A sad truth of the food service or hospitality industry is that shrinkage is universal. No matter how small or large the business, some degree of shrinkage affects profitability.
This may be due to waste, unintentionally providing customers with more food than they have paid for, or even employee theft.
While the first is inevitable and the second at least has the potential to offer some benefits to the business, the last is a problem that should be dealt with as efficiently as possible.
Employee theft in the food service industry is common. From occasional snacking to large scale thievery used to supplement household shopping, this type of shrinkage adds up over time, chipping into profitability margins that are often tight to begin with.
While there are various avenues that you may choose to solve the problem of employee theft, before you can consider any options, first you need to identify it.
Related: Reducing Waste to Control Restaurant Food Cost
Identifying Employee Theft
Identifying employee theft can be challenging in the food service industry, even if you are relatively certain it is happening in your business.
Most food has a relatively short shelf life. Furthermore, even a small spill can make moderately large quantities of food unsafe to serve. Due to these facts, there are often legitimate reasons for shrinkage. If you suspect theft, you need to separate legitimate shrinkage from illegitimate shrinkage.
Daily inventory control is an ideal way to identify employee theft. As you might expect, daily inventory control monitors inventory levels and compares them to expected levels. If those levels don’t match, you know exactly what is missing and can more easily determine whether the shrinkage is justified.
Inventory Control
However, daily inventory control does more than just monitor inventory levels. Another aspect of daily inventory control is monitoring profit margins on specific offerings your business makes, and during specific shifts.
By comparing the actual profit margins against expected profit margins, you can identify specific areas of shrinkage and analyze them based on employees working a particular shift, type of inventory they include, and other similar factors.
It is this benefit of daily inventory control that is most useful for identifying employee theft. For example, if you notice that profit margins are unexpectedly low on certain days, you can compare those days to your employee schedules. You may discover that a specific employee is stealing inventory. Because it is never the same inventory, noticing the theft through simple inventory management would be more difficult, but profit margin analysis shows a clear pattern.
More impressively, this type of analysis can identify employee snacking, which is usually quite difficult to identify without some sort of video evidence. The reason it is normally hard to identify is because snacking only removes a small portion of inventory from a larger container.
Profit margin analysis, though, can identify that small portion by identifying small changes in profit margin. It may only be a 1% change in profit margin, but when margins are already small, that type of consistent loss can be devastating to your business.
Using This Information
How you choose to use the information depends on your business practices and your relationship with your employees. However, simply being able to provide concrete evidence of theft puts you in a position to act decisively and knowledgeably, and that is always valuable!
High food cost? We can assist you with daily inventory control, ensuring your profitability with Ideal Stock Control
Ian Said, entrepreneur and founder of Ideal Software, a software company specializing in Point of Sale and Inventory Control software designed exclusively for the hospitality industry. Follow him on Twitter @costofsale
