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Unethical employees use these five scenarios to steal from you. Learn how to stop them and retake control.
Most restaurant employees are hard workers and honest, and provide excellent service that attracts customers to your restaurant as much as your menu. However, internal employee theft plagues some restaurants, thus leading to profit loss and an atmosphere of distrust.
The key to stopping employee-based restaurant scams is understanding how they occur and focusing on the most essential areas for theft detection and mitigation: inventory tracking, expense tracking, auditing and hands-on involvement.
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Toxic employees in restaurants often take advantage of employer trust and the sometimes hectic atmosphere of a successful eatery. Here are the top five employee restaurant scams, along with why they work — and how you can retake control.
One common way dishonest restaurant workers steal money is by undercharging customers and pocketing the difference.
What happens:
A customer orders a $10 beer. The server charges the customer $10 but enters a $5 beer sale into the restaurant POS system. The server gives the customer the $10 beer and pockets the $5 difference.
Why it works:
When managers compare POS reports against the register take for that day, everything will look correct. However, in the physical inventory, a $10 beer will be inexplicably missing, and an extra $5 beer will be on the shelf.
This scam is popular because POS reports won’t detect a problem, and most restaurant owners don’t check the physical inventory.
Solutions:
Another common inventory scam is outright stealing from the restaurant.
What happens:
Employees steal raw materials like food and alcohol from the pantry and kitchen. It may be a stretch to call stealing from the pantry, walk-in or bar a scam, but it’s astonishingly common.
Why it works:
Many restaurant owners leave purchasing to managers or chefs who order what they need without tracking dry goods, food and alcohol costs. Since few owners check costs, no one checks to see if costs are higher than necessary. Employees therefore seemingly have free rein to take what they like without fear of being caught by owners or management.
Solutions:
A common way for employees to steal cash is by voiding checks.
What happens:
A server takes an order for a table, and the total check is $100. If the table pays the bill in cash, the server voids the check and takes $100 out of the register.
Why it works:
Since the voided check won’t show up on the total amount sold, the POS report total from the day and the take from the register will match. Voided check scams often involve more than one person, especially in restaurants requiring manager sign-offs to void a check.
Solutions:
Comping is when an owner, operator, manager or server gives a partial discount on a restaurant bill. However, unauthorized comps and unrecorded freebies are significant problems for restaurant owners. [Related article: Most Popular Giveaway Items for Customers]
What happens:
An employee removes items from a table’s bill or brings out items without adding them to the check. They may be serving friends and trying to get them free food and drinks.
Sometimes, a server gains a reputation among restaurant regulars as someone who comps or gives away freebies. These regulars generously tip the server in exchange for significant comping on their bill or receiving on-the-house extras.
Why it works:
This scam works because comping or sending out free items is often a legitimate restaurant practice. A server or manager may be compensating for poor service or a mistake on the part of the restaurant. The problem is when the employee comps items or gives freebies without authorization.
Servers in busy restaurants operate with autonomy and trust, so this scam is difficult to detect unless you know what you’re looking for.
Solutions:
A dine-and-dash is when customers order from your restaurant, eat their meal and disappear without paying the bill. Dine-and-dashes are a genuine problem for restaurants, but dishonest employees can take the scam to a new level.
What happens:
A server claims a table has dined and dashed. However, the customers paid the check with cash, and the server pocketed the cash.
Why it works:
This scam works because managers and owners trust their employees. Dine-and-dashes are a real thing, so they’re not unexpected. Even if you suspect the employee is scamming you, it’s your word against theirs. Accusing them of faking a dine-and-dash without hard evidence is unwise — and employers must avoid employee rights violations at all costs.
Solutions:
Other types of restaurant fraud you should be on the look out for include:
A chargeback is when a consumer contacts their credit or debit card provider to ask for a refund of an amount in dispute.
What happens:
If the credit or debit card provider authorizes a refund request, your merchant account provider deducts the value of the refund in full from your settlement (the amount of money they transfer to your business account).
Why it works:
Credit card companies nearly always side with customers in disputes with merchants. That’s the case even if they request a refund days, weeks or months after a guest dined with you. All the consumer has to say is the charge is fraudulent or you didn’t provide the service. It is possible to appeal a dispute but you need evidence for it — that’s difficult for restaurants without a POS system.
Solutions:
Non-existent suppliers bill restaurants for goods and services they never ordered. The scammer collects the cash but the restaurant receives nothing in return.
What happens:
A scammer will create a fictitious company that appears to be a legitimate supplier. They send an invoice to the restaurant owner or manager who then pays it believing the invoice is valid. Sometimes, invoices will be made to look similar to other restaurant suppliers to fool an owner or manager.
Why it works:
Restaurants often use dozens of suppliers each with different payment terms. The sheer volume of invoices makes it easier to slip bogus bills through, especially if multiple staff members can place orders. Often, the value of the fake invoice is low so it’s less likely to raise alarms.
Solutions:
Many dine-and-dashes are carried out with the complicity of staff, as this article mentions earlier, but not all incidents.
What happens:
Customers come to your restaurant, and then order and consume your food and drink. They then leave without paying the bill.
Why it works:
Most non-fast-service restaurants allow you to pay after you’ve eaten your meal so dine-and-dashes are an abuse of the trust that exists between eateries and their patrons. When a restaurant is packed, it’s sometimes easy for even the most experienced team members to lose track of customers. Dine-and-dashers often use sleight of hand. For example, one member of a group might stay behind pretending to wait for the others to return, only to leave later without paying.
Although the financial hit of a dine-and-dash is real to a restaurant, the cost and time investment in pursuing legal action against perpetrators is even greater.
Solutions:
There are two main types of reservation scam. The first involves using a stolen credit card and the second entails reselling fake reservations at restaurants, which are often booked out for weeks or months in advance.
What happens:
When scammers use a stolen credit card, they normally first pay a deposit for a large reservation. They later cancel the reservation but request that you make the refund to a different valid card. In the second type of scam, people turn up expecting to be served only to find there is no reservation.
Why it works:
For scammers using a stolen card, restaurants, especially those without a top POS system, may not keep a record of the original card and will make a refund to the card the scammer requests. When diners think they’re purchasing reserved tables from someone else, they often don’t apply their normal due diligence on the seller because they’re excited about getting a chance to eat at a particular restaurant.
Solutions:
You may receive an email, phone call or visit from someone pretending to be a local official or representing a financial services provider.
What happens:
Scammers will pose as officials or company representatives to gain access to your restaurant’s sensitive information and bank accounts. They could claim to be from the IRS or other tax agency, a health inspector, or a loan officer from the SBA, a bank or credit union. They will try to extort money from you in the form of a fine or an application fee or they’ll request access to your computer systems.
Why it works:
Restaurant owners and staff are trained to comply with officials when carrying out inspections or audits. Backing this up, they’re often fooled by effective and convincing fake IDs, official looking documents and spoofed email addresses. In addition, the restaurant sector has faced unprecedented challenges in recent years and may be susceptible to scammers offering financial assistance. [Related article: How to Get Approved for a Small Business Loan]
Solutions:
Here are six ways to protect your restaurant against employee scams:
The likelihood of widespread employee theft increases the more you’re absent from your restaurant. Your staff may believe you don’t care, so why should they? This atmosphere makes theft feel more acceptable.
It’s also easier to steal from you if you’re not there. Be present and involved, pitch in when you’re there and drop by unannounced often.
Mark Fairlie contributed to this article.