The restaurant industry is rife with ways to lose profitability.  Just when you think you have things buttoned up, a new twist comes along that can threaten your business and you may not even know about it.  Last year the restaurant industry lost an estimated $200 million to a theft scheme called “skimming”.  The cashier or server is equipped with a portable electronic device commonly known as a “skimmer” that can be easily be hidden in a pants pocket.  When handling customer credit cards the employee swipes the card through the POS system to capture the sale and while still in possession of the customer’s card, swipes the card through the skimmer as well.  The customer’s information contained on the magnetic stripe on the back of the card is captured in the device.  The information is then typically sold or transferred to organized rings that produce counterfeit cards and rack up fraudulent charges.  

The adventure usually begins with a notice from the bank that a deposit was either short or is missing.  It triggers questions of who was supposed to have taken it to the bank and when.  When the accountability for the deposit is determined, the employee in question undoubtedly swears that they followed deposit protocols to the letter and denounces the bank records.  Requests are made to the bank to inspect their night depository including the chute and all deposit records.  If applicable, recorded video may be viewed to determine when the particular deposit in question was prepared and removed from the store.  It’s a long, arduous process.  Trust levels are threatened, feeling can be hurt and false accusations could lead to civil action.

It has nothing to do with concrete blocks and mortar. Cranes and bulldozers are not involved, and it has no reference to the facility where you make your deposits or take out a loan.  The first time you encounter it, you may think you’re ahead of the game.  What it may all mean is the foundation for a scam to steal hard earned cash from the register.  Building a bank, also known as “padding the register” is part of a theft scheme and you may never know it without a keen sense and knowledge of how it’s done and the skills to do something about it.

The assistant manager was in charge of inputting hours worked by employees into the back office system.  She was very diligent in making sure employees were paid accurately and that the employees were punching in and out correctly.  She applied correct discipline to those that forgot to punch in or out.  Her supervisor was proud of her that she took such care in the accuracy and discipline of their payroll.  He was so confident in her competency that he left it all in her hands.

I met with a potential client this past week.  It was a referral from a current client that knows I can help this business with their many in house “issues”.  The manager of the business said that he suspected an employee of stealing and perhaps bringing drugs into the workplace.  When I asked, “What makes you say that?”  He then related that the employee in question changes addresses, moving from friend to friend.  One of those former roommates told him that his employee frequently brought home unpaid merchandise for them all to share.  There were also unexplained cash shortages on the community cash register during the shifts the employee was working. 

The 2010 Marquet Report on Embezzlement was released recently. It’s an annual study on major embezzlement cases in the United States over $100,000. In what has been described as a banner year, 485 such cases were studied. An assumption can be easily made that in this bad economy the thefts were triggered by deep financial problems. The study found however, that the most major embezzlers were driven by greed or a need to live a more lavish lifestyle that could not afford otherwise.

Two weeks ago I wrote about a city employee in Monroe, LA who stole thousands of dollars from her employer while collecting cash payment for lodging and shelter rentals at a city facility (see "Financial Controls Somewhat Limited", Jan.11, 2011).  I mentioned the absence of financial accountability and audit processes as a key ingredient in the “theft triangle”.   Because of the lack of accountability, there was a perceived low risk of detection, which lead to motive for stealing the cash. 

The article headline stated “Restaurant Robbery May Have Been an Inside Job”. A headline like that usually grabs my attention. It detailed a Subway’s front glass had been shattered and cash stolen from the safe. Current and former employees are suspected, because after all, a few of the employees were on the verge of being fired and someone used the combination to enter the safe. That’s a given, but what’s more relevant to me is the fact that this was NOT a robbery – it was a burglary; two very different crimes. I’ve heard many times, “My store was robbed last night!” My response was usually, “Wow! What happened? Was anyone hurt?” “ Uhhh, no someone broke in when no one was there.” So, it is common mistake to interchange the crimes.

 This article from Monroe, LA reports the theft by a city worker.  She worked at a city park venue where she collected the payments for lodging and shelter rentals since 2004.  When the payments were in cash, she stole it.  Her thefts totaled thousands of dollars.  She allegedly issued receipts, but did not turn in the cash to City Hall. 

Losses to restaurants can occur from just about anywhere. We talk about cash stolen from registers and from customers by a multitude of internal fraud schemes. Food losses can mount from poor inventory controls and thefts through the POS or out the back door. Crime can generate huge losses from robberies, burglaries and external fraud scams such as credit and gift card fraud. Neglected safety precautions may result in losses from slip and fall accidents or OSHA fines. But how about losses generated from members of the restaurant chain’s executive team to the tune of $1.9 million!