Restaurant Theft

and the hard truth

about losses in the
food industry

Webinar
- - - - Introduction - - - - 2

The statements which you see have been taken directly from recent news sources,
depicting actual theft situations in the food service industry.

Our objectives throughout this presentation will be to educate you on how situations
like these can occur, how they can be prevented and how greatly they can affect your
operation.

Drive-thru employee steals repeatedly from registers

Restaurant manager arrested after stealing from owner

Waitress sentenced in credit card theft from customers

Deli employee voids daily receiptspockets cash

8 Servers found skimming patrons credit card

to commit fraud

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- - - - The Other - - - - 3
Loss Prevention

In the food service industry the term loss prevention normally relates to your safety
and risk management program. There is however, another aspect of loss prevention
that causes considerable harm to the profitability of a restaurant operation internal
and external theft.

Unfortunately, the food service industry does not maintain many statistics related to
theft but the lack of statistics does not mean an issue does not exist.

The latest survey we found specific to restaurant theft was conducted in 2004 by the
National Restaurant Association. In this report, they stated that theft represented on
average 4% of a restaurants total food costs.

As a comparison, each year the University of Florida conducts a survey regarding

various areas of theft and loss in the retail sector. Their recent survey results of 2010,
reports over $36 billion (dollars) lost due to theft and error in the United States alone.

Although restaurants are not represented in this study, we believe there is some merit
to showing these results and the magnitude of loss in a similar consumer-facing
industry.

Loss Prevention
Safety & Risk Management
Internal & External Theft

How much does theft cost?

National Restaurant Association 4% of Food Costs
University of Florida $36 billion

Dont think theft will happen in your establishment? It will and

it can be damaging

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- - - - Employee Theft - - - - 4

Lets look a little deeper into employee theft.

The University of Florida study, which breaks down the causes of loss, states that over
$14 billion was stolen by employees within the retail marketplace. That statistic
represents an overwhelming figure that on average 43% of a companys annual loss is
due to employee theft.

According to the United States Chamber of Commerce, 75% of employees have stolen
at least one item from their employer. Additionally, the Chamber also reports that one-
third of small business bankruptcies can be attributed to losses caused by theft or
errors.

Once again, our experience shows that although statistics like these are not restaurant-
specific, employee theft is a largest contributor to business losses and when it does
occur, it affects your bottom line, lost forever.

Employee Theft
University of Florida $14 billion / 43%
U.S. Chamber of Commerce 75% employees steal

One-third of bankruptcies attributed to theft or error

Employee theft is the largest contributor to loss and is

affecting your bottom line.

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- - - - Anyone Can Steal - - - - 5

So, who are those stealing in the restaurant environment? That answer is simple, who
makes up your staff?

Theft can and does occur at all levels throughout a restaurant unit

Servers and Wait Staff

Bartenders and Bar Staff

Chefs, cooks and kitchen staff

Back Office employees

Management, Operators and even Owners

And dont forget your Vendors they too may

look to defraud you.

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- - - - What Do They Steal - - - - 6

Now that we know anyone could steal from your environment, lets take a look at what
is stolen.

Food & Products this includes raw foods, packaged or canned items and even
finished meals in the form of free meals for friends or employee eaten meals outside of
allotted comp meals.

Cash is always king when it comes to employee theft. Theft of cash can come in many
different forms; some as simple as straight out of the register or a stolen deposit.
Others a little more sophisticated like void theft, receipt manipulation or back office
schemes with cooking the books. With most employees needing money for outside
issues or concerns, cash is the most sought after item when it comes to theft.

Cash
Cash out of the register
Deposits & Accounts
Receipt Manipulation

Food & Product

Raw Foods
Packaged and Canned Items
Meals

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- - - - Credit Cards - - - - 7

Another continuing concern in the food service industry is the theft of customer
information & data, particularly credit card information.

Skimming card numbers and credit card fraud continues to plaque this industry.
Although it may not be a direct loss to your business, having employees involved in a
skimming scam will most certainly hurt your brand and customer trust.

Customer Information & Data

Credit Card Numbers
Loyalty Points & Programs

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- - - - Stolen Items - - - - 8

Other thefts that you need to consider would be restaurant products & supplies, and
depending on your business, intellectual property.

There are a lot of items that can be stolen in the restaurant environment by everyone in
the restaurant environment. Lets take a look at how they do it.

Products & Supplies

Kitchenware
Restaurant Supplies

Intellectual Property
Recipes
Business Intelligence
Concept / Brand Protection

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- - - - Servers - - - - 9

Here are some of the ways Servers and Wait staff may steal from you.

Providing Discounts or Free Food to friends

Eating or taking food for their own personal consumption

Voiding items or checks and pocketing the cash

Failing to properly ring items or dropping sales and taking

the cash

Inflating tips by changing the tip amount, giving themselves

a higher tip without the customers knowledge or approval

Being involved in a credit card skimming scheme; This often

involves outside criminals who may provide your wait staff
with skimming machines and pay them for every credit card
number provided from your clientele.

To refresh your memory, here are some of the earlier headlines in our presentation t
that included servers.

