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5 Restaurant Employee Scams That Will Cost Your Business Big

Unethical employees use these five scenarios to steal from you. Learn how to stop them and retake control.

Mona Bushnell
Written by: Mona Bushnell, Staff WriterUpdated Aug 13, 2024
Chad Brooks,Managing Editor
Business.com earns commissions from some listed providers. Editorial Guidelines.
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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.

Editor’s note: Looking for the right POS system for your business? Fill out the below questionnaire to have our vendor partners contact you about your needs.

5 restaurant employee scams to watch for 

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. 

1. The employee undercharges for orders and pockets the difference. 

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:

  • Don’t accept cash: Consider accepting only credit card payments in your restaurant. There will be no cash to pocket. You also won’t have to worry about securing cash drawers and a safe.
  • Monitor your inventory: One way to catch this scam is by cross-checking the most recent inventory in your POS system against the actual inventory in your restaurant. If something doesn’t match up, you have a potential problem.
  • Investigate all discrepancies: If there’s a discrepancy between the POS report and an inventory check carried out by a staff member, investigate it promptly.
  • Implement security measures: Buy security cameras as part of an overall restaurant security plan. Place cameras so you can monitor the cash register or POS system. Check the footage to verify if the items the POS recorded as sold were actually served to the customer.
TipBottom line
There are pros and cons to accepting Bitcoin in your restaurant as a payment method. While crypto payments are secure and can’t be charged back, their value is subject to volatility.

2. The employee steals outright.

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:

  • Conduct daily inventory counts: Restaurant owners should do a daily inventory check themselves.
  • Check inventory against POS reports: Check your physical inventory counts against POS inventory management reports to check for discrepancies. The best restaurant POS systems include ingredient-level inventory tracking. Check our review of Clover and our TouchBistro review for platforms with that feature.
  • Handle ordering personally: Ask your chefs and managers what the restaurant needs and order it yourself, so you know what you have and what it costs.
  • Use security cameras: Install security cameras in the pantry, bar and kitchen to monitor who handles dry goods, food and alcohol, and when they access these items.
  • Offer employees discounts: Discount food to your employees to minimize the need for stealing.
FYIDid you know
Many retailers and restaurants use inventory software to ensure stock is properly accounted for and to detect theft faster.

3. The employee voids checks and pockets the money. 

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:

  • Don’t accept cash:This scam won’t work if you don’t accept cash as there will be no cash to pocket.
  • Have managers sign off on voids:If you currently don’t require manager sign-off on voids, start insisting on it.
  • Check a void’s validity:Cross-reference what’s listed on voided checks with items that are easy to count, such as bottled beverages and high-end individual food items. If nothing is missing, the void is real.

4. The employee gives unauthorized comps and freebies.

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:

  • Implement server oversight:Ensure your POS system allows you to see which server waits on each table and have managers sign off on comps and freebies.
  • Spot-check for comps and freebies:Perform random in-person inventory counts and regularly review comps in the POS system. If you find a discrepancy between actual inventory and POS inventory, it may be a scam. Immediately speak with the server involved.
  • Check for a bigger problem: Talk to your servers and ask why they feel the need to comp items or give out freebies. You may find out customers are unhappy about slow service from the kitchen, popular items running out or poorly cooked food. Your team may feel compelled to compensate them to keep them happy. If this is the case, spend more time in your business to identify and rectify problem areas.

5. The employee fakes a dine-and-dash and pockets the cash.

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:

  • Don’t accept cashLike some other scams on this list, this scam won’t work if you don’t accept cash.
  • Use security cameras:Install security cameras and inspect footage from alleged dine-and-dash incidents to see if payment was made before the party left. [Related article: Key Business Security System Features]
  • Be on-site often: Work on-site at your restaurant more frequently to overview operations and staff performance.
  • Vary your on-site times:If you’re not always at your restaurant, vary the times and days you come. Servers performing this scam are only likely to try it when you’re not on the premises.
Did You Know?Did you know
Restaurants have low net profit margins, about 5 percent, according to the National Restaurant Association. Stopping restaurant scams is the quickest way to increase your restaurant's profits, so it's worth taking seriously.

