Internal and External Theft in Restaurants

Experts estimate restaurant sales will hit a staggering $1.1 trillion in 2024. That number indicates impressive profits, but the truth is that rising costs associated with labor and loss can keep businesses in the food and beverage industry in the red. Owners and operators continue to face internal and external theft in restaurants, including quick-service restaurant (QSR) operations.

For restaurants eager to protect their bottom line, loss prevention strategies can help curb theft and improve profits.

Types of Theft in Restaurants

Internal and external theft in restaurants is often lumped together, but it’s important to understand the differences in order to tailor your prevention strategies.

Internal theft

A shocking 75% of employees say they’ve stolen from their employer at least once, according to the U.S. Chamber of Commerce. This crime, known as internal theft, occurs when someone on your own team swipes items that belong to the restaurant and are either part of internal operations or intended for sale.

In restaurants, internal theft might include:

• Employees eating and drinking items not approved for their consumption
• Stealing from the register
• Stealing items in inventory, such as bottles of liquor or packs of frozen burgers
• Overcharging customers and pocketing the difference
• Comping orders and keeping the refund instead of returning it to the customer
• Intellectual property theft, like stealing a proprietary recipe or selling customer lists
• Manipulating wages by clocking in early or clocking out late 

External theft

External theft includes losses incurred due to the actions of non-employees. This usually refers to guests, but suppliers and vendors can also be guilty of external theft.

Examples of external theft in restaurants include:

• Customers who “dine and dash,” eating what they ordered but leaving without paying the bill
• Fraud, such as when a delivery or takeout customer lies about not receiving items in order to get a refund
• Fraudulent chargebacks, where the customer tells their bank or credit card company that they never authorized payment to the restaurant in the first place
• Vendors who intentionally deliver fewer items than the restaurant ordered and paid for
• Break-ins, with thieves physically stealing inventory or cash

Tips for Dealing With Restaurant Theft

The key to loss prevention in quick-serve restaurants is to put together a comprehensive strategy that addresses the people and causes behind theft. Addressing both internal and external theft in restaurants at the same time can help create a culture of awareness and attention to detail. When theft is positioned as everybody’s problem, you’re more likely to get widespread support.

Strategies for tackling internal theft

When it comes to minimizing employee theft, try implementing these approaches that educate employees and make it clear that there is no tolerance for dishonesty.

1. Install Video Security

Putting up security cameras is a big decision. Surveillance can help you keep an eye on employees and customers and keep both groups safe, but cameras can also make some people feel uncomfortable. Still, adding video security serves two very important purposes: watching your business when you can’t and creating a record of events to identify or verify fraudulent activity.

Focus your cameras on areas prone to theft, such as your walk-in fridge and registers. Set up remote viewing for nights when you can’t close with the team and review both routinely and if you suspect theft is occurring.

2. Install an Alarm System

Like security cameras, alarm systems serve as automatic protection that goes beyond the capabilities of your human team. Alarm systems can be used to ward off burglars, but you can also alarm the back door and entrances to other key areas (use silent alarms to avoid disturbing customers). These alerts will give you a head’s up if someone is entering a storage room without authorization or trying to sneak out product in the middle of a shift.

3. Rethink Your Setup and Flow

How your restaurant is set up, both inside and out, can make you more susceptible to theft or help prevent loss. For instance, overgrown shrubs that obscure entrances and poor outdoor lighting could make it easier for thieves to gain unlawful entry after hours. Registers tucked into dark corners or under-counter safes with no clear line of sight give would-be thieves an opportunity to steal undetected.

4. Know Your Inventory

You can’t tell what you’re missing if you don’t know what you should have on hand. Conduct inventories regularly, counting all food, beverage, and smallware items. Maintain a spreadsheet that lists items in stock, items ordered and received, and any discrepancies. This can be used to track when items are disappearing and if there is any pattern to the loss.

5. Cut Down on Cash

Many thieves are looking for an easy way to fill their pockets, and that often means cash. Restaurants are increasingly moving toward cashless transactions, but if you aren’t 100% there yet, simply posting signs that say your cash-on-hand is limited could help.

• Let would-be thieves know that you have less than $50 in the safe.
• Use armored transport to move deposits to the bank rather than asking employees to carry cash out in the open, risking their well-being.
• Limit the number of people who have access to the safe or set it on a timer to open only at specific times and when management is present.

6. Be Transparent About Rules and Expectations

Theft should be universally understood as a criminal and unethical act, but sometimes employees don’t realize that what they’re doing is harmful and illegal. For example, think about the cashier who gives their friend a free drink, the line cook who couldn’t afford breakfast and snags a burger on the sly, or the waitress who gets splashed with coffee and changes into a new company polo without purchasing it.

These acts can seem innocent, and employees might not even realize they’re committing theft. Educating your team on policy regarding theft and sharing these examples could prevent mistakes and keep well-meaning employees from disciplinary action.

7. Take Care of Your Team

While theft is never acceptable, you can prevent acts of desperation by taking care of your people to minimize the desire to steal. Providing staff meals, for instance, gives hungry workers plenty to eat before, during, and/or after their shift. This is a planned cost for you and can lessen the likelihood that someone will steal food simply to fill their belly. It can also prevent health department violations if someone is caught eating on the line or in another food prep area.

8. Be Present

Finally, you can help prevent theft by being a part of day-to-day operations. Interview potential hires and conduct background checks. Get to know your people. Create a positive work environment where everyone feels invested. Be on the restaurant floor to witness transactions, spot activity that looks iffy, and identify opportunities for improvement.

Take the time to dine as a guest, too. You may see things from that perspective that you wouldn’t notice otherwise.

9. Automate Loss Prevention Wherever Possible

You can’t be everywhere all the time — but automated systems can. Automated loss prevention is designed to go beyond human abilities and alert you to theft as it happens. This combination of innovative technology and comprehensive processes monitor activity, comb through data, and prepare reports that can help you make informed decisions.

Protecting Your Restaurant Against Theft

The restaurant industry is complex and ever-changing, which can make it difficult to turn a profit. But by identifying new ways to prevent theft, you can help safeguard your finances, your team, and your customers, creating a better environment and brighter future for all involved.

To improve your approach to tackling internal and external theft in restaurants, learn how you can detect and prevent loss with Delaget.