The Elephant In The Room...
Theft, or loss, in the restaurant industry is everywhere. Lots of small, cash transactions are one factor that sets the stage for loss. Food that can be consumed at home is another. This is a touchy subject for restaurant companies, a reality that very few like to discuss.
Of all the discussions that are uncomfortable for restaurant companies, manager theft ranks near the top. At most companies, the manager is a key control point for finances. We empower them with unique access to money and data. One bad apple can do a lot of damage.
Restaurant Management Theft - A Taboo Topic?
Quality statistics on the dynamics of theft in a restaurant company are not abundant. The total amount of loss is not known, but some have estimated it as more than 4% of sales. Other studies conclude that 75% of all staff have stolen at least once, and most will likely steal again. While the research in this area is hard to find, the way theft is discussed is often skewed towards the staff, and not on the management team we tend to trust.
In many companies, the fast path to the executive suite goes through restaurant operations. In those cultures, you have to 'earn your stripes' by working up through the chain of command in the field. The experienced gained, it is thought, is critical to taking on one of the top jobs of a restaurant company. In those companies, the managers are potential future leaders. This role within the culture could help explain why manager theft is seldom discussed openly.
The Manager position is responsible for lots of activities, such as:
- Counting cash and making bank deposits
- Ordering food and other supplies
- Counting inventory
- Authorizing labor
- Balancing all the numbers at 'end of day'
These responsibilities give many managers the keys to the vault. If these keys are misused, the financial consequences can be significant. I know of situations where a manager was able to take $8,000 per month out of one restaurant for several months. Now, that is perhaps an extreme example but it highlights the potential exposure a manager represents.
Some of the techniques used by managers to steal seem obvious when looking backwards, but an experienced thief understands the scrutiny he or she is operating under. What numbers are being scrubbed? What excuses are being accepted? A popular technique used by managers of a seafood restaurant was voiding checks at the end of day that were tendered to cash and contained high cost items like lobster or crab legs. They would pocket $150 or more per night using that technique.
I have known companies to be slow reconciling the daily bank deposits with the actual bank records. In the worst cases, five days or more can go by before a missed deposit is detected. On holiday weekends, that might grow to six or more days. Do you know how much cash your restaurants generate in that amount of time? Enough to tempt even good people. Too many restaurants have found out too late that a manager has stolen away with three or four days worth of deposits.
The remedy for all this exposure is to focus on your controls, and double check everything. Basic principles of accounting controls encourage us to have two or more people involved in any activity that exposes the company to significant loss. Do not over-rely on one person, no matter how much you trust them. Honest people can make bad decisions in the right circumstances.
Leverage your data in managing your controls. Automate as many controls as you can. Ideally, examine every check from every restaurant every day. I know this sounds absurd, but it is not. Not with today's technology. You can employ solutions that allow you to set thresholds for acceptable and unacceptable values. And, it's not just checks. Review your orders and invoices, your deposits (of course), and even employee punches that are modified by the managers. Showing the managers that you are reviewing all of the data seriously is an effective deterrent. Make it hard for a thief to succeed in your company. Smart thieves will move down the street and steal from your competitors.
Conclusion
Trust, but verify that your managers are doing the job you hired them to do, and are not bending the rules to supplement their income. You give them a lot of the keys to the kingdom and that is a lot of temptation, even for good people. Examine the data. Automate the examination. Review only the exceptions that demand your attention. You and everyone else will sleep better if you do.
Thoughts?
Do you have a story about restaurant management theft?
Do you think management theft is a taboo topic?
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