Hospitality Staff Steal.
9 Ways Staff Lose You Money and How to Combat it
I know that’s a sweeping statement, and in my experience honest staff most certainly outnumber the dishonest staff in the industry
The Reality
However, the sad reality when you are dealing with staff, have products that can be used, worn or consumed you can expect some pilferage from some quarters. To what degree will come from systems and procedures you have in place and the due diligence you employ with your business and your people. The scary part is its not always your team , it can be customers delivery personal or just plain opportunists. Don’t panic in my opinion honest people in all walks of life outnumber the dishonest.
The Big one
In my opinion in the number one cost to loss of sales/profit in the hospitality industry is not theft but the failure to charge for some food and drinks items that are served. This has come from my number of years in the industry both as a manager and later in my own business. I will relate one story to back up my opinion. Click here to see our Article the Big Mistake that everyone makes in hospitality that costs Thousands for more on the big one.
An example
I worked with a client whose drink gross profit was always lower than it should be. That is there was always considerable amounts of stock missing. So, he put a great deal of effort into the fixing the problem.
He put in procedures for receiving stock, storing stock and issuing stock. He even got in a detective to watch the tills for a couple of nights all to no avail. It was only when a customer that happened to be a friend of the owner came in asked for the owner.
This customer apologised that he had not realised that a bottle of wine he had enjoyed with his wife the night before had not been charged for on his bill. Normally he would not look at his receipt but this time he just glanced at it before he binned it and realised he was not charged.
Nearly all my clients team were not putting everything on the bills. This only seemed to happen when the business was flat out busy. He put in a proper procedure into place to remove this issue and looked at his rosters putting more staff on during the busy periods and less during the quite ones.
To him before he got to the bottom of it he felt he had a major stock theft problem.
There are many ways in which it can look like stock is missing. But a lot of the time it’s just not being accounted for.
Here are 9 common ways that staff lose you money. It is where your stock goes missing or is not accounted for which eats away your sales and profit.
- Delivery Stage
This is where the stock does not get to you in the first place. In other words, a delivery comes in, its signed for but not checked. This is where some items disappear.
I recall an incident back in the early 90s when I was working in the kitchen of the local hotel doing my time as a commis chef when I noticed a delivery come in. The delivery driver walked into the kitchen gave the docket to the store’s manager. The store manager signed it and delivery guy left. At the time, I was a smoker and went outside for a fag (Irish for cigarette), this was when I noticed the driver picked up two boxes that he had just delivered and took them away.
I made my manager aware and they then checked the delivery to notice then that 2 boxes were missing. This I have come across numerous times over the years and most recently where a delivery of kegs was left for a client – they checked them went back inside to get someone to help them bring in the kegs when they came back the kegs were gone. They at the time had no CCTV so they have no clue who took them. Of course, the following week CCTV was there and the theft was not repeated.
Action
Never leave your stock unattended until it’s under lock and key. Have a good CCTV system for all areas that you have your stock or where stock will be for any period. Have a procedure mapped out for all routes for stock, that is ordering, receiving ,storing and issuing. Ideally you would have an employee handbook with all your policies and procedures clearly stated.
- Storeroom stage
This is where security is not as tight as it should be. This can lead (depending on where your stores are located) to inside or outside opportunists taking stock.
I recently had a conversation with a client where they were missing 4 strip-loins of steak. The reason they knew it was earlier that day they had done a stocktake and when the chef needed to prepare more steaks that evening they were gone. Their walk-in fridge was just outside the main kitchen and a drunk disgruntled customer walked in and took them without being seen by any staff member. Luckily the CCTV picked it up.
Action
Keep all fridges locked that are not in a monitored area. Create a security protocol. Limit the amount of people that have access and limit the times for access. In a bar for example do your stock up before the premises opens or when it is closed. When you run out during a busy period have management only access.
- Lack of care in ensuring that everything is being charged for.
This is where items of food and drink are served but they are not charged for. From doing secret shoppers for clients and from just dining out with my family it’s amazing how often I notice things not going on the bills. Be it from teas and coffees to desserts and bottles of wine. I have worked with many clients and when their GP is not what it should be we find this practice happens a lot more than you might think. I have even seen some clients lose up to 5% of Profit based on this. (see the biggest mistake everyone makes article)
Action
Train your staff and monitor them. Have a clear no docket no produce. For example, many premises nowadays have a printer system in their kitchen to speed up food preparation and the same in the bar. Ensure that its used and nothing can leave those areas without first having a printed docket that has gone through the till. It won’t solve all the problems but it will reduce it dramatically. See our How do I create procedures article should you wish to create implementable procedures. Again, have your policies and procedures stated clearly in your employee handbook.
- Stock been given away to friends that are on the premises drinking for free
This can be a grey area as some premise have a policy to issue drinks to appease customers when errors happen. However, this can and does get abused. When I was a trainee manger and doing my time in the bar side I experienced a shocking incident.
