Whether you own one restaurant or 100 there's no eluding the fact that at some point you have been stolen from. It may have been a lot or a little but your employees who handle food and money day in and day out have either purposefully or accidentally stolen from you. (Who am I kidding, 99.9% of the time it was on purpose and chances are multiple people conspired in it...)
In conjunction with HT Magazine, Editor in Chief Abigail Lorden has worked with myself and Mirus President/CEO Dave Bennett to dive into the subject of loss prevention within the restaurant industry. The commentary below will be featured in a future issue of HT Magazine but we feel it's important enough to also be featured in The Mirus Reporter.
About Mirus CEO, Dave Bennett:
Dave was born and raised in the Boston, MA area and prior to joining the Mirus team worked for brands such as McDonald's, Dunkin Donuts and IBM. He has over 4 decades of service within the IT and restaurant industries but ironically does not have a technical or hospitality degree. Rather he holds a BS in Business Administration and an MBA with concentrations in Strategy and Economics. In 1999 Dave moved from Boston to Houston to join the Mirus team. In just a few short years, Dave was appointed President of the company and in 2006, he obtained the title of CEO. For years Mirus has been known for above store restaurant reporting and analysis providing multi-unit restaurant companies reliable restaurant management software to further analyze their business performance. About a year ago a Mirus client came to him with a need. This need was loss prevention and fraud detection.
The following is a Q and A with HT Magazine on the topic of loss prevention within the restaurant industry and the solution Mirus is providing.
HT Mag: What’s the overall impact fraud can have on a restaurant’s bottom line? How much fraud does it take to adversely affect food cost?
Dave: "As all operators know, many variables come into play when calculating the bottom line. Fraud committed through the point of sale, if not managed properly, can destroy a restaurant’s profitability. Managing your gross margin is tough, and fraud makes it tougher. If fraud is 3% of revenues, the food cost is inflated by one full percentage point. That 1% amounts to 20% of the bottom line for many companies. For every 1% of fraud, food costs increase 0.3%."
HT Mag: Are there best practices, from a process standpoint, that help a restaurant first determine if they have an issue, and eventually guard against theft? How can restaurants protect themselves?
Dave: "There are multiple ways restaurant companies can protect themselves from employee fraud/theft but most processes are labor intensive and/or expensive. A common practice is to conduct an in-depth manual daily/weekly/monthly audit analysis of the restaurant’s paper records; sifting through all of the numbers to discover outliers. This process costs at least $400 per store to audit depending on who is doing it and how often the audits are performed. An expensive solution is installing video surveillance. With video, the labor is used to review tape instead of conducting the audit. Both can help guard against employee fraud, to an extent, but companies using these methods should be prepared to spend more money and crunch more numbers. Another shortcoming of these practices is that they are not comprehensive; it is unlikely you will be able to detect every fraud event in every store, every day."
HT Mag: What are some of the common misconceptions restaurants have about detecting and preventing theft? (i.e. inventory systems as a sufficient line of defense?)
Dave: "Detecting theft requires examining every guest check for potentially fraudulent activities. Activities are examined in three ways: activities occurring within a check, activities of each crewmember, and the activities of management."
"Food costing and Inventory systems do not collect the check level detail information necessary for detection thus making loss prevention more of a challenge. The data these systems collect is summarized, which limits the capabilities. Another critical missing piece is the inability to set thresholds and trigger an alert when the theft or fraudulent activity occurs."
HT Mag: Are there methods of stealing that don’t cause a variance between actual and theoretical food costs?
Dave: "Yes; this is where we discover the difference between back-of-house (BOH) and front-of-house (FOH) theft. FOH theft occurs at the POS, BOH theft occurs, literally, out the back door. BOH theft will almost always show up in the variance between actual and theoretical. However, most FOH theft will not. Any POS function that allows you to take money off the check will not show up as a variance between actual and theoretical. Examples of these functions are Discounts, Deletes, Coupons, Voids, Over-rings, and Clears."
HT Mag: What are some of the unique capabilities of Mirus’ technology in helping restaurants with their fraud detection and management efforts?
Dave: "One of our clients came to us with a problem and asked if we could develop a solution. After a year of development and testing, Sentinel was created as an all-in-one fraud detection, management and prevention solution. Sentinel fulfills the need for a process oriented monitoring system to detect fraud down to check level detail. A big part of the value delivered by Sentinel is the process itself. Once the monitoring begins, clients can dictate the specific criteria and set thresholds of when to be alerted of suspicious activity and even better, thresholds can either be tightened or loosened depending on preference. When a threshold is exceeded, the details of the check are filed as a potential fraud activity and routed to the appropriate manager for resolution. After the alert has been routed, the manager decides how severe the event is, and decides how to resolve it. The resolution of the event is tracked and measured to keep you updated on the big picture. The solution calculates the trend of fraudulent activity from each person or location, the average time each manager takes to resolve the issue, the percentage of events that have been resolved, and the cycle continues. The trend in resolutions can even help you determine if there are issues related to training. It’s an ongoing, closed-loop, systematic process designed to monitor, detect, route, resolve and measure theft and fraudulent activity at the POS down to check level detail."
How do you manage restaurant theft?
Mirus Restaurant Solutions 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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