When It's Not "On the House." (Employee Theft in the Food Service & Restaurant Industry)(includes Related Information)

By Sherer, Michael | Security Management, March 1990 | Go to article overview

When It's Not "On the House." (Employee Theft in the Food Service & Restaurant Industry)(includes Related Information)


Sherer, Michael, Security Management


The scene: a chi-chi Manhattan restaurant frequented by celebrities. A recently hired bartender's assistant watches suspiciously as the bartender puts money from a customer in the cash register drawer without ringing the sale. Later, when the bartender hands the shift's receipts to the owner, the assistant tells what he saw. The pilfered cash is found in the register, and the bartender is fired. NBC's "Tattinger's"

INFORTUNATELY, WHAT SHOULD BE SIMply an evening's entertainment in front of the television is a sad fact of real life. Employee theft could cost American business as much as $300 billion a year.

Though no one likes to talk about the problem, the statistics are staggering. The US Department of Commerce estimates that employees stole money, goods, and property valued at $50 billion in 1988, 10 times the total lost to street crime-and the figure increases 15 percent every year.

The profile of the thieves themselves makes the inside job an even more frightening problem for food service operators. Employees who have worked two years or less commit two thirds of all thefts. Young employees, aged 16 to 22, commit 67 percent of thefts. The food service industry's constant need for relatively inexpensive, unskilled labor is a magnet for employees matching this description.

"Some jobs attract people who believe they can enrich themselves through theft," says Ryan Kuhn, president of Reid Psychological Systems, a Chicago-based marketer of employee attitude surveys. Jobs where employees have ready access to cash or merchandise, such as those in food service, are more likely to attract thieves. In large-scale, anonymous surveys, for example, the company has found that about 26 percent of manufacturing employees admit to stealing, but the number admitting to theft in retail establishments rises to nearly 42 percent.

"Employee theft is a constant problem in the restaurant business," says James Walls, cofounder of Stanton Corporation in Charlotte, NC, another paper-and-pencil test marketer, "partly because employees tend to be so transient. It's hard to do background checks. The business also has traditionally lacked good controls. "

According to the National Restaurant Association (NRA), employee theft accounts for four cents of every food service dollar, meaning operators expected to lose about $8.6 billion in revenues in 1989. That figure is far more conservative than the 15 percent the Commerce Department estimates is added to the cost of retail goods by employee theft. About 75 percent of inventory shortages can be directly attributed to employee theft, according to the NRA. Operator profits are literally walking out the back door or being eaten up.

"Employees say to themselves, 'It won't hurt the restaurant, and $100 will help me big time'," says Jeff Ruby, owner of The Waterfront in Covington, KY. "It's an ongoing game of strategy. Every time you put a policy, procedure, or system in place, some employees try to figure out a way to beat it. "

The Waterfront has been plagued with theft, Ruby says, and just when management figures out how one employee is stealing, another employee finds a different way to profit from lax controls or a weak link in the system. Ruby's problems have ranged from a broiler cook selling expensive strip steaks to employees for $3 apiece to a cashier who skimmed nearly $800 in cash from the register when the power went out one night.

Sometimes the problem becomes so pervasive that operators shrug their shoulders in helplessness. Bill Hannan, administrator of nutrition services at Jackson Memorial Hospital in Miami, says employees there have been on staff so long that they're in collusion not only with each other but also with vendors.

"We have a large operation, with nearly $4 million in food going through annually," Hannan says. "Because theft is a problem throughout the hospital, we have a preventive security department, but they can't catch it all. …

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