Combat Theft & Lost Profits

By Vicki Powers, Contributing Editor | June 10, 2010

Restaurants must squeeze every penny they can out of their customers these days as consumers closely watch their dining dollars. While doing everything they can to keep revenue coming in, restaurants must also closely guard against revenue going "out" through theft or loss. Typically, the three major areas of loss in a foodservice environment are in lost time and productivity; theft of monies, food and/or beverages; and spoilage or poor management of inventory. Here are several ways that restaurants are fighting back against lost profits.

Time theft
Candlelight Inn (www.candlelightinnrestaurant.com), an Illinois-based family-owned restaurant since 1967, added handheld technology for loss control prevention in fall 2009. Since then, owner Matt Prescott estimates the technology has added 3 percent to his restaurant's bottom line, "which turns into a lot of money," Prescott relates.

The restaurant's new Digital Dining (www.digitaldining.com) handheld POS technology covers a variety of aspects related to loss prevention including labor scheduling. By creating shift rules, the technology prevents employees from clocking in early to their shift. The software knocks about $1,000 of off the restaurant's $10,000 weekly payroll.
 
"Having control gives us a competitive advantage, and I don't have to charge extra to make up for our loss," Prescott says. "Going to POS is worth 10 cents on every dollar of business, so you can make your money back in six months."

The handhelds also enable servers to turn tables 10 minutes faster by eliminating steps. This translates to 30 percent more business on New Year's Eve, Prescott says, with less problems and taking better care of the customer.

"I didn't have to add new seats or build a new building," Prescott relates. "You can't put a price on that."

Food, beverage and monetary theft
Employee theft remains the number one cause of profit loss in restaurants, according to Steve Barth, attorney, University of Houston professor, and founder of www.hospitalitylawyer.com.   

"Food and beverage are not cash, so employees often don't think of it as stealing," Barth says. "If I asked an employee if they'd steal money in a bank, they would say 'no' because they'd get caught at the bank."

Beverage theft is a common occurrence as employees give away freebies to friends or provide a more expensive drink at lower prices and pocket the difference. In fact, the average bar loses 20 to 25 percent of its profits through theft and carelessness of the bartender, according to Bevinco (www.bevinco.com), a beverage inventory control consulting company. As is typical in a down economy, this number is on the rise as employees take advantage of owners' liquid assets to compensate for their own lost tips from lower sales.

The main source of loss at The Tides Inn's restaurant (www.tidesinn.com), Chesapeake Club, in Virginia are bartenders behind the bar, since they are the only ones with access to product and cash at the same time. Tim Johnson, director of food and beverage at the Chesapeake Club, says the economy has put more pressure on people to bring home money.

"No one is taking large amounts of money at one time," Johnson relates. "We're looking for small money, a lot of times. People who you think might not steal, when put in a situation, do."

In the last year, Chesapeake Club installed a new computer system, InfoGenesis POS by Agilysis (www.agilysys.com). The restaurant has become vigilant in not allowing employees to get anything from behind the bar without ringing it up first.
 
The reports and data analysis capabilities are a major component Johnson relies on for clues regarding profit loss. He can track items such as how long a check is open, how it was paid, or items that are void but the check is kept open. The reports help to identify where to look and who to look at to catch those who are dishonest.

"The challenge is trying to give staff members the appropriate freedom to take care of our guests and not be intrusive," Johnson says. "We know the system works if you watch it, because someone had to be fired for stealing."

Killarney's Publick House (www.killarneyspublickhouse.com), a New Jersey-based Irish pub on the outskirts of Trenton, added Restaurant Manager's (www.rmpos.com) mobile platform, RM Monitor, about 18 months ago. Owner Jack Manousos says the technology has made a huge difference by enabling him to view data from the restaurant using his iPhone over a 3G or wireless network.

"I feel a lot safer when I'm not in the restaurant and actually watch it less," Manousos relates.  "Before, I would call the manager four to six times a day."

From a loss prevention standpoint, Restaurant Manager tracks all types of data, such as which employees are making check deletions and which manager makes the deletions. These transactions could provide opportunities for stealing. E-mail alerts are triggered once a threshold is reached. Even while traveling in Greece, Manousos could see his restaurant data. At the time, Manousos noticed someone making deletions in the restaurant using his unique ID while he was abroad.

The restaurant houses 16 cameras set up to DVR over IP, which can be accessed from the desktop or iPhone. Using a data overlay over the video, the restaurant can drill into incidents that might be suspicious. For example, Manousos caught a bartender who was giving customers Crown Royal but ringing up house whiskey and then pocketing the money. Although it's hard to quantify, Manousos estimates that his restaurant has saved $5,000 per year.

Smokey Bones Bar & Fire Grill's (www.smokeybones.com) new system has created such a buzz in the restaurant that management is paying attention.  Andy Haas, director of IT, reports that the number of anomalies has decreased since adding Radiant Systems' (www.radiantsystems.com) Aloha Restaurant Guard in January 2010. Through the software, information is fed to Radiant to be analyzed and shared through weekly reports. As a result, management can identify potentially fraudulent activity and address it right away. "It's heightened awareness among our employees that we're looking and we care," Haas relates.

Haas states the bar business is growing so the restaurant has to put more emphasis on controls. As a result, Smokey Bones is focusing on reducing alcoholic beverage costs with an emphasis on pouring techniques.

"Loss prevention is a combination of a lot of things," Haas says. "We definitely try not to be more adversarial but to protect the business. Scams are based on paper, so as the POS evolves, it precludes you from doing some of them."

Inventory management theft
Another potential loss in restaurants relates to inventory management. Technology such as Point of Success Inventory (www.pointofsuccess.com) identifies food cost and profitability issues such as theft, waste, spoilage, poor portion control, and even under pricing.  

Barth agrees that restaurants need to look at potential loss profit as importantly as any type of restaurant theft.  "If you're not pricing items right, you're not getting the most amount you could get from the customer," Barth relates.  "It's not enough just to look on the cost side of things; you need to look at the revenue side as well. People leave a lot of money on the table in regard to pricing."
 
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