At an average cost of more than $6,000 to hire and train a new employee, it makes more sense to rehabilitate and turn around an employee who may have gotten off the right path, especially if they are more experienced members of the team.
Every restaurant deals with lost revenue, but what about when those losses come from your own employees? According to the National Restaurant Association, an estimated 4% of all revenue in restaurants is lost to theft and it comes in many forms. From misusing employee discounts to comp meals for friends to not ringing in items, unnecessary voids, overpouring, or simply taking money from the till, whatever the reason is – it still happens.
For most restaurants, pre-tax profit margins are typically small, ranging anywhere from 0 to 15% with an average of approximately 3 to 5%. When employees accidentally overpour or intentionally void orders, it makes it harder to operate a profitable operation. While it might not be a comfortable topic to discuss openly, Jim Farrell, Vice President of Sales and Partnerships for Solink, says conversations like these are vital to keeping employees, managers, and operators on the same page.
“The NRA did a study and concluded that restaurant loss due to fraud runs on average around 4% of sales,” Farrell said. “Couple this with the incredibly narrow margins restaurants operate on, and one can see why it is important to take this seriously and implement the controls needed to minimize your losses.”
Unfortunately, if those numbers weren’t scary enough… it somehow gets worse! Factor in the time it takes to put together a hiring plan, advertise the open position, recruit a new employee, officially hire them, and then onboard them, it can set a restaurant back several weeks and several thousand dollars.
“The Center for American Progress estimated that it costs 21.4% of an employee’s salary to cover the cost of finding a replacement,” Farrell explained. “Forbes found it costs a business between $15,000 and $25,000 to replace a millennial worker. This might seem pretty doom and gloom given that staff turnover is so high in the restaurant industry.”
Identifying Problems in the First Place
In many cases, having the right point of sale system in place can do a lot to keep track of sales and identify situations where losses may be occurring. The emergence of powerful surveillance technology like Solink has helped operators understand possible areas of concern and gather more insight into what might be happening.
“It’s a sad reality of the business that comps/voids/employee discounts can be abused for theft,” Farrell says. “It is possible that employees with a high percentage of comps or voids could be stealing from the business. As a restaurant manager or operator, be alert and inquisitive when comps and voids arise. Most of the time, they are natural byproducts of a bustling business, but as trends emerge, you need to know when to take action.”
So why would an employee steal from a restaurant? There are plenty of reasons why someone would purposely do it, whether they feel disrespected, discouraged, left out, or overlooked at work. Other times, they may be peer-pressured to do it or see others who have gotten away with it and think they can too. They could be desperate and need to take care of other commitments in their lives. Sometimes, employees might not know they are hurting the business when they accidentally overpour drinks, mishandle voids, or slip up during busy peak hours.
In any case, continued losses can add up to sink a restaurant. Farrell says it is worthwhile to identify issues impact the bottom line if left to go on for too long. If there is potential for restaurant workers to abuse voids, comps, or discounts, it is worth sitting everyone down for a refresher course about company policies. This includes coaching the team about:
- the difference between voids and comps, and when to use the two.
- policies related to employee meals and general VIP comps.
- the potential costs to the business for giving items away.
- monitoring and retraining employees who make excessive POS entry errors.
- revisiting service operations where a process may lead to mistakes.
The Case Against Firing Employees Who Cost the Restaurant Money
It might seem counterintuitive, but there is a logical reason for not terminating an employee at the first sign of theft or policy abuse.
In 2016, the NRA reported that the turnover rate was more than 60% in the restaurant industry but was close to double that for frontline restaurant jobs. The situation has not improved since then. In fact, the industry has faced an ongoing restaurant labor shortage and 100%+ turnover rates for several years now. On average, restaurants are losing about $150,000 a year due to employee turnover.
At an average cost of more than $6,000 to hire and train a new employee, it makes more sense to rehabilitate and turn around an employee who may have gotten off the right path, especially if they are more experienced members of the team. With some mercy and a bit of training, operators and their employees can grow from these events and be better for it.
Reward Good Behavior to Prevent Issues in the First Place
As with most things in life, no one wants to be the bad guy. We have talked a lot about what to do with an employee when they make a mistake, but what if you didn’t have to think about it in the first place? What if you were able to curb bad behavior immediately while highlighting model behavior at the same time?
“Have managers share recordings of instances where the staff goes the extra mile for guests or coworkers in their shift notes or manager logbook,” Farrell said. “Use the same video technology to demonstrate and share compliance to restaurant policies. This demonstrates the value of staying engaged, but also that your business values and rewards this kind of behavior.”
The same surveillance cameras used to catch wrongdoing can easily track and reward people who go out of their way to create the ultimate guest experience. This can increase revenue because happy guests will keep coming back and tell their friends, upping their lifetime value.
By highlighting positive experiences and integrating them into a comprehensive training program, restaurant operators can level up their entire staff while giving credit to exceptional employees.
“When a customer reports they are extremely happy with their service, the related video clip can be used to train other employees,” Farrell explained. “By the same token, if a customer reported a negative experience, the video can be used to provide feedback and identify what additional training may be required. Platforms like Solink can catch mistakes, errors, and outright theft while obtaining valuable feedback and staff training material.”
Turning a Negative into a Positive
People make mistakes, and it is understandable to want to terminate employees for costing the restaurant money. It is also in your best interest to dig deeper into the issue to figure out what the problem might be. If it is happening with one employee, it could be happening with others as well.
By getting to the bottom of the problem and figuring out how to prevent it from happening again, operators and their teams will be on the same page and possibly address future issues earlier. Employees who are given lenience and training may potentially become better workers, leaders, and mentors for the team. Their experiences can also be used as training for the team, leveling up everyone using real-world examples.
Finally, rewarding good behavior when you see it is as important, if not more so than calling out the bad. By highlighting what is going well and correcting the negatives quickly, operators can get everyone on the same page to create a better workplace and more positive guest experiences.
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