Frauds from customers, employees, and third parties are among the biggest challenges in the restaurant industry. Food service businesses need to be prepared for a variety of scams. That’s done by carefully analyzing any potential dangers and crafting a thorough restaurant risk management plan. Scammers have also adapted, and the most recent frauds are very complex and hard to detect. In this post, we’ll share more about the common restaurant frauds and how business owners and managers in the food service sector can prevent them. If you’re interested in the food service sector, make sure to also check our posts on management for restaurants and how to manage restaurant tips.
Key takeaway: Restaurant fraud is a major challenge in the food service sector. There are different types of fraud committed by customers, distributors, waiters and other employees, competitors, and third-party scammers & hackers. Restaurant fraud prevention is the key to tackling this challenge.
Most Common Restaurant Frauds
The different types of restaurant fraud can be divided into four main categories based on who commits them – employees, customers, suppliers, and third-party scammers. Let’s examine the main ones.
- Employee theft. Unsurprisingly, this is one of the most common types of restaurant fraud. It can have many forms such as cash skimming, inventory theft, and even time theft. Large restaurants and chains have multiple procedures and prevention mechanisms to reduce employee theft to a minimum.
- Vendor scams. When it comes to B2B sales, restaurants need to be very careful when choosing suppliers. Partnering with unrelated distributors can result in deliveries of lower-quality products and invoice padding.
- Credit card fraud. There are various types of fraud related to credit cards and financial transactions. From card skimming and tip adjustment to customers using stolen credit cards.
- Phishing. Although this popular fraud is not commonly associated with restaurant websites, scammers have become more creative in recent years. Phishing attempts aim to collect personal and credit card information. Businesses in the food and beverage industry should invest in proper cybersecurity measures as well as include fraud prevention as part of their restaurant training programs.
- Unfair competition. Although that can hardly be categorized as restaurant fraud, it’s still a major issue that food service businesses need to deal with. Unfair practices might include the creation of fake negative reviews, fake table reservations during peak hours, and more.
- Other types of restaurant fraud. One of the keys to restaurant success is to try to prevent challenges but be prepared to face them. There are dozens of different types of restaurant frauds and only a well-prepared business can withstand them. Ghost employees, reporting fraud, over-pouring and over-portioning, false discounts, and fake complaints are just a few additional examples.
How to Prevent Restaurant Fraud
Dealing with fraud is something every manager and business owner needs to understand. Making fraud disappear is not an option. However, properly analyzing the risks and preventing fraud can help food service businesses withstand these challenges. Here are a few ideas on how to prevent restaurant fraud.
- Integrate modern inventory tracking. Doing regular physical counts and matching vendor invoices with received goods can prevent some of the most common restaurant frauds.
- Train staff and managers. Restaurant manager training courses often include modules on detecting and preventing fraud. Managers in the food service sector should also include knowledge about company values, acceptable behavior, and fraud consequences in the employee training program.
- Security cameras and other technologies. Most of the latest restaurant technology trends are focused on automation and better efficiency. However, there are also multiple tools that help food service businesses to prevent restaurant fraud. Some of them are included in other software solutions for restaurants such as POS systems.
- Implement internal controls. From the segregation of duties to limiting POS permissions based on roles, there are various types of internal controls that can help with restaurant fraud prevention. Other examples include rotation of responsibilities and performing random surprise audits on cash registers, inventory, and POS data.
- Analyze and review reports. Thanks to modern data gathering, managers have access to a lot of data from restaurant operations. This data can be reviewed to analyze employee sales performance, discount logs, and inventory usage.
- Search for custom-tailored solutions. All businesses have their specifics and an individual approach is required to improve restaurant fraud prevention. For example, some frauds might be more common in coffee shops while others can be common among catering businesses. Each niche market of the food service industry has its specifics and it’s best to integrate fraud prevention measures based on your type of business.
Frequently Asked Questions about Restaurant Fraud
From ideas about modern restaurant design and advice on how to open a sustainable restaurant to resources about the latest restaurant marketing trends and restaurant customer acquisition tips, you’ll find plenty of materials on BlueCart. Check out the answers to some of the most popular questions regarding restaurant fraud and how to prevent it.
What Are Some Frauds in the Food Industry?
The most common fraud in the food industry is related to the substitution of a high-value product with a cheaper one. Misslabeling lower-quality olive oil as extra virgin is one of the most common examples of fraud in the food industry. Honey is another product that is often subject to fraud. Another type of scam in the food industry is related to supplying products outside of the controlled and regulated supply chain. This is done as a way to reduce expenses and bypass regulations. Counterfeit food products are also a common scam, especially for high-end and gourmet goods.
What Are the Common Frauds in the Hospitality Industry?
Frauds and scams are a major challenge for the hotel and hospitality industry. A common one is chargeback fraud. Using stolen credit cards can be another fraud that leads to losses and reputation damage for hospitality businesses. Information theft, industrial espionage, and other types of competitor fraud are also common, especially among large hospitality chains. Coupon fraud and inventory theft (inventory shrinkage) are also problems that many businesses in the hotel industry need to deal with. Luckily, modern technology offers multiple options to prevent the most common types of fraud.
What Are the Trends in Food and Restaurant Scams?
Digital scams are among the most common types of food and restaurant fraud. They are mostly related to chargebacks initiated by customers or the risk of fraud during online orders. Having a secure checkout process and saving evidence from orders in case there’s a contested charge are the two main ways to combat those. Hacking and account breaches have become a trendy topic among many restaurant businesses and various other industries. With the rise of cybercrime, companies need to invest more in proper cybersecurity.
BlueCart: The Restaurant Technology You Can Count On
From finding vendors to managing inventory, there are various solutions BlueCart can offer to restaurant managers. Thanks to our software, food service businesses can easily automate certain processes and save costs. BlueCart’s marketplace also attracts many nationwide broadline distributors as well as specialized local wholesalers. BlueCart has various features for suppliers. From easy creation of eCommerce catalogs to hassle-free management of bulk orders. Schedule a demo and see how our wholesale ordering software can help you increase wholesale sales while making your business more efficient.