How to Handle Employee Theft and Fraud

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Whether you’re a new restaurant owner or have been at it for awhile, you know that you can’t do it alone. Even if you own a small business like a  food truck, you will likely need to hire some employees at some point.

In an ideal world, everyone you hire would come with experience, work hard, and treat your business with honesty and respect. The world is rarely ideal, however, and sometimes even your best employees can surprise you. In this post, we’re going to talk about not what to do when a trusted worker lets you down, but also, give you some tips on preventing it in the first place.

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Common Types of Theft. If you’re new to the restaurant business, you may be wondering just how your employees may want to steal from you. Unfortunately, there are a myriad of ways, some of which are easy to prevent, while others not so much. It happens to every restaurant, however, so don’t think you’re immune.

One of the most common ways to lose money for any type of business is what is known as “milking the clock.” This could be something as simple as your servers checking their phones instead of working, but you could also end up paying overtime for hours not worked. Obviously, either will cost you money, but the latter can put you out of business, especially if you have more than one employee doing it.

Inventory theft is another way money walks right out your door. It’s usually something that happens if you’re not there at closing — a server loads up to go boxes to take to his family, or a cook grabs a few steaks to take home thinking you’ll never know.

Theft also happens in the bar. It’s not uncommon for bartenders to give friends “extra pours” or free drink here and there, and with the cost of liquor, you know how quickly this can add up.

These are only a few of the ways employees can steal from you. They can fudge orders on your point of sale system to pocket cash, or hand out comp cards to friends and relatives. The bottom line is that if there is something somewhere to gain in your restaurant — free food, drinks, cash, time, or even equipment — you will at some point have someone you trust try to take it from you. Over time, these types of fraud can cost you a lot, and will really hurt you if your business is going through a slow period.

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Preventing Theft and Fraud. Once you know the many ways theft and fraud happens, it’s easier to prevent. Learning how to spot it can be key in keeping things in check.

There are three very simple ways to minimize theft that have little to do with fraud itself. First, make sure your hiring process is strict. Even when you’re desperate for help, don’t hire the first person that comes through the door. Check references, watch out for criminal records, and steer clear of those that give you a bad feeling.

Next, and this is perhaps more important — treat your employees well. This doesn’t just mean paying them well, but also treating them with respect, and showing appreciation for the work they do. Well treated employees stick around longer. If you’ve constantly got new employees in and out of your restaurant, you will constantly have theft.

Finally, it’s important that you be present in the restaurant. This doesn’t mean you have to watch over everyone like a hawk all the time, but if you are never around and your staff knows it, bad things will happen. Come in to check up on things on your day off, and do so unannounced if possible.

Of course, there are more specific ways to prevent theft, and you should definitely implement those that apply to you.

First, have clear, defined systems in place for every aspect of your restaurant. Get a reliable time clock and make sure your POS system is easy to use and monitor. Put systems in place that require employees to double check with each other or the manager on duty if something out of the ordinary happens.

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Get your inventory under control, and make sure that you or someone you trust keeps strict tabs on what goes in and out, especially expensive items like meat or liquor. Create a meal policy that allows employees a certain number of meals per shift.

Give access only to those that will be held accountable. This includes keys, security codes, cash drawer access, and stock room access.

Consider video surveillance where high-dollar theft can occur. This will deter outright theft, but also make it easy to identify the culprit if it does happen.

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What to Do When Trust is Broken. No matter how many security measures you take to prevent your staff from stealing, it will happen, and when it does, you will be devastated.

First and foremost, make sure you know exactly what is going on and who is responsible before taking any action. Falsely accusing an employee of a crime can lead to lawsuits or worse. This is where security cameras can come in handy, but if you don’t have them in place, you need to catch the wrongdoer in the act.

Once you do, you have a couple options. The easiest and swiftest action is termination, but if it’s a high dollar crime, you certainly have the option to prosecute. Before doing so, it’s a good idea to consult your attorney; he can give you the lowdown on what to expect. Remember, though, that prosecution doesn’t necessarily mean you’ll get repaid, and it will likely take a lot of time. If you find out your manger embezzled tens of thousands over a period of time, it might be worth prosecuting, but if it’s just a bartender taking home a few bottles of liquor, it’s easier to terminate employment and move on.

You can also contact your insurance company, as they may cover some losses due to employee theft, but don’t get your hopes up on retrieving anything from the perpetrator or otherwise.

In most cases, it’s best to keep the details of any fraud to yourself; discussing it with other employees is bad form.

If you have a long restaurant career, you will likely come across employee theft and fraud more than once. Each time it will get easier, but that doesn’t mean it’s ever a fun thing to have to deal with. Remember, prevention goes a long way, but doesn’t eliminate employee fraud entirely.


Have you dealt with employee theft? If so, tell us about it!


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