Many small businesses struggle with managing employee theft. According to research from the University of Massachusetts, small business revenue loss from employee theft totals somewhere between $3 and $6 billion per year. The National Restaurant Association reports that, for those in the restaurant industry, employee theft alone accounts for 75 percent of overall losses. Further, research from the United States Chamber of Commerce found that 75 percent of employees will steal from their workplace at least once, while 50 percent will steal repeatedly.
While employee theft is no doubt an issue for restaurants, there are a few actions that business owners and managers can take to cut down the prevalence of the issue and its overall effect on their losses. The key is to take a tailored approach to each type of employee theft and to respond to offenders in a way that lowers the likelihood of the incident repeating itself.
Food and Inventory Theft
Perhaps the most common forms of employee theft that restaurants must deal with is food and inventory theft. This type of theft includes actions such as taking food home, snacking and distributing free meals without authorization. Employees working the bar may also take unallotted sips of alcohol or provide friends with drinks free of charge.
While incidents of food theft may be minor in and of themselves, they can slowly eat away at a restaurant’s profits. Thankfully, food and inventory theft can be easily identified and prevented through a solid inventory management system. If this type of theft appears to be a common problem among staff, restaurants may want to consider offering free shift meals or snacks to ensure that employees aren’t going hungry.
The second most common form of employee theft for restaurants tends to be checkout theft. Checkout theft involves an action such as stealing cash from the register, ringing up purchases improperly, inflating tips, and voiding ordered items in order to steal payment.
A simple way to prevent the majority of checkout theft is with an automated POS system, which can be used to track cash in and out and to send alerts for unusual behavior. Most automated POS systems also allow for customers to enter their own tips at checkout, minimizing the risk of tip inflation. Even with a strong POS system in place, some employees may still attempt checkout theft. One common warning sign of such behavior is a sense of secrecy from employees, particularly regarding transactions and tips.
Oftentimes, employees resort to checkout theft because they find that their wages are not enough to cover their needs. If a restaurant finds that checkout theft is a common problem, it may be beneficial to reconsider their pay system.
Intellectual Property Theft
Intellectual property theft, though not as common as the forms of employee theft listed above, can have a major impact on a restaurant’s market share. This type of theft includes stealing “property” such as ingredients lists, branding, and recipes. In an industry as small as the restaurant industry, the exposure of a secret ingredient or signature recipe can be enough to cost a business its competitive edge.
Unfortunately, because the restaurant industry sees a large number of part-time and seasonal staff, it is very difficult for restaurants to prevent former employees from sharing trade secrets with their next employer. One way that restaurants can attempt to manage this issue is by having employees sign non-disclosure agreements. Ultimately, however, the best way to prevent intellectual property theft is by building a solid relationship between staff and management. When staff members feel valued, they’re less likely to act out against their employer.
Time is money, and time is not exempt from employee theft. Acts such as arriving late, leaving early, taking unscheduled breaks, and falsifying time sheets all comprise this form of employee theft, though it’s important to note that time theft may sometimes occur inadvertently. When employees commit time theft (intentional or not), they harm a restaurant’s efficiency and, ultimately, negatively impact its profits.
While time theft can be difficult to spot, as in many instances it is not egregious, it is also incredibly easy to prevent. By working to avoid over-scheduling and ensure that employees receive adequate break time, restaurants can cut back on the likelihood that staff will take an unplanned break or slip in and out on their own time.
Employee theft is an issue that most restaurants will have to deal with at some point in time. However, by taking a tailored approach to preventing and managing different types of employee theft, restaurateurs and managers can limit the impact of employee theft on their business. In some instances, however, even careful preparation will not be enough to prevent employee theft. For these cases, restaurants may want to consider purchasing employee dishonesty coverage under their insurance provider. Although many Business Owner Policies include employee dishonesty coverage, it is better to be safe than sorry. Contact us for a free — and comprehensive! — analysis of your policy.