If you’re like most restaurants, you probably run on narrow margins and strive to minimize waste while maximizing profits.
This requires a number of practices to encourage productive behaviors by your staff and improve efficiency.
In this article, we’ll discuss 10 loss prevention practices to grow your profits.
We’ll start by examining common examples of theft and loss in the restaurant industry, followed by a rundown of our tips to prevent them.
Let’s dive in.
Common Examples of Theft and Loss in the Restaurant Industry
Before we talk about loss prevention practices, we need to understand what we’re trying to prevent in the first place.
There is a multitude of behaviors and situations that result in loss and they can be categorized into two groups: internal and external.
This section will discuss and present examples of both categories so that you can prepare yourself in case these things happen in your restaurant.
While it may be hard to acknowledge, losses due to employee theft and general non-compliance are real.
According to Fast Casual and the NRA, employees cause about 4% of sales discrepancies and 75% of inventory shortages.
So how does this happen? Let’s look at the most common internal issues you’ll face.
Short ringing refers to the practice of inputting a cheaper item to the POS and pocketing the difference.
For instance, let’s say a customer buys a $10 drink from the bar and hands over the exact amount to the bartender. But instead of punching in the $10 drink, they use a different $6 drink and pocket the $4 for themselves.
The customer receives what they’re paying for but the cash register and POS records will have a lower amount on them than they’re supposed to.
Most of the time, short ringing persists due to poor inventory management. Comparing POS reports with physical inventory is not the most exciting task in the world so it often gets neglected.
However, solutions like Glimpse automatically detect what type of drink is passed over the counter using your security cameras. If it’s different compared to what’s entered in the POS, you’ll know this (and who’s responsible) without having to take inventory every day or review camera footage for hours. If you want to learn more, check out Glimpse or request a free demo.
Although it’s acceptable for your servers to give complimentary products, doing it too much can cause a deficit in your inventory. Additionally, some servers even conspire with customers to get comps, cheating you out of potential profits.
This practice can be something benign like a server regularly giving out comps to friends and family whenever they come to the restaurant. However, it can also be something more malicious, like a server consciously working with several patrons to get free products.
For instance, a server could give more than the allowed amount of comps to other customers in exchange for additional tips. Since the customers can enjoy more food and drinks for less money, they are more likely to support this setup.
This creates a win-win scenario for both your servers and your customers: the customers enjoy free complimentary products, while the waiter enjoys more tips – all at your restaurant’s expense.
Register skimming is when employees pocket the money from unregistered transactions.
For example, a customer wants a dessert from your display. Your employee hands them the product, but doesn’t ring the purchase in and instead keeps the cash.
If you’re not careful about doing end-of-day checks between your inventory and cash register, then you’re highly vulnerable to register skimming.
Another common strategy is voiding checks.
Voiding can occur in many different ways, but the most common ones include cooperation between servers and supervisors.
For example, your server can receive the payment for a table’s order of $100. At the register, your server will then approach their supervisor and let them sign off to void the check. The server will then take $100 out of the register.
Your supervisor can also be working by themselves and void single items from a table with several orders and then pocket the difference.
Since voided checks are not included at the end of the day count, the POS total for the day and the register’s take will match.
The only foolproof way to detect this is to compare the voided items to your inventory. If nothing is missing, the void was real – but if the item is voided on paper but the physical inventory is missing, it means that money has been pocketed.
Many times, restaurant losses are caused by external factors. Let’s look at the most common examples.
Dine and Dash
The most common form of externally-led loss is dining and dashing.
Dine and dashers are customers who don’t want to pay for their table’s orders, and instead, quickly get away from the premises without being caught.
The Fair Credit Billing Act is used by customers when they’re victims of fraudulent sellers.
However, some customers abuse this law and cause inventory loss through false chargebacks.
Customers can order food online and receive a meal. They will then use the Fair Credit Billing Act to dispute the charge and refuse to pay. This can sometimes work, especially when your managers find the dispute resolution process to be too much of a hassle.
Simply put, vendor fraud is when any part of your supply chain charges you for more than what you’re receiving. This type of scam is particularly effective in restaurants because they deal with multiple vendors often at the same time.
If you don’t regularly check your inventory, untrusted vendors can overcharge or underdeliver supplies.
10 Restaurant Loss Prevention Practices
Now that we’ve looked at the most common example of theft and loss in restaurants, let’s review a set of practices to prevent this from happening in your establishment.
1. Upgrade Your Surveillance System
A good surveillance system will let you see and record what happens in specific areas of your restaurant. The knowledge that customers and employees are being watched will deter most dine and dashers, register skimmers, and other forms of theft.
So consider purchasing more cameras and position them in strategic locations where issues are most likely to occur – such as above the bar and near the kitchen exit areas.
2. Create Policies on Complimentary Items
Implementing perks that give your employees discounts or free food does wonders for morale, plus it also reduces motivation to steal from inventory.
You’re even doing yourself a favor by making staff more familiar with your restaurant’s menu, so they’ll be better equipped to suggest dishes and upsell customers.
However, you need to ensure that these perks are not being abused by giving false comps.
