Defending Your Bottom Line

Russ-Bubas-headshotBy Russ Bubas
President, Data Quest, LTD

You may be going out of business and not even know it.

Every restaurateur and bar owner is cautioned against silent partners. Over the thirty years we’ve been in business, we’ve encountered literally thousands of them, some of whom have actually put the owners out of business.

Some are startling to the owners and generate disbelief. In one case, I went into an upscale steak house to do an integrity audit at the bar. The bartender was a polite and professional and served my drink promptly. I placed the money on the bar right away for payment, and he ignored it as he served the drink. That was the first clue. A few minutes later, he served another customer and then collected from him and me at the same time. Going to the terminal, only one drink was recorded, and it looked like my money (marked) went into a tip cup. I called the owner and told him what I saw. His response: “Impossible! He’s been with us for 25 years. He’s like a member of my family. He has dinner with us every Christmas. He baby sat for us numerous times. You’ve got to be wrong.”

My response: “We should audit the terminal and take a look in his tip jar. And let’s bring him to the office to at least ask why he doesn’t collect from customers every time he serves.”

Sure enough, the marked bill was in the tip cup, and, after a brief conversation, he admitted stealing. For how long? He couldn’t remember. Couldn’t remember, but… he would bring it all back.

The owner was shocked but wanted to give him the benefit of the doubt, so he offered the opportunity for the bartender to make restitution by the next day and then suspended him. The bartender was nearing retirement and a pension was in jeopardy. After he left, the owner asked me how much I thought he would repay. I said I wouldn’t be surprised if he brought back five thousand dollars or more. The owner shook his head and said he knew the bartender would never steal that much. The following day, the bartender walked in on time with a large shopping bag. In it was more than seventy-seven hundred dollars in cash, mostly tens and twenties. He said he had been saving for his retirement in the past year.

Upon reflection, this bartender had some honesty in him. He could have brought back five thousand and kept twenty-seven hundred, and the result would have been the same: The owner would have received the presumed stolen amount with no way of knowing the true total. The bartender was terminated for cause, but the owner’s business was saved.

Statistical Impact

Statistics show that sixty-two percent of new businesses go out of business in the first year, mainly the result of unexplained losses. A bartender giving away drinks that help generate larger tips has the same effect on the bottom line as if he put the money directly in his pocket. Consider this: If you have a nice ten percent profit margin, you need $1000 additional sales to make up for a $100 loss. I’ve had owners tell me the only way they know a bartender is not stealing is that he does not open his own bar across the street after three years.

You have to protect yourself and your profits. First, never, ever let your bar staff read the terminals or do the cash audits. This is an invitation to theft. If they can’t tell how much money has been taken in, they have to keep track of what they are clipping from you. Some tricks are:

  • Beware of a bartender who keeps a swizzle stick or toothpick in his mouth. They will bite down on it whenever they clip a sale, and they only have to count the nicks to know how much they have under-rung.
  • They also use an open slot in the register drawer in which to put coins: Each coin represents a sale they’ve taken for themselves.
  • They’ll “bunch” sales, collecting for two or more customers at a time, and only enter some in the terminal.
  • Bartenders have been known to smuggle in their own inexpensive booze to keep the inventory correct.

Owners have to stay alert and always be skeptical of any unusual actions. Letting your staff audit the registers is simply an invitation to steal. Do conduct unannounced register audits to keep staff on their toes.

It’s critical to maintain a culture of honesty. People respond to their environment. Therefore, the actions of an owner or manager must always be on the straight and narrow. Build in deterrents, such as the register audits and random spotter inspections to reduce temptations. Do frequent inventories. Open and fair communication helps enormously, and some owners and companies will use a confidential “tip line” to let employees communicate anonymously. You can be very surprised at what you can learn during exit interviews with departing staff.

Incorporate good loss prevention actions into your management style, and maybe you won’t be the victim of the bartender who brought in his own cash register that rung up all sales to him alone.