Evan Schuman's StorefrontBacktalk

Franchisee Columnist Todd Michaud has spent the last 16 years trying to fight IT issues, with the last six years focused on franchisee IT issues. He is currently responsible for IT at Focus Brands (Cinnabon, Carvel, Schlotzsky’s and Moe’s Southwestern Grill).

Billions of dollars are lost each year to employee theft and it is only getting worse. The National Restaurant Association (NRA) estimates that the restaurant industry alone may be losing more than 3 percent of sales each year due to employee theft. This figure is very scary to be sure, especially for franchisees who don’t typically have big Loss Prevention teams working on their behalf. What many franchisees have not discovered is that the advanced integration between POS, inventory systems and video surveillance systems can be used to catch these types of activities and dramatically improve the top and bottom line.

If you really want to be depressed, go to Google and type the words: “working at BRAND_NAME steal” or “how to steal from BRAND_NAME” or other variations of the same. What you find may be surprising. Many people have actually posted how-to guides for the best way to steal from a certain brand as an employee. A quick search I just did turned up several for the major restaurant chains.

For example, I found this comment posted on a consumer Web site: “If somebody pays for an item and leaves without waiting for you to ring it up, you can also enter a smaller order and keep the difference. For example, if somebody gets a drink ($1.65), you can enter in a cookie ($.65) and keep $1.00. This is significantly less suspicious on paper, but you absolutely have to make sure nobody is watching you. A cookie is the cheapest item that anybody can buy without it looking too suspicious on the order. A pack of butter ($.25) is certainly cheaper, but they’re not the things an average person would buy.”

The primary methods for employee theft are either physically taking an item out of the store without paying for it or manipulating the POS in attempt to allocate some of the money to them. For the restaurant industry, that could be ringing up one item while selling another, providing additional quantity to the customer than was rung up, voiding items after a customer pays, etc.

Knowing the ways that it happens is only half the battle. What methods can you apply to catch errant employees? Let’s look at the three main ways to stop employee theft:

• Catch them in the act (physically putting money or product in their pockets) either live or on video.
• Identify variances in inventory.
• Identify variances in POS transactions.

Depending on your business, some of these methods may be more effective than others. In some cases, it may take all three. For the most part, the old way of watching videotape to identify the thief is no longer effective. Today, the best way to identify theft is too use the inventory and POS reporting to identify which video you should look at. Many systems now automate that process. If you can recover even half of the estimated 3 percent loss ($15,000 per year on a million dollar per year outlet), why are so many retailers using outdated CCTV technologies?