Like it or not, employee theft happens. Here’s how to curb it.
Last year, a female employee of a Pizza Hut in the southern Illinois town of Cahokia Heights halted her shift – and employment at the eatery – by snatching money from the registers and safes before strolling out of the restaurant.
The Pizza Hut’s manager called police to report the theft, which was captured on video surveillance. It was a brazen act of thievery and a startling reminder that employees can – and do – steal.
Not every employee theft, however, is so audacious and obvious. Many times, in fact, employee theft slides under the radar. An unauthorized freebie to a buddy here. A stolen bottle of booze there. The result for every pizzeria, though, is the same: real losses.
“Restaurant margins are thin as is and you certainly want to keep the profits you have in the business,” says Amber Bradley, executive director of the Restaurant Loss Prevention and Security Association (RLPSA).
Consider this napkin math: if a pizzeria has a profit margin of five percent and an employee steals a seemingly measly $10, the restaurant needs $200 in sales to make that $10 back. Add those losses up and the restaurant could end up fighting for its life.
“So many small business owners go out of business thinking they couldn’t make it work despite evidence to the contrary. Oftentimes, it’s at the hands of one or two people that profits of the business are being consumed,” alerts Catherine Penizotto, founder of Penlight, a loss prevention consultancy based in Florida.
The many forms of employee theft
To be certain, employee theft takes many different forms.
Some snag cash from the register. Others snag product, such as alcohol, ingredients or supplies. Penizotto, in fact, has seen some employees make sales of stolen products on the black market a side hustle.
Some engage in the age-old practice of “sweethearting” and give food and drink away to friends. Others engage in a more recent practice: taking a photo of a customer’s credit card with their smartphone and using that information in illicit ways. While the latter act doesn’t produce a direct loss to the business, it can significantly harm a restaurant’s reputation and its relationship with customers.
Some get creative, particularly at the point-of-sale (POS) system, issuing refunds to their own credit card or
removing items from a ticket in favor of a tip. Others cut side deals with sales reps that send dollars to their pocket, not the restaurant’s P&L statement.
“Now, imagine this over the course of a day. The impact on the business can be tremendous,” says Penizotto, adding that employee theft also hampers a restaurant’s culture and team morale.
While employee theft might not be top of mind for small business owners, loss prevention insiders encourage restaurant leadership to be mindful of warning signs, which can range from cash shortages and too-frequent voids to employees living above their means.
“Quite often, employee theft starts simple and small, but it blows up in frequency and amount quickly,” Penizotto says.
4 preventative steps against employee theft
Pizzeria owners can limit the potential of employee theft with a mix of active leadership, diligent attention to the numbers and clear protocols.
#1: Show your vigilance.
Regularly ask questions of employees. What happened with this void? What’s behind this customer comp? Be mindful to adopt a curious, rather than accusatory, tone, as voids and comps often happen for legitimate reasons. But do ask questions.
“Talk of your awareness spreads,” Penizotto says. “If there is a dishonest employee and you show your awareness, that employee either rights themselves, finds another method or, quite often, leaves.”
#2: Watch for changes in numbers.
Operators should monitor their numbers to inform business decision-making and detect theft. They should note discrepancies or if anything, such as payroll or purchasing, is running awry. Product orders and sales, for instance, should travel in parallel over time.
Though some out-of-whack numbers could be solved with an operational fix or training, some might be attributed to employee theft.
“Follow the breadcrumbs because the numbers don’t lie,” Bradley says.
#3: Set clear expectations – and consequences.
Ownership should set the stage for employee conduct, including theft, during hiring, including having employees sign a code of conduct to eliminate any potential misunderstandings.
“Be up front when hiring what the consequences are if any employee is caught stealing,” says Doug Rector of Washington-based Northwest Loss Prevention Consultants, who also recommends restaurants conduct background checks on prospective employees as an added preventative measure against employee theft.
#4: Put up guardrails.
Don’t make it easy for employees to steal – or even be tempted to do so. Some well-informed practices will help to this end. For instance, restaurants should enforce policies around employees using cell phones on the floor or near the POS. If restaurants have cameras, including technology that matches every transaction or exception to a video clip, they should make this known to staff.
“Limit opportunity,” Penizotto says. “If your beer cooler is next to the open back door and you’re not monitoring it, then you’ve created a prime opportunity.”
The aftermath of employee theft
When investigating a potential issue of employee theft, restaurant ownership should take detailed notes, collect video images and document any relevant conversations, interactions or behaviors.
“You should be doing a lot of background before you ever confront an individual,” Bradley says. “You want to know something’s happened, not be guessing something’s happened.”
Penizotto says ownership should go into any conversation about potential employee theft with facts, details and a clear-minded action plan.
“Don’t let the punishment be emotional,” Penizotto says. “Set a policy and honor it: someone steals, and this is what we do. Establish the consequences before a face is ever assigned to the problem.”
And while some restaurant owners don’t want to take the time necessary to file a police report, Rector urges otherwise for the collective good of the industry.
“What [bypassing a police report] does is pawn the employee off to another restaurant where they probably will steal again,” he says. “My suggestion is to prosecute. Word will get around.”
DANIEL P. SMITH Chicago-based writer has covered business issues and best practices for a variety of trade publications, newspapers, and magazines.