Restaurant Fraud & Theft – Part III

“What I like to drink most is wine that belongs to others.”

Today’s post looks at alcohol related thefts once the alcohol has made its way to the coolers and shelves in the bar.  These types of alcohol theft are broad categories.  Within each there are many scams, too many to list.  As I have discussed many times on this blog and my tax blog, alcohol theft has dire tax consequences for a restaurant.  In Canada, the total cost of the theft can easily be twice the cost of the stolen alcohol.  That’s why it is so important to minimize theft in your operation.

On The Job Stress Relief
From another study, as many as 56.6% of your employees are drinking your alcohol without authorization.  On average, half of your employees are stealing alcoholic drinks from your restaurant or bar.  If there is inadequate supervision of staff during the shift, alcohol will disappear.  A water glass filled with vodka or a glass of wine served in a tea cup will not appear out of the ordinary.  A Cuba Libra looks like a Coke.  The only way you can catch these types of theft is to properly observe bar staff during all shifts.
It’s a Party!
Many restaurateurs have allowed their staff to drink after hours, at least once in a while.   Others allow their staff to drink after hours on a regular basis.  Rarely are staff charged for these drinks.  You might think that it is okay, as long as the owner is on hand to monitor drinking.  You would be wrong.  It isn’t just the cost of the alcohol consumed (or the tax liability that accrues), it is the effect of this policy on employee theft.
If you allow staff drinking after hours, there is a significant increase in employee theft from giving away alcohol to friends, customers and staff at other establishments (who will return the favour to them in the future).  Suffice it to say that almost every one of your employees will give-to-get alcohol (9 of 10).
If you do allow staff drinking after hours, stop.  If you wish to treat your staff, take them off-premises.
It’s On Me
About 2/3 of your employees will give free drinks to their friends.  You know, “it’s on me.”  Actually, it’s on you, the restaurateur.
While it is good practice to “treat” your best customers to free drinks every once in a while, it is equally important to keep track of these treats.  Even if you agree with your staff’s treats to customers, they must be supported in the event of a tax audit.  If your staff is simply giving away free drinks without recording them, you will be unable to prove the amount of customer promotions, leading to a significant tax liability.  Without any record of the “treats”, it is impossible to control your alcohol costs, making it impossible to monitor alcohol theft.  It really is worth the paperwork.
About half of your employees are guilty of over-pouring drinks to friends and regulars.  Over-pouring adds up over time and has a significant cost to the owner in terms of the cost of alcohol and tax liabilities.  In a way, it is even worse than giving away drinks.  At least customer comps can be documented for tax purposes.  It is difficult to prove over-pouring during a tax audit.  To put this in perspective, a 1.0 oz. over-pour on a 6.0 oz. glass of wine increases the serving cost of the wine by 16.67% .  A 1/4 oz. over-pour on a 1.0 oz. shot of liquor represents a 25% jump in alcohol costs!
Keep in mind that when your staff over-pour drinks, your customers will order fewer drinks during the stay.  Customers that receive free drinks order fewer drinks too.  This means lower sales to the restaurant, and a potentially large tax bill down the road.   All these costs, so that your staff can make a few dollars of additional gratuities.  These are the most expensive gratuities ever “earned”.  It would be far cheaper to simply hand over the equivalent cash to your servers and bartenders!
If you don’t already maintain a log of customer comps (“treats”), start doing so.  Ideally, enter every order into the POS, print the guest check and discount the bill to a promotion account.  Maintain a log of the customer comps to indicate the customer, reason for the complimentary drink, date and authorization.  Keep all promo guest checks with the monthly log.
Properly train all serving staff on drink sizes.  Make sure proper measuring devices are available.  Monitor portion controls through effective supervision.

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