Are All Thefts Equal?

Today’s post asks, are all thefts equal?  I’ve listed four common forms of theft in restaurants and bars.  If the amount of theft is equal in each case, is the cost to the restaurateur the same?  If you think each one has the same impact on the restaurant or bar, read on.

Types of Theft
1. Employee takes or consumes food, supplies or assets without paying.
2. Employee takes or consumes alcohol without paying.
3. Bartender over-pours drinks (and under-pours others to maintain the proper cost of sales).
4. Bartender consistently over-pours or gives away free drinks.
Employee takes or consumes food, supplies or assets without paying
In this type of theft, the restaurant loses the cost of the items taken.  Pretty straight forward.
Employee takes or consumes alcohol without paying
You may think that this form of theft has the same cost as an employee taking food or supplies.  However, the cost can be quite a bit higher than you think!  Yes, you’ve lost the cost of the alcohol consumed, but you will also incur a substantial tax liability directly related to the theft.
To understand why, refer to my paper, The True Cost of Staff Theft.  The average tax cost (including penalties and interest) will be approximately equal to the cost of the alcohol taken.  It can be even more than this, depending on whether the tax authorities charge a benefit to the shareholders.
Essentially, this form of theft costs the owner at least two times the cost of the alcohol taken.
Bartender over-pours drinks (and under-pours others to maintain the proper cost of sales)
At first blush, this theft doesn’t appear to cost the restaurant at all.  While there are no sales or income tax consequences and there are no net inventory losses, the restaurant will still incur significant losses over time.
Those customers who receive under-pours may decide to take their business elsewhere, resulting in a significant, longer term loss of revenue to the restaurant.  Even though it is an indirect loss, it still costs the owner.
Alternatively, the under-poured customers will notice that some customers are receiving larger pours and demand them too.  You keep the customer, but now most customers are receiving larger pours.  The over-pouring can no longer be masked by under-pouring, resulting in a direct inventory loss as well as the related tax consequences.
Bartender consistently over-pours or gives away free drinks
Similar to the last case, this one involves the direct cost of alcohol given away in full drinks and by systematic over-pouring.  In an audit, sales and income taxes will be calculated based on the sales that would have been reported, had the missing alcohol been sold to customers.  Note that when customers are given free drinks or heavy pours, they will be ordering fewer paid drinks.  The cost to the restaurant is the full selling price of the drink that wasn’t “sold”.
With this form of theft, (a) you don’t have the cash from the missing sales, (b) you have a loss equal to the cost of the missing alcohol, and (c) you have a substantial tax liability.
The Bottom Line
You cannot afford to let theft go unchecked in your restaurant or bar.  If you think you are only losing the cost of the missing alcohol, you’re probably not devoting nearly enough time and effort to combat theft.  Failure to heed this advice could put you out of business.

Leave a Reply

Your email address will not be published. Required fields are marked *