It was time to do the Friday night bank change run. I jumped into my Blazer…the battery was dead. I didn't have much time so I borrowed my senior delivery driver's car. As I pulled into traffic I couldn't help notice there were six of my guest check books in his sun visor. I thumbed through them at the drive up window. I couldn't believe my eyes. These books belonged in the restaurant.
I remembered making many of the orders. What were they doing here? This wasn't a good sign. Three hundred orders with an average check value of 15 bucks apiece. The only master copy was never accounted for. My most senior, trusted driver was ripping me off. A wave of nausea came over me. If he was doing it maybe others were too.
At Big Dave's Pizza & Subs most everyone was cross trained to Make it, Bake it & Take it. During a rush the drivers could jump into cooking and cooks could deliver. Everyone took phone orders. It seems that this driver had been taking phone orders on a guest check book he lifted from the office and kept in his pants pocket. He wrote the order, processed it to the kitchen and made sure he delivered it. The master would never be counted into the night's deliveries because we had no record. I did some quick math and estimated there was between five and six thousand dollars worth of unpaid guest checks in the visor. He was dismissed on the spot. I researched better guest checks and discovered a system designed just for pizzerias. This system was first used by Domino's Pizza, had master copies, greater accountabilities and was pretty much theft proof.
National Cash Register did a study almost a hundred years ago. The findings documented that out of all of your employees 25 percent will never steal, 50 percent will occasionally steal if it is easy and the chances of getting caught and prosecuted are slim. The remaining 25 percent are thieves without a conscience. They'll take anything in sight without any pangs of guilt. They have kleptomaniac tendencies. The study has been repeated every 10 years with the same ratios holding true till this day. The National Restaurant Association attributes that 30 percent of all restaurant failures are theft related. We're in a cash business and the temptation is always there.
Why Do They Steal?
- Most employees think you're rich. They think you clear 30 to 40 percent profit on every order.
- They have a personal need for money. The need may be legitimate or sometimes for illegal activities.
- It's fairly easy.
- We don't do thorough background checks on new hires so we hire thieves.
- We have poor cash procedures and assume no one would steal from us.
- Poor crew morale.
How Much Do They Steal?
- Just from restaurants, the number has been estimated at nine billion dollars
What Do They Steal?
- Trade Secrets.
- Personal possessions of co-workers.
- Supplies, smallwares and tools.
- Delivery bags and signs.
How Do They Do It?
- Under-ringing sales at the register and pocketing the cash.
- Under-reporting delivery sales.
- Steal from petty cash change bank.
- Lift money from the night deposit.
- Breaking and entering when your business is closed.
- Collusion between employees and splitting the cash.
Prepared Food Theft:
- Unauthorized swapping of food with other restaurants.
- Unauthorized meals for themselves or friends and family.
- End of shift leftovers to take home.
- Guzzling soda.
- Intentionally messing up orders.
- Taking food for resale to others or personal consumption.
- Poor food rotation resulting in excess spoilage. Trade Secrets:
- Recipes to competitors.
- Recipes for future personal competition.
- Divulging sensitive data to others.
- Mailing lists and customer data.
Equipment and Supplies:
- Office Supplies.
- Small Wares.
- Delivery bags, wallets and cartop signs.
- First Aid Kit
- Co-workers personal property.
- Company property.
To Catch A Thief:
- Beware of extra money in your cash register drawer.
- Limit who has access to cash.
- Set cash Over & Short limits.
- Do random unexpected cash counts.
- Look for coins in wrong places or other counters.
- Sign for all cash drawers.
- Lock up all petty cash and counted money.
- Require two signatures on all bank deposit slips.
- Surveillance cameras.
- Password protect all sensitive data on your POS system.
To Catch a Thief – Delivery:
- Establish a zero tolerance on unpaid deliveries.
- Eliminate the coupon shuffle.
- Call back delivery customers and survey them.
- No co-mingling of personal and company cash.
- No assigning deliveries to others.
- Duplicate paper guest checks with master full-page sheets.
- Zero unauthorized discounts.
To Catch a Thief – Food:
- Use clear garbage bags and pour in bleach before they go to the dumpster.
- Sign for all incoming deliveries.
- Create a policy on meals, drinks and swapping.
To Catch a Thief – Trade Secrets:
- Protect all of your data. Lock it up.
- Create a need-to-know policy.
- Create a non-competitive and proprietary information contract.
To Catch a Thief – Equipment & Supplies:
- Permanently mark all equipment, tools and small supplies.
- Hold employees financially responsible and accountable for all assets under their control.
Snap The Trap
- Create a Loss Prevention Statement.
- Play a game of Profit & Loss Statement Monopoly.
- Install a security system with cameras.
- Prosecute thieves.
- Tie in financial excellence with bonuses.
- Be aware of that gut feeling that tells you, "This doesn't feel right."
- Train for violent crime situations.
- Institute a Drug Free Workplace policy.
I have consulted for scores of operations that are on the verge of bankruptcy. Many owners are at wits end and finally admit to themselves that something is very wrong. They work all day and night and there is never enough money to pay the bills, let alone live on. When I'm retained, many times with a handshake, I do a food cost study, check out menu pricing, pricing from distributors and portion control systems. If the above seems to be in order, I immediately start to get suspicious of possible theft issues. I use this outline and invariably start to pinpoint where the cash and food hemorrhaging is coming from.
Employee theft is hard to swallow. We would never consider stealing a dime from our employees and find it unbelievable they would take from us. They do, and it can take you down. I have co-coordinated sting operations with undercover plants to quickly root out this problem. I've shown videotapes and written statements to owners with proof that their trusted, beloved employees are ripping them off. Between the tears and rage, they are still in denial. Theft is very hard to prove, let alone prosecute, but it must be done. This issue is the second highest reason that independents fail in business, right behind portion control and pricing. If your local bank and Wal-Mart can account for every penny, shouldn't we?
A copy of my Loss Prevention Statement is available in a free downloadable Microsoft Word file from the Manager's Toolbox icon on the PMQ homepage. You can customize it to your needs. It's a good place to start and has saved me countless thousands of dollars of grief and will hold up in a dispute.
The bullet points have come from my personal business experiences from owning Big Dave's Pizza for over 25 years. It's not a popular subject, but it is may be happening at your shop right now. The theft issue will never go away so we have to be diligent and do everything in our power to minimize it. It could save your business from slowly bleeding to death.
For additional information on how employee theft occurs and how you can prevent it, read the article Employee Theft: The Profit Killer located on page 74 of the Winter 2002 issue of PMQ or read it online at: https://www.pmq.com/mag/2002winter/employee.shtml. Other resources on this topic can be found at www.employeetheft.com and www.etheft.com.
If this article hasn't answered all of you questions and you want to discuss it further please visit my website at www.bigdaveostrander.com or call me at (888) BIG-DAVE.