Loss prevention efforts are, or should be, a big part of any restaurant’s operation. Unfortunately, all restaurants must deal with employee theft.
Delaget, a provider of restaurant data technologies, provides some startling information and some good advice in a series of blog posts, referenced below (Delaget,2013, 2014, and 2015). According to the firm, the U.S. Chamber of Commerce reports that 75% of employees steal from the workplace at least once, and the National Restaurant Association reports that internal employee theft is responsible for 75% of inventory shortages. It also reports that quick service restaurants lose up to 7% of sales to employee theft.
Delaget brings the dollar cost home, reporting that employee theft robs restaurant owners of $14 billion every year. One way it advises to reduce employee theft and restaurant losses is to “make it easy for your employees to report theft by providing an anonymous hotline or email alias.”
An anonymous hotline is part of a five-part approach recommended by Delaget, to include 1) communication to set clear expectations, 2) training so that employees know how to report what they see, 3) pre-screening of job candidates,4) paying fair wages, and 5) critically assessing the work environment to keep it positive, open, and honest.
Examples of these kinds of approaches in use in restaurants can be found via a web search. A number of restaurant operations provide confidential telephone and web-based ethics hotlines and make their ethics policies and expectations available to employees and to members of the public. Some provide ongoing compliance and ethics training for employees, managers, and directors, and make other related materials available as well.
The approaches summarized above are not unique to restaurants, nor are the risks of fraud and theft. We know from reports of the Association of Certified Fraud Examiners (ACFE) that typical organizations lose five percent of revenues each year to fraud, with small businesses suffering disproportionately large losses from occupational fraud.
ACFE data shows that organizations are more likely to detect occupational fraud cases from tips than by any other single detection method and, as noted above, organizations with effective hotlines in place will detect fraud more quickly. Additional proactive detection measures include management review procedures, internal audits, and employee monitoring mechanisms (ACFE, 2014).
Restaurants and their parent companies can prevent or reduce losses with appropriate use of ethics hotlines, training and education for employees and managers, and implementation of other detection measures.
Ethical Advocate provides ethics hotline solutions and custom-designed live and on-line ethics training and seminars for clients in many sectors, including restaurant operations. Contact us to learn more.
ACFE, Report to the Nations on Occupational Fraud and Abuse: 2014 Global Fraud Study, 2014. ACFE.com/RTTN
Delaget,LLC blog posts:
“Top 10 Loss Prevention Objections to Overcome in 2014,” Delaget Blog, December 4,2013.
“5 Ways to Eliminate Workplace Theft,” Delaget Blog, August 25, 2014.
Delaget, LLC. “Analyze These 3 Restaurant Metrics to Fight Employee Theft,” DelagetBlog, July 15, 2015.