More types of restaurant fraud

Other types of restaurant fraud you should be on the look out for include:

Chargebacks

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:

  • Keep detailed records: Retain copies of your receipts, server notes and security camera footage for a few months as evidence.
  • Respond quickly to disputes: If you have evidence supporting your side of the story in a dispute, provide it to the credit card company as quickly as you can.
  • Use a chargeback protection service: They can provide a gateway allowing credit card companies to connect to your CRM or POS, giving them access to your database for information about a disputed charge. This can help with your defense.
  • Display a clear refund policy: Let diners know what your refund policy is and get them to acknowledge it on larger orders.
FYIDid you know
To avoid chargebacks when a consumer makes a claim, you’ll see a reason code attached to the document you sent. Other than informing you of the basis of the claim, it also provides you with a timeline for fighting against the chargeback.

Phantom suppliers

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:

  • Centralize your purchasing: Allow as few staff as possible in the business to place orders and authorize the payment of invoices.
  • Use a purchase order number system: Insist purchase order numbers appear on all invoices and confirm the purchase order matches an invoice before payment.
  • Implement a supplier list: Check the credentials of any new supplier before entering them onto the system. Make it a rule suppliers off the list can’t be paid, period. 
  • Require multiple sign-offs: You could also require that all staff with responsibility for ordering and invoice payment must approve a new supplier or a large payment.
FYIDid you know
Fake invoicing is one of the most popular types of small business scams. It doesn’t just affect restaurants. Other scams to watch out for including phishing attacks, fake charity solicitations, and being sent unsolicited products and services.

Real dine-and-dashes

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:

  • Invest in more staff training: If dine-and-dashes are a regular occurrence, train staff on how they can make themselves more aware of their surroundings and the behavior of diners.
  • Create a host station: If you place a member of staff permanently at the door, dine-and-dashers may choose another restaurant.
  • Install security cameras: Visible CCTV cameras may deter dine-and-dashers because you’ll have evidence the perpetrators ordered their food and drink and left without paying.
TipBottom line
Increased security helps businesses grow faster, including restaurants. CCTV can help restaurants monitor their premises and door access systems can protect food inventories by restricting unauthorized access.

Reservation scams

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:

  • Verify large party reservations: If you receive a booking for a large group, look at implementing extra verification steps to cover yourself.
  • Refuse to refund: Diners will be able to approach their bank for a refund directly rather than you having to refund them. Be careful with this method, however, as too many chargebacks may mean you pay higher fees or your payment processor cancels your account.
  • Introduce a nontransferrable reservation policy: Make it clear reservations cannot be transferred or resold. To ensure the correct diner has turned up, you might make it a policy to request ID to check that it matches with the reservation name.

Face-to-face scam

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:

  • Ask for and check ID: Always check the ID of anyone claiming to be acting in an official capacity. Contact the organization they claim to represent to verify their identity.
  • Train your staff: You may not always be there if a scammer drops in unannounced so create a procedure for staff to follow in these situations.
  • Don’t pay fees or fines on the spot: If you’re presented with a fine by someone claiming to be a public official or an upfront fee by a supposed broker or lender, don’t pay it and ask them to send it by post.
  • Don’t provide access to your system: Likewise, don’t give someone claiming to be a public official, broker or lender access to your IT system.

How to avoid employee restaurant scams

Here are six ways to protect your restaurant against employee scams:

  • Perform inventory checks regularly.Make inventory checks a common occurrence and ensure your staff sees them completed. Keep meticulous inventory logs and check them against POS inventory reports daily.
  • Install CCTV cameras. Video surveillance at key locations will deter many scams because you can use camera footage to prove or disprove colleagues’ claims.
  • Welcome all whistleblowers.Let your staff know you’ll protect their identity if they come forward with evidence of their co-workers scamming your restaurant.
  • Limit POS, safe and cash drawer access.The fewer people who handle cash, the better. Lock surplus cash in a safe to which only a handful of staff knows the combination. Limit administrator access to your POS system to reduce the chances of staff voiding or editing bills.
  • Provide staff meals.Look after your employees by providing free or discounted meals, so they’re fed and energized for their shift. The more you make staff part of the family, the more likely they’ll be loyal employees.
  • Hire personnel carefully.Thoroughly vet your potential new hires and check their references. Consider incorporating background checks into your hiring process. 

Taking back control of your restaurant

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.

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Mona Bushnell
Written by: Mona Bushnell, Staff Writer
Mona Bushnell is a Philadelphia-based staff writer for business.com and Business News Daily. She has a B.A. in writing, literature, and publishing from Emerson College and has previously worked as an IT technician, a copywriter, a software administrator, a scheduling manager, and an editorial writer. Mona began freelance writing full time in 2014 and joined the Business News Daily/business.com team in 2017. She covers business and technology.
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