One night whilst I was out with my work colleagues in a local bar I ordered my pint give in fiver and was given my change. As I was a trainee (on £60 punts back then per week) I had only planned to have 2 pints and 10 cigarettes which the fiver would have covered. After a few sips I had smoked my last cigarettes and went to buy a pack of ten in the machine. I took out my money and was surprised to see that I had four pound coins and some change totally up to £5. I at the time naively thought I must have had more money in my pocket than I thought I had and continued to buy my 10 fags and went back to my colleagues.
As I had more money I went back to bar and paid for a pint then another one and then went home. A few nights later I was on duty and the first guy that served me came to the bar ordered a drink I took the money for it.
That’s when I realised what had happened. He called me over and pretty much told me I better give him the pint as he had given me one the other night. I instantly realised I had only a fiver and that the pint was given to me only so that he could have free drink in my workplace. I told him that is not my problem, never to give me a drink again, but I said here to have no hard feelings I gave him the price of the pint out of my own pocket.
It annoyed me so I spoke to my boss and told him what had happened. He said don’t worry Anthony and thank you for letting me know. A week or so passed and I was on duty in the large function room/nightclub I was in a one man dispense bar on my own and there were four colleagues in the other main bar.
Things went on as usual was busy then closed the bar. But at the end of the night I was on my own with the floor staff trying to do all the clean-up and the 4-other bar man were not there. After about an hour I went to my manager to see where the hell the guys were because I was doing all the work.
This is where I got the shock of my short career. It turned out my colleagues and a host of local bar tenders in the local area were all giving out free drink to each other. They had an elaborate scheme where they all got to drink for free in each other’s place of work. About 12 premises were involved and about 20 bar tenders lost their jobs that night.
That was about 22 years ago, now I have not seen the scale of this since but I have seen where bar staff give out drink when they should not and have seen it far too often. When I notice, it I try to let the owner know. Some don’t want to hear it and that’s fine and some are delighted to hear it as they can fix the problem.
Action
Get periodical secret shoppers, or monitor CCTV. Have a clear drinks policy in place? That is only managers can give out complimentary drinks and that everything needs to be accounted for. Have your till system set up with a complimentary button. Periodically question the reasons for complimentary so not to create a culture of the slightest error leads to a free drink and make it so managers only can use it. Again, ensure your handbook has all the relevant detail.
- Staff consuming.
Most hotels and restaurants and gastro pubs allow the staff to have a meal when on their breaks as a perk. But when this is not monitored the soup and sandwich, or roast of the day can become the steak of the day.
It has long been a practice for some operators to give a drink to employees at the end of their shift but this can lead to people taking an “I can have what I want when I want” approach to stocks, meaning as and when they feel like it they will have a coke here and red bull there.
In the worst cases when the owner/manager lets the team have a drink after work and leaves them to lock up many can and do over indulge. I came across a story where the police were called as a fight broke out with two drunk staff members on the premises when it was closed and a passer-by heard it and called the police. It became a major headache for the owner when it came to getting the licence for the year ahead. Thankfully they got it.
Action
Adopt a clear policy. In my opinion I would remove the after-work drink all together but have a few staff nights throughout the year instead. Do a contra deal with someone to keep costs down. When you allow people to drink on your premises after work it can and does get abused and the reality is if you are not their things can and do get out of hand.
- Staff taking stock home for home consumption
Some staff never drink at work but feel because others are getting an after work drink its ok for me to take one. I came across an instance of this with a client where the chef never took a drink at the end of the shift. But after the company installed a CCTV system everywhere it was noticed overt a 2-week period he had taken a bottle of wine and 4 bottles of Heineken home after each shift.
Action
Use of CCTV and spot bag checks. Again, remove the after-work drink see above. If you are going to do bag checks ensure that the policy is stated in your employee handbook.
- Wastage
This is where things go off, are spoiled or in the pub world can be as simple as gas lines being too high on draught but when it’s not known that this is the case it shows you are missing stock. This per say is not a massive issue when its accounted for, but I have come across full striploins and whole fillets being thrown out because they had gone off due to over ordering and a lack of stock rotation.
I have also seen full 20 litre pots of curry, stroganoff and the like end up in the bin but were not reported as people were afraid of getting in trouble. I once seen 6 cases of beer having to be disposed of because they were 2 years out of date. This all leads to a loss in profit
Action
Have a clear stock rotation policy. FIFO is the simplest – first in first out. This is usually an issue more for beverage stocks that food (with food that’s assuming HACCP is being followed not just signed for). Have a clear waste policy and investigate anomalies. That is when somethings seem to be high. We want to avoid it being abused that is people taking drinks themselves and putting it into the waste book or where food is concerned staff not monitoring dates.
