Bar Fraud: A Growing Source of Concern
Written by Raakesh Madoo
Customer fraud is prevalent; a universal problem indeed. From customers walking out without paying their tabs; making unnecessary complaints to avoid paying the bill; false credit cards and counterfeit currency; to soliciting bartenders with a larger tip. All Food and Beverage Managers acknowledge the cleaver and indigenous ways by which the unscrupulous customer seeks to avoid paying legitimate tabs.
This article, though, focuses on bar fraud from the other side of the bar: a scenario where the trusted bartender and master mixologist is skimming bar inventories and pillaging the register. Here in the Caribbean with a booming bar industry, it is better for managers to hire on the basis of attitude and honesty and train for skill. According to the National Restaurant Association (2016), shrinkage of beverage inventories (wastage, spoilage and theft) can absorb 20%-30% of annual Net Profits: whilst annual losses on Sales amount to 23% on liquor and draft beer; 10% on Wines and 2% on Bottled Beer.
Eliminating (if not minimizing) bar fraud can be the difference between success and failure for most small bar operations in the Caribbean. Even with direct supervision and the installation of surveillance cameras and electronic equipment, bar fraud is difficult to eliminate since it is lucrative, hard to detect and easily accomplished. Food and Beverage Managers are all too aware of these nefarious schemes, such as: recording legitimate sales as complementary drinks or spillages; selling personal/private bar inventories; under-pouring drinks and pocketing sales from saved inventories; diluting pot distilled and over-proof spirits to make additional sales; substituting premium for pouring inventories and pocketing the difference between selling prices; over-pouring preferential guests whilst under-pouring other patrons to influence a larger tip; over-charging bar tabs and skimming sales after these phantom sales are voided; stretching inventories obtained from electronic dispensers and other fraudulent measuring devices; and even outright credit card fraud and identity theft via illegal scanning of electronic cards.
These practices can be handicapped by preventing the bartender from being the “judge, jury and executioner” of all bar operations through having a separation of powers. Critical in this endeavor is separating balancing the register from inventory controls. Managers in particular should take responsibility in reconciling sales, regular spot checks of inventories and monitoring of guest complaints. Finally, compensation and hiring policies should also be periodically reviewed against a fulfilling and ethical work environment for all.