

Look out for restaurant fraud that can eat away at the bottom line

Theft is estimated to cost restaurants 4 percent of annual sales. Photo by Malerapaso - Photo by Malerapaso / iStock Photo
By Lauren Kramer
March 01, 2013

Theft in the restaurant industry is a widespread phenomenon, in part because the products available are items everyone can use. 

“A restaurant is like a ship punctured by holes created by theft,” says Dan Cosgrove, CEO of Mercantile Systems in Brentwood, Calif. “An owner or manager has to try and fill those holes so the ship doesn’t sink. And you can’t eliminate theft completely — you can only manage it to an acceptable percentage so that you can sleep at night. Otherwise, you can drive yourself crazy.”

Cosgrove estimates that restaurant theft costs the industry approximately 4 percent of annual sales. Mercantile Systems consults restaurants on how to minimize theft, including techniques like mystery shopping, cameras and investigative services. Over the years Cosgrove has seen the gamut of industry theft, from blatant stealing of products or cash to grayer areas, such as bartenders over-pouring alcohol for friends or regulars without charging extra. 

“In a bar environment when you’re putting alcohol together with cash at night, it creates an opportunity that people sometimes cannot pass up,” he says.

One client that stands out was an Italian restaurant that was not making any profit. After conducting dining and bar surveys, Mercantile Systems showed bartenders failing to record drinks, up to 55 drinks at a time. The chef was cooking food for staff to take home with them before closing up the kitchen and was using the restaurant’s scale to weigh and sell marijuana to customers and employees. 

“We saw bartenders stealing, trading alcohol to other restaurants in exchange for food for themselves,” he says. The restaurant subsequently closed, as its owner had neglected the business to such an extent that it was no longer salvageable.

“Employees respect what you inspect,” says Mike Bare, president of Bare International in Fairfax, Va. The global mystery customer research organization helps restaurants discover if they’re experiencing theft, and if so where and how they can resolve it. “Revenue loss doesn’t only occur with theft,” says Bare. “It’s also a result of a lack of upselling, a failure to accommodate customers in a positive way and from a liability perspective, when you serve people who are intoxicated, who cause injury to others and then the restaurant or bar gets sued.”

There are a number of telltale signs that theft is taking place in a restaurant. Bare and Cosgrove shared a few of the most common, along with some prevention tips.

Count your cash: “Take tips and techniques from the days of old, when restaurant owners used to count money in the middle of shifts,” says Cosgrove. He also counsels restaurant managers to count employees’ tip money to determine if they have a higher percentage of tips than there are sales. 

“If my employee is making 50 percent of sales, it tells me he’s stealing,” he says. Tips should always go into a receptacle for tips instead of into the cash drawer, adds Bare. “We’ve seen staff shifting money from the cash drawer to the tip jar and these things aren’t checked as often as they should be. Inventories tend to be done monthly at the most, when in fact they should be done weekly at the least.”

Pour cost: Keep a close tab on how much alcohol you purchase, versus how much you sell. If that ratio starts to increase, you know you have a problem. Watch out if your bar is doing an excessive number of beverage sales, says Bare. 

“Notice if everything is being rung up as a soda instead of a beer, or something more expensive,” he suggests. It could be a sign that your bartender is dishonest.

Bar bounty: The bar is a prime location for revenue loss. Look out for liquor bottles that are watered down — a dishonest bartender’s remedy to prevent the appearance of inventory loss. Drinks can be “forgotten” to be charged for after they are served. And bartenders can bring their own hard liquor into work, using that instead of the restaurant’s liquor supply and pocketing the revenues. Look out for employees keeping their bags behind the bar, bags in which they might easily stash all kinds of unorthodox items that detract from restaurant revenue.

Phony walk-outs: Sometimes servers will claim that diners walked out on their check, when in fact they left cash on the table that was pocketed by the server.

Check confusion: Sometimes servers are able to confuse diners with over-printed guest checks, or checks that are illegible. 

“Servers can tell which customers will analyze their bill and which ones are partially drunk or trying to make a great impression, and are likely just to pay quietly,” Bare says. Sometimes servers will handwrite total amounts owed on the guest check, amounts that conflict with the actual order total.

Check the trash: Bare and his team have discovered restaurant staff placing food items like steak and chicken into trash bags and then placing those bags in their vehicles. “Do random inspections of garbage bags,” he suggests. “That way you’ll also get to see what customers aren’t eating, what they are dissatisfied with.”

Hire a mystery shopper: Depending on the type of restaurant, hiring a mystery shopper can cost between $30 and $200 per visit for a restaurant or bar. 

“Credentialed mystery shoppers provide objective, detailed documentation of their experience as well as observations of activities around them,” says Bare. “But it’s important to make staff aware that you’re doing these programs, to make them think twice about doing things wrong. Use mystery shopping as a tool so staff know what they need to do to take good care of customers,” he adds. To find a mystery shopper specializing in restaurant theft, visit the Mystery Shoppers Providers Association (www.mysteryshop.org).  

EDITOR’S NOTE: This is the second in a two-part series on restaurant fraud. The first article can be read in the February issue Behind the Lines 

Contributing Editor Lauren Kramer lives in British Columbia 

 

Find other SeaFood Business articles on theft here.

March 2013 - SeaFood Business     

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