- Breakage
Like wastage it is not always reported due to the fear of being given out to. It can just be sometime a bit of carelessness.There can also be cover up breakage. I remember as a young man I came home after a night on the lash (Irish for going out a drinking probably too much) with a friend we had planned to go back to his place as he said he had more drink there.
When we got back his sister had taken his drink and we had none. Then in a flash of brilliance I remembered there was a bottle of hackler (a horrendous spirit that was marketed as legal Poteen) that my mother had won in a local draw.
I said sure why don’t we feck it (Irish word for taking something that no-one should miss perceived as not steeling but of course it is) so we took it and I dropped a bit of water on the ground broke a glass from the kitchen to leave a little bit of a mess and some liquid to make it look like I broke it.
Anyways the next day I came home, my mother asked “Anthony did you see my bottle of hackler” and I said “sorry mam I broke it but I cleaned up after myself”- “oh really “she said “ah that’s why the floor was wet and there was a bit of glass on the floor” Me all proud of myself “yes mam” She the proceeded like Colombo to unravel me. First
Her “can you show me the broken glass “
Me “no mam as I did not want anyone to get hurt I through it in the ditch “Thinking to myself a dodged a bullet there.
Her “ok fair enough “
And in true Colombo style just as I was about to leave.
Her “there is just one thing Anthony “Poteen has a very strong smell – The broken glass was one of my glasses so what the hell really happened.
Caught Caught Caught.
I felt terrible and apologised, but it turned out this lesson would help me find a thief a few years later.
When I was running the bar department while still a trainee, a young bar tender came to me to let me know he had broken a bottle of whiskey so we could but it into the waste and breakage book.
The hotel I worked in at the time was very sharp about beverage stock control. So, I asked him to show me where and the broken bottle. So, we went into the store room and low and behold there was a broken bottle on the floor with what looked like liquid on the floor.
Ok I said thanks for letting me know. Just as the bartender was about to walk away there is just one thing (Colombo is back). Can you explain why there is no smell of alcohol. EH EH EH he said “I cleaned it up “I then asked “ok can you also explain why the seal on the bottle is broken”, “when a bottle breaks the bottle breaks but the seal does not”. At this stage, he admitted to opening the bottle pouring it into another bottle.
Of course general breakage could also cost you a small fortune, I bet under every wash up area there is a mayonnaise bucket full of broken crockery and glassware . Most is caused by carelessness.
Action
Confirm the breakage of beverage stocks – That is ensure breakages are in fact accidental. When we have a great deal of broken glassware and crockery happening frequently speak with your team about it. This is usually down to a bit of carelessness and doing the lazy man load, i.e. trying to carrying to much in one trip.Train them on the correct use of trays and trolleys ensuring they are not overloaded.
- Staff stealing money;
Staff taking money from the till, either in a simple just raking it out of the till type way or charging customers then pocketing it rather than putting it into the till. I have also seen it where I have caught on camera people swapping change that is going to the safe to get a back of coins but not putting the cash into it to replace the change value.
Action
Periodic till lifts and cash spot checks. Have a clear note on daily cash sheets. That is who was on duty whether the tills were up or down. Most of the time when the tills are out it can be done to human error but look for the pattern if it is happening all the time. Then do what’s known as till lifts. Which is do a read and swap over with a new float. When you do this, it does a few things. It sends a message that the cash is being properly monitored. When you have a problem, you can isolate it to a few people rather than the whole team. It’s easier to catch one person when you have some evidence that something is wrong rather than suspecting everyone.
Conclusion
Sadly, when things are loose around cash, stocks or anything that can be used in the home things will go missing. The more accountable practices you have in place the better your business is protected. My advice is do periodical stocktakes on all other items an top of regular F&B stocktakes twice a year will let you know if you have a problem and will act as a major deterrent.
Now, so that I am clear these things most certainly don’t happen in all businesses. But some of them happen from time to time in most businesses. I wrote this article so that if you are having issues with profitability being lower than expected that you have something to work with to improve the situation.
This is of course under the assumption that you know what your Gross Profit should be. That you conduct regular stock takes to give you an accurate Gross profit and that from those stock takes you can see that there are variances that can’t be accounted for.
These are the main areas that stocks (and profit) are lost and not accounted for.
Knowing what it might be is only part of the solution that’s why I created the 9-ways staff lose you money “Combat” checklist to act as a guide to first figure where your problem is and then to fix it. Click here to get the 9 Ways Staff loss Money “Combat ” Checklist free download
One thing to bear in mind you will never get this perfect but you can get it dam close. Remember your handbook is one of the few things that you can use to protect yourself. Far too many believe the handbook is only to protect employees but when used correctly can protect your business too.
Learn More
If you want to learn more on how to create your own procedures and standards to remove/reduce this issues , book a complimentary kick start session with us.
On this call, we will take roughly 15-20 minutes where you will leave a solid clear plan around the 12 month results you want to achieve and 3 key action items you need to complete to kick start your business within the next 90 days.
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