Not all restaurant theft is stealing cash or eating food without paying for it. Some acts of dishonesty may not show up as shortages in your register or be easily detected through inventory counts. Here are some methods of theft and fraud that you may not always think about in a food service environment.
Not a method of theft often thought about in the restaurant environment, being that most people do not “return” items. However, it is possible that this type of theft exists in your environment. Refund fraud in restaurants may be disguised as another form of transaction at the register.
Does your point of sale (POS) system allow negative sales?
Can you complete a return to a credit or debit card?
Recently a McDonald’s employee was arrested for ringing up fake returns at the register and putting the funds onto her own credit card. Not very smart, but she managed to steal over $900 in two weeks. Fortunately, the McDonald’s team had POS data analysis software and uncovered the theft.
Protect yourself against refund fraud
- Educate associates on the reasons a refund should be processed (this includes negative sales transactions)
- If possible, have only members of management perform refunds or negative sales transactions in your restaurant
- Review weekly POS reports for any refunds or negative sales transactions
Gift Card Fraud
Gift Card usage has increased dramatically, becoming the gift of choice for many shoppers. Thanks to technology, plastic gift cards have rendered paper gift certificates mostly obsolete. Yes, although this change alone has decreased the likelihood of fraud; it has not removed it from existence.
Unfortunately, the majority of gift card fraud involves employees. There are several methods that both employees and customers can use to defraud your restaurant of funds via a gift card program. We have outlined many of these methods in an article titled, “Preventing Gift Card Fraud”, which is posted on our website (www.lpinnovations.com).
Protecting against Gift Card Fraud
- Use scratch off labels to protect the gift card account numbers. This will prevent dishonest employees from obtaining non-value card numbers, selling them and then immediately using their value.
- Have gift cards activated at the end of the sales transaction. This will assist in preventing any “laundering” of gift cards (read our article to learn about this method of theft).
- Understand how your POS system handles gift card transactions. What if a sale was voided? Suspended? Will the gift card remain activated?
According to Jupiter Research over 75% of the population has at least one loyalty card. Loyalty cards have been the craze for the past few years, allowing businesses to retain customers by offering discounted pricing, special sales or the accumulation of points for the redemption of goods. Loyalty programs are also susceptible to fraud or theft like other forms of discounting in a consumer-based environment.
Paper-based cards such as punch cards are often easily duplicated using readily available technology. Color printers/copiers with the ability to use thicker paper can easily re-create cards and “punches” can often be duplicated.
Plastic loyalty cards can also be used for theft and like gift cards, the majority involve your employees. Dishonest employees will often keep a card nearby to scan if a customer does not have one of their own. Some create multiple fictitious accounts so that cards are not used repeatedly transaction after transaction. Using cards belonging to friends and family in place of a customer’s card is another means of gaining benefit. The points accumulate on their cards, which in turn allow friends and family to redeem the points. Sounds petty, but when loyalty programs involve food loss resulting from this form of theft adds up quickly and is difficult to detect, much like sweethearting.
Protect Your Loyalty Card Program
- Establish policies and procedures for your loyalty card program how employees must handle customers without cards or transactions involving family members.
- Create a “house” card that employees can use to provide discounts to customers who forgets their card or integrate your Loyalty Card system and POS system for Card lookup.
- Monitor loyalty program usage for # of times a specific card is used in a day, week or month. Although you want repeat customers, seeing a card used an excessive number of times in a day or week should present a red flag.
Not all theft is as simple as taking cash from the register. These unique methods of theft exist and if you have these types of programs in your food service environment, it is safe to say theft may be occurring in one of your locations.