To ensure this wouldn’t happen, create accompanying policies such as monthly amount allotments, discount percentage limits, and more. You can even include these policies in your Employee Handbook.
3. Ensure Proper Inventory Management
Inventory management is crucial for preventing most activities that lead to restaurant loss.
Scams like short ringing, voiding, and vendor fraud can be avoided by having a solid inventory management system. When it’s done correctly and consistently, inventory management lets you catch those who are up to no good by having the right data at the right time.
4. Adjust Staff Controls
Many forms of restaurant loss happen in the register and POS system, so a great way of minimizing issues is to limit what certain employees can do with the system.
For example, you can set which employees can cancel and modify orders, open/close the register and more.
5. Improve Cash Handling Procedures
Another efficient way to minimize restaurant loss is by implementing better cash handling protocols. Having solid and controlled procedures minimizes the chance of theft or human error because it diffuses responsibility and enhances transparency.
Here are a few ways you can refine your establishment’s cash handling procedures.
- Spread the responsibility. Increase transparency by diffusing cash handling responsibility to multiple individuals. For example, assign one person each for collection, receipt checking, deposits, and more.
- Involve supervisors. Require supervisory presence when handling large amounts of cash, such as when depositing money to safety boxes.
- Install safety boxes. Only a set amount of cash should be on the register. The rest could be placed into a dropbox, strongbox, or safe, near the register.
- Incentivize compliance. Create bonuses or other incentives for employees who reach a no-discrepancy milestone.
- Create disciplinary procedures. Outline a clear set of disciplinary procedures for those who break the rules and make sure everyone knows it.
The core of cash handling is to create a healthy system of responsibility and accountability that makes it easier for your employees to be honest.
6. Control Food Costs
If you want a highly efficient restaurant, you need to implement strategies to control your food costs.
Quick service restaurants (QSRs) should have a food cost percentage within 25-35%, while table service restaurants (TSRs) should fall within 30-35%. You need to optimize your sales mix and strategies to fall within these levels.
Here are some of the best practices you can implement to control food costs.
- Track regularly. Set schedules to track cost trends versus item sales, food costs versus sold items, etc.
- Compile data. Record statistics and metrics so that you can use historical data to predict trends and set goals.
- Set realistic goals. Optimize your food costs percentage to fall below the acceptable levels by setting the right prices and knowing which items are most profitable to promote.
- Monitor employee consumption. Track the most frequently comped items and make sure they fall below your monthly limits.
- Design your menu. Optimize your menu with on-the-ground restaurant data to ensure it brings in maximum profits.
7. Monitor POS Reports
Having a great POS system is useless if you don’t make it a habit to monitor POS reports. Employee theft will often reflect in your POS and inventory, so you need to make it a habit to check things every once in a while.
When looking over reports, look for the following situations.
- Credit card tips recorded on your POS
- Modified and deleted transactions
- Discounts, voids, and complimentary services
- Instances when the register drawer was opened
When you regularly check on your system’s reports, you can easily spot discrepancies and approach whoever was responsible for the issue.
8. Review Employee Performance
Theft can go well beyond stealing inventory or money.
Some bad apples within your team could also be conducting time theft. Time theft is often conducted by changing logs in the POS. For example, the employee could change the clock out time to 11 PM when they actually left at 9 PM.
Not only are they reducing your restaurant’s operational capabilities during peak hours, but time theft also lessens employee morale and serves as a bad example to new hires.
Conducting employee performance reviews is a great way to spot time theft and deal with it.
9. Provide Proper Compensation
An employee might steal to make ends meet; but at the same time, firing them can also result in plenty of other problems for the restaurant because of the tight job market.
Providing competitive compensation rates and generous incentives can prevent employee theft from happening in the first place. When employees could gain more by working hard than they would by stealing, theft becomes inefficient.
Having a competitive compensation package for employees solves two problems: it disincentives petty theft and increases employee retention while boosting morale.
10. Continuously Refine Your Loss Prevention Strategies
Lastly, you need to remember that the restaurant industry is highly dynamic. Things are changing all the time and if you haven’t felt it before, the pandemic should have certainly made you realize that.
This means that your management practices need to stay sharp and you can’t do that by sticking to a passive and static loss prevention strategy.
Instead, you need to continuously refine your approach to adapt to the environment. Tweak imperfections when you see them and keep your ear to the ground with routine monitoring and inspections.
Also, keep maintaining a positive working environment for your employees. They’re the ones who feel the impact of your policies, so they have undoubtedly plenty to tell you about your policy’s effectiveness. You can include these evaluations in your periodic reviews.
Preventing Loss In Your Restaurant
Losses through theft and error accumulate over time. If you don’t take care of it well, it’s going to result in an inefficient operational system that bleeds money and demoralizes employees.
Thus, you need to have a clear set of loss prevention strategies – from surveillance to proper inventory management and more.
We hope that our best practices will help propel your establishment to more success while building an enjoyable workplace for your team.
Compliance monitoring may seem like a chore most of the time but it doesn’t have to be. Use Glimpse to automatically compare POS entries with your security camera footage and see the full picture in your restaurant. Learn more in a free demo now.