Putting a Stop to Shrink

By Christina Volpe, Associate Editor | October 09, 2009

Loss prevention, though not a new area of concern, is by all means a persistent, if not growing problem that will never fully die out. Whether shrink occurs as a result of internal theft, breaches in system security from an outside source, or simple run-of-the-mill employee errors, the fact remains that any lost amount can have a disastrous effect on your bottom line (not to mention severe repercussions in customer confidence should that loss be related to the theft of customer data). Although there are a vast number of strategies and solutions that can aid restaurateurs in their battle against theft and profit loss, technologies that converge at the point of sale (POS) are proving to foster increased security and peace of mind for the operators who are using them.

"For me, employee theft is an ever evolving issue," says Sean Power, director of information technology for Smith Dairy Queens, Ltd. (www.smithdq.com), operator of 37 Dairy Queen locations in Texas. "As technology evolves people will get smarter, and if you do not shut that door, that creates an opportunity for fraud."

To aid in its loss prevention efforts, Smith Dairy Queens is leveraging Custom Business Solutions' (www.cbs-posi.com) POSitouch with Northstar reporting tools in all 37 locations, a move that has revolutionized the franchisee's cash handling procedures.

"Before we rolled out the POS we had a significant cash handing problem and over-ring was our number-one problem. We turned on the security features and saved $19,000 in nine months. That is a 57 percent decrease. Additionally, our over/short went down by $13,000. For over/short we do not allow managers to allow an overage or a shortage for over ten dollars,"says Power.

The software's accounting system also enables Smith DQ to more easily recognize and red flag suspicious transactions, specifically tickets that remained open for extended periods of time. "We look at the time of voids and when the check was opened and rang. What we found were checks that were opened at 11 a.m. and over-rung at night, so we went into a couple of stores and asked them how much time is required to close a check. Thirty minutes was the average response."

Smith DQ also activated a blind cash-out feature, which does not allow the cashier to know how much money is in his or her drawer until they have finished their shift, and has plans to roll out DigitalPersona (www.digitalpersona.com) biometric fingerprint readers in the future. "The technology right now is heading toward biometrics," says Power.

Fingerprints don't lie
Well over a year ago, one of the largest Wendy's franchise owners, the North Carolina-based Tar Heel Capital (www.tarheelcapital.com), made the decision to incorporate biometrics into its efforts to control shrinkage and employee accountability.
 
"A long time ago we were using keypad entry which is not very secure,"recalls Rob Ireland, Tar Heel's IT director. "We then moved all of the stores to swipe cards, which are a little bit better, but you can lay those cards down and there is abuse with them. Then we said, 'let's do biometrics.'"

Tar Heel is using DigitalPersona's UareU biometric fingerprint readers which integrate with the restaurant's NCR (www.ncr.com) POS terminals and WAND Corporation (www.wandcorp.com) POS software. "Now we have fingerprint recognition and it cannot get much better than that,"says Ireland. "When the employees clock-in, they use the biometric readers and the manager knows that it is truly them."

Big brother is watching
Video surveillance systems, which are traditionally utilized by restaurants for physical security and premises monitoring, are seeing new applications that link back to the POS. Known as managed-video-as-a-service (MVaaS), this application enables restaurant managers to track point of sale transactions, such as voids, over couponing and more, and then compare them against recorded video to catch potentially fraudulent transactions.

"It lets employees know that the eyes are in the sky, and we have seen a reduction in the use of voids, discounts and refunds,"says Evan Pennant-Jones, director of operations for Amaregal, Inc., a multi-unit Burger King (www.bk.com) franchisee. Amaregal is using video and auditing solutions from Envysion (www.envysion.com), in conjunction with its PAR Technology (www.partech.com) InFusion POS, in all of its restaurants to curb fraudulent transactions. "It is a great solution because with a camera system, employees know that we are watching them and it keeps them honest."

One of Amaregal's largest fraud issues has to do with employee discounting and voids. "There shouldn't be any employee or manager meals rang through the drive-thru,"says Pennant-Jones. Through this solution, managers are able go into transaction logs to identify if any of these transactions occurred at the drive-thru and then watch the corresponding video to prove or disprove the event. This solution also helps management to identify any employee meals that exceed average check amounts, an indication of employee discount abuse. "The average check is about $7 or $8, and when we see a price more than that, it throws up a red flag."

Pennant-Jones also notes that this solution enables Amaregal managers to quickly investigate any 'red flag' transactions that show up in cash audits. "Our managers are very busy, so it is hard to sit and watch the video because we want them in the stores. When they go to do a cash audit, by having Envysion accessible they can grab a void and pull up a video."

Like Amaregal, the Dark Horse Tavern located in Miamisburg, Ohio is tapping a POS integrated video solution to catch fraudulent activities on tape. Dark Horse is using the Remote Eyes (www.remoteeyes.com) interface with its Future POS (www.futurepos.com) to catch employees in the act 24/7. Because the system works like a DVR, it enables managers to go back and view saved footage. A module can also be used that allows owners to watch footage in real-time as well. "It is on a DVR and it saves it [video] for one week so I can go back and watch anything,"says Sherry Bartlett, Dark Horse's general manager. "When I first took over, we had the challenge of giving discount privileges. We had more theft than any business I have ever worked. I printed up canceled sales, voids, discounts, everything."

Bartlett recalls one incident of an employee with sticky fingers. "There was one girl, for example, that on the last night that she had 'discount privileges,' she [rang up] discounts, voids and canceled sales. She had probably $400 that night and that is just what we lost in one night,"says Bartlett. "It is so easy to bust someone stealing [with this solution]."

The details are in the logs
Unlike their stand-alone counterparts, restaurants located on hotel properties feature a unique set of security requirements. "It's been challenging to find a system that meets all of our needs when it comes to our audit process and that has all of our security preferences built in,"says Fred Sullivan, vice president of hospitality for Jackson Rancheria Casino & Hotel (www.jacksoncasino.com). "Different systems we've tried all seem to have functionality and security issues that still need to be addressed."The Jackson Rancheria Casino & Hotel, located in Jackson, Calif. features a number of dining options on its premises, including the Raging River Restaurant, Uncle Bud's Burger's, Italian Deli, Coffee Cafe and Pho Bac Hoa Viet. Jackson selected Agilysys' (www.agilysys.com) Infogenesis POS because it fit the needs for the entire property. 

InfoGensis features a number of components that can help operators on the POS security front such as an electronic journal, back office audit log, a surveillance interface and analytic reporting. "We currently use the report functions on Infogenesis and we utilize our own internal audit procedures,"says Sullivan. "We look for duplicate charges, misuse of voids and comps, cashier variances and charging incorrectly for items sold.

"Employees will always come up with new ways to manipulate transactions; as managers it's our responsibility to keep our eyes and ears open and try to stay one step ahead,"says Sullivan.
 

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