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Coupon Fraud: You May Be Giving Away More Than You Think

Posted by Chuck

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Are your promos being used to commit fraud?

The majority of restaurants have utilized some type of promotion in order to build revenue, introduce a new product, drive traffic or reward loyal customers. In short, your restaurant business is providing a coupon offer in return for more / specific customer interaction. This give and take process generally works well. However, while it may be increasing traffic and driving sales, your business may be losing hundreds, heck even thousands of dollars due to fraud and you may not even know it.

What Is Coupon Fraud?

According to the Coupon Information Corporation (CIC)—an organization that monitors coupon fraud —coupon fraud is defined as; “intentionally using a coupon for a product that he/she has not purchased or otherwise fails to satisfy the terms and conditions for redemption, when a retailer submits coupons for products they have not sold or that were not properly redeemed by a consumer in connection with a retail purchase, or when coupons are altered / counterfeited.”

Further, the CIC stated that the coupon business is worth $4 billion, and coupon fraud results in $500 million in losses each year. Unfortunately, there are no solid statistics that indicated what percentage of these losses is related to the restaurant industry.

How Coupon Fraud Works.

Restaurants that initiate promotions by offering discount coupons in local or national newspapers can be victimized by dishonest managers, cashiers or servers who purchase multiple copies of the newspaper and clip the coupons. When a guest pays a bill with cash but has no coupon, the employee attaches a coupon to the check, deducts the amount of the discount and pockets the cash for the coupon amount.

How to Identify Coupon Fraud.

Fraudulent redemption of coupons, daily deals and other offers can catch you by surprise and turn a promising promotion into a costly experience. While specifics vary, short of having the ability to electronically tie a coupon to a specific buyer you’ll want to employ techniques that will allow you to identify those employees whose behavior makes them stand out from their peers.

The best way to uncover and minimize this type of behavior is to use a solution that will allow you to on your team. This is best done with the use of a reporting solution that will look at every line item on every check at every location every day and then produce a targeted result set using an exception-based reporting technique.

Exception-based reporting

Exception Based Fraud

Exception-based reporting generates value by combining the lowest level of detail (e.g., in the case of POS that would be check level) with a set of filters defined by your company that sets the limits of acceptable and unacceptable results. The system applies the filters to the detailed data to find exceptions that meet or exceed your criteria – in the case of coupon theft it presents a list of individuals whose behavior matches the limits (filters) you established. Instead of having to look at everyone, individuals not in scope are filtered out and better still - the computer is performing the filtering, not a person.

Add bonus points if the solution you use will automatically deliver these exception based reports to the individual(s) responsible for review and action. This auto delivery will further improve your team’s efficiency and speed to resolution – which, in the case of theft can add up quickly.

Using filters to limit the list of potential fraudsters means that you and your team will not waste time and better still, as you move forward you’ll find that you’ll be able to adjust and tighten up your filters to further reduce the potential for fraud.

Be upfront with your staff, you want them to be aware that you’re using various technologies to keep an eye on the business. Following that, swift action due to exception-based reporting will only serve to reinforce team member awareness which, in turn, can lead to immediate changes in employee behavior and prevent many others from engaging in fraudulent activity in the first place.

I’d like to think that with the use of technology you can identify and eliminate theft but in reality, theft prevention is the best anyone can hope for. The key, continuous monitoring so you can locate and quickly remove those who are stealing from you and minimize the losses otherwise certain if left unchecked.

Related Article: Why Exception Based Reporting is Vital for Restaurant Operators


Do you have established thresholds and continuously monitor employee actions against them? If not, why not?

About Mirus:

Mirus is a multi-unit restaurant reporting software used by operations, finance, IT, and marketing.

For more information, please visit: www.mirus.com

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Topics: Restaurant Operations, Restaurant Loss Management, Restaurant Finance


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