Tag Archives: Internal Controls for Food

WSJ Reports Businesses See Rise In Employee Theft

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WSJ-LogoThe Wall Street Journal posted a great article on the rise of employee theft as a result of the recession.  You can read the entire article on MSN’s Money page here.  The article reports that ‘New research shows that employers are seeing an increase in internal crimes, ranging from fictitious sales transactions and illegal kickbacks to the theft of office equipment and retail products meant for sale to customers.’  The article also mentions that ‘To many employers’ chagrin, the workers guilty of the most grandiose theft frequently turn out to be those deemed to be highly trustworthy’.

We have seen a dramatic increase in internal theft while in the field and expect to see a continued increase in 2009, especially in employees who rely on tips for a large part of their salary.  Many hotels have been forced to dramatically reduce the number of hours as occupancy declines and many of the hotel restaurants have slowed down.  Many employees are now really struggling to make what they made in the past and most cannot afford to take a pay cut and still pay their monthly expenses.     Continue reading →

Are Rising Food Costs Killing Your Restaurant’s Profits?

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Are rising food costs decreasing your restaurant’s profits?  You better act now!  We anticipate the cost of food, especially the staples, to continue to rise.  Food and Beverage Departments for hotels are typically low-profit areas and can easily turn into no-profit areas if you do not react quickly.  Here are some things that you can do:

Know Your Food Costs – It is surprising how little hotels actually know about their food costs.  Most hotels have a breakfast buffet, however, few hotels have any idea what their food cost is on the buffet.  Most just assume they are making a high profit because they were taught that buffets were always high profit.  Not true.  Spend the time to calculate your buffet cost.  You may be surprised to find out that your buffet food cost is 40 or 50 percent!

Here is a simple way to find out the food cost for your buffet:  Have the kitchen log every single item that is used on the buffet during a 7 day period (10 cases of bacon, 22 cases of eggs, etc).  At the end of the week, add up the total food expense and divide it by the amount of revenue you posted for those days.  Be sure to do it for a whole week because you will find that your weekend food cost is very different than your weekday food cost.  Also, be sure to add in all items included with the buffet such as juice and coffee.

Re-engineer Your Menu – Hopefully, you are using a spreadsheet or computer program to monitor your menu engineering.  Be sure to re-evaluate your menu every single month.  For additional menu engineering help, check out this article.

Evaluate your menu prices – Now that you know your food cost and your menu engineering, be sure to evaluate your menu prices.  You will most likely have to raise prices.  However, don’t just raise all of the prices across the board, be very strategic.  Raise only the prices of the items that are the best sellers but do not have the best profit.  Keep the prices the same on the items that do not sell well but have a high profit.  Replace the items that do not sell well and do not have a high profit.

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The McScam

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It turns out that hotels are not the only victims of crafty employee theft.  Here is the fast-food version of the breakfast buffet scam:

I was in West LA last weekend and had time to get a quick bite to eat with some friends.  Most convenient, of course, was a major fast-food restaurant down the street.  Some of us were not very hungry, so the ones who were ordered first.  Everything was normal at first; we ordered food that the cooks in the back had to make, the cashier entered the transaction into the computer, processed the payments, gave a receipt, etc.

Then the ones that just wanted small items came to place their orders.  As I waited for my food to the side, I noticed that she started to use a small calculator instead of the register that she had used with me to add up the cost of each order.  One of my friends ordered a drink and large fries (both items the cashier could retrieve herself).  She punched the amounts into the small calculator and asked for $2.79.  My friend paid with cash, the cashier put the money in the drawer, did not present a receipt, and provided the drink cup and fries.  Another one of my friends ordered a specialty coffee drink.  The cashier listened to the order, then asked, “That’s it?”  Once my friend nodded his head, she then recalled the price from memory and asked for $2.19.  She then did the same with the money as the previous transaction.

There was a good flow of people coming in to order food and as I waited for my food, I could not help but laugh.  For every transaction that she did not have to send to the cooks or have to process a credit card, she would not ring the transaction into the register.  One can only imagine how much money this cashier was making, but even worse, how much more money the fast-food restaurant was losing.  She obviously had been doing this for some time and because the restaurant was in a very high volume area, the managers or owners probably do not even notice.