8 servers found skimming patrons credit card to commit fraud

Deli employee voids daily receiptspockets cash

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- - - - Bar Business - - - - 10

Another area of great concern when it comes to theft is the bar business. There are
many honest, hardworking bartenders out there, but unfortunately there are also many
dishonest bartenders as well.

If you operate a bar or provide liquor in your business, this should be a great area of
concern. Bar theft can happen and happen fast. Some of the more common methods of
theft include;

Overpouring drinks for customers to get bigger tips

Shortpouring customers to compensate for overpouring others like friends (this

helps to hide inventory variances)

Ringing with an open drawer, dropping or failing to ring sales and pocketing the
cash

Overcharging customers for premium drinks while serving and ringing well
drinks; pocketing the difference

Back in the kitchen, theft and loss can happen there too.

Theft of raw products right out the back door

Eating or grazing while cooking, which may not be considered theft but will
affect your food costs depending on how much is eaten

Kitchen Staff can also be involved with others like servers. Servers will work with
kitchen staff in void frauds or removing meals from checks.

Vendors can also get involved with kitchen staff when it comes to shorting
shipments, providing lower quality food items all while providing

kickbacks to chefs, cooks or others involved in the ordering or inventory process.

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- - - - Back Office and Management - - - 11

Management, back office personnel and even owners and operators can be a source of
loss and dishonesty. Often, when these individuals are involved, the thefts are more
elaborate, widespread and of course, more damaging.

Larger losses of cash are often the result of theft methods used by management. As
simple as a deposit theft to more involved schemes like cooking the books or
accounting frauds.

Management can also been involved in smaller thefts, which over time can add up to
thousands or even millions of dollars. Having the ability to change transactions at the
end of the day can be a mechanism for void theft, cancelled checks or other register
manipulating theft methods. Being the person responsible for reconciliation, often
leads the thefts uncovered for a long period of time.

If you were to see this headline, more than likely it was a back office employee,
management or even the owner who was involved in the theft.

Deposit Theft
Manipulating the Books
Changing Daily Receipts (Post Voids, Cancel Checks)

Restaurant closes as a direct result of employee theft

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- - - - The Cost of Theft - - - - 12

So without hard industry statistics, what is the cost of theft and how do you know if
you are experiencing theft in one of your business units?

Check your food cost history is it going up? If you own multiple units, are they all
going up and did you change anything to cause an increase?

Look at your profit margins are they going down? Are you serving the same number
of meals or drinks but profitability is dwindling?

Are you losing customers or have heard complaints from your customers regarding your
employees?

Listen to your employees. Are they telling you things about the restaurant or has
morale changed? Talk to them and see what they say about issues changing you
profitability.

Most losses can be prevented. Knowing that it can happen is the first step. Now, lets
help you with the next steps.

Increased Food Costs

Lower Profit Margin
Loss of Customers
Employee Morale

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- - - - Theft Prevention - - - - 13

How can you prevent theft from happening in one of your food service establishments.
Here are some key recommendations.

Incorporate a theft prevention program into your existing risk management or loss
prevention program. Whether you use internal of external resources, having and
executing a developed program will better protect your business.

Involve your staff through educating them on how people steal, how it is detected and
the true costs associated with losses caused by theft. Training should be continual
through awareness methods that keep theft prevention top of mind.

Investigate and resolve theft issues promptly and professionally. If your business cannot
handle a theft investigation, hire a professional organization that can help you resolve
issues.

Know that a dishonest employee can be anyone, starting at anytime. Most often
dishonest employees start because of a sudden need. A theft prevention program
should be part of your business, not a break glass in case of emergency or I only
need it if something comes up, by then the losses have already occurred.

Continue to keep reading about restaurant theft prevention and how to best protect
your business. We can help you with that, but first

Incorporate a Theft Prevention Program into your existing loss prevention

program.

Involve your staff through education, training and awareness about theft
prevention.

Investigate and resolve issues involving theft promptly.

Understand that although theft may not be happening now, it can occur at
anytime with anyone.

Continue to learn about theft prevention.

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- - - - Theft Prevention - - - - 14

Remember those earlier headlines and statements of restaurant theft. Here they are
again with their actual amounts of reported theft.

I ask you now, how much do you think restaurant theft could hurt your business?

Drive-thru employee steals $100,000 from registers

Restaurant manager arrested after stealing $4,300

from owner in one deposit loss

Waitress sentenced in $10,000 credit card theft

from customers

Deli employee voids daily receiptspockets $343

cash in a single day

8 servers found skimming patrons credit card

to commit $736,000 in fraud

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- - - - Resources - - - - 15

6 Principles of Loss Prevention eBook

Discusses the pertinent principles of Prevention, Awareness,

Detection, Investigation, Compliance and Resolution.

5 Ingredients of a Food Service Loss Prevention Program eBook

Reviews the key elements of Policies & Procedures, Safety &

Physical Security, Food Safety, Audit & Investigation and
Education & Awareness.

Additional Resources

Food Service Best Practice Blog

Restaurant & Food Service Loss Prevention Programs

Resources

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- - - - More Information - - - - 16

To learn more or to discuss specific areas

of concern:

Email: [email protected]
Call: 877-574-6682
Website: www.lpinnovations.com

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