Take it from me, she was being so obvious because she knows that she probably won’t get caught.  These things happen often in places I go.  Managers and owners just need to take a closer look at their operations.

Got a McStory to share?  Post it in our comment section.

Book Report: Burning Down the House

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burningWho has read ‘Burning Down the House: The Infamous Waiter & Bartender’s Scam Bible’?

This book was actually written to teach bartenders and servers how to steal from their restaurants and bars. The tagline on the back reads ‘Diners and Managers, beware!  Waiters and bartenders, give yourself a raise!’

It was written by two servers who work on Bourbon Street.  It is a quick read, you could probably finish it on your lunch break.  It is a very dangerous book! It covers the simple scams like check representing and the more complicating scams like the wagon wheel. A couple of the scams are far-fetched or out of date, but the book does a good job of describing all of the ways a server or bartender can steal from your hotel.  The book is also pretty entertaining.  It is written in an edgy fashion and includes chapters like ‘Suggestive Stealing’ and ‘The Buffet Scam’.

Please add your comments about the book below… and if you buy the book, don’t leave it sitting around your office where your servers will see it!

Servers and Bartenders Split Checks (and steal) in a Blink of the Eye

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It never amazes us to hear about all of the ways our Mystery Shoppers see servers and bartenders stealing from their hotels. With the advancement in technology, especially point of sale systems, you would think that it would be harder for servers to steal. However, in many ways, it actually makes it easier.

With the advancement in technology, a server can make a guest check-in seconds. That means they can easily manipulate a guest check-in seconds. Here is one example our Mystery Shoppers see. A server serves 2 breakfast buffets and presents check number 101 to a customer. The customer pays $40 cash. Instead of closing the check to cash, the server pockets the cash and goes back and splits that check, and creates check number 102 for 1 buffet and check number 103 for 1 buffet. Now the server has two open checks for very popular items that he/she can do many things with. He/she can present a check to their next customer who orders a buffet or they can add additional items to the buffet or transfer it to another guest check. The opportunities are endless.

This not only works with buffets but with any items that are not prepared by the kitchen such as beverages, desserts, and especially alcoholic drinks.

How can you protect your restaurant?

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Restaurant Menu Engineering

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Take a break from working on your budget to catch up on a new law that will have a huge impact on your gross operating profit. As you may have already read, on September 12th, 2006 Governor Schwarzenegger approved a bill to increase the minimum wage. The bill calls for two raises to the minimum wage over the next year and a half as follows:

-On January 1, 2007, the minimum wage for California will increase from $6.75 per hour to $7.50 per hour.

-On January 1, 2008, the minimum wage for California will increase an additional 50 cents to $8.00 per hour.

To read the bill, click on the following link: http://www.dir.ca.gov/IWC/iwc.html

The biggest area the new law will impact is in the hotel’s food and beverage departments. Most restaurants only make a profit of about 10 percent. With server and bartender labor to increase 11 percent to $7.50, it could easily squeeze out the entire profit. Hotels with high benefits (especially high workers comp rates) will be hit the hardest. Now is the time to examine your menus and consider any price increases. There is a great article on menu engineering available at http://www.restaurantowner.com/public/330.cfm . There is also a menu engineering worksheet available for download to help you out. It is also a great time to examine your labor productivity. Make sure that you have a productivity number for each position and those numbers are used to forecast, schedule, and report each week.

The earlier that you can prepare for the increase, the easier it will be to absorb the expense. It is critical to examine what positions that it will affect and have a plan for them. Typically any position under $10.00 per hour will be affected by this minimum wage increase. You may want to consider raising the wages on those positions immediately rather than waiting until January 1st. As the word about the minimum wage increase gets around, employees will start looking around to see what other hotels are paying. The hotels that wait until January 1st could risk losing some good employees to their competitors. Also, a large increase before the government requires could be a great boost for morale, especially in December when hotels are slow and work is scarce.

Link provided with permission from RestaurantOwner.com. For more information, visit http://www.restaurantowner.com/.