Data Helps Restaurants Battle Profit Loss

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Data Helps Restaurants Battle Profit Loss

By Larry Bernstein, Contributing Editor - 02/08/2018

As consumer confidence in the economy rises, more people are heading out to eat. While good news, restaurant owners remain focused on retaining sales and preventing profit loss. Analytics and exception-based reporting tools are integral to building effective, scalable solutions for detecting fraud. For years, restaurants have used analytics to both prevent and detect fraud, but now there are new tools to find information and alert operators to issues. Every modern POS system and integrated security system comes with a range of controls and includes some type of smart reporting. Ed Heskett is the senior area coach for Border Foods (www.borderfoods.com), which has approximately 200 Taco Bell franchises. He notes that the analytics department at Border Foods looks at the fleet at large scale and generates reports with a focus on  underperforming stores.  

“I look at inventory level and variance. We count between 8-20 items a day, and there is a daily goal. If it’s bouncing, that’s a red flag,” he says.  

Border Foods uses a Delaget (www.delaget.com/guard) reporting tool and a location dashboard daily, which gives the company a snapshot/summary and alerts it to potential problems. According to SpeedLine Solutions, Inc. (www.speedlinesolutions.com), POS systems send an alert that can come in the form of a message or report when suspicious activity occurs. Every notable event can be tracked.

Being able to collect, analyze, and react to information in a short time span empowers restaurants to take action and address potential problems before they mushroom. 

“Collecting transactional information for analysis in real-time is imperative for a successful loss prevention-oriented, exception-based reporting or BI platform for restaurant brands or franchise operators,” says Scott Langdoc, senior vice president and practice lead at Boston Retail Partners (https://brpconsulting.com). As the time between a loss or fraud event and its detection increases, investigations become more challenging. On-duty managers must leverage well-developed fraud analysis thresholds to address outlier events — especially staff-related issues — as quickly as possible.  

“For many, the movement to cloud-based POS has helped make data available more quickly for loss prevention (LP) intelligence. Companies with traditional, on-premise POS systems must rely on faster POS transaction syncing to centralized systems to enable near real-time aggregation and analysis of local POS data for trends and exception-based monitoring,” Langdoc says.

Cedric Lecroc, beverage director for the South Beach’s Delano Hotel in Miami Beach, Fla., (www.morganshotelgroup.com/delano/delano-south-beach), believes that technology is the best option to efficiently improve beverage inventory management and detect and decrease theft. The Delano Hotel upgraded its bar inventory control systems, which improved reliability and enabled approved staff to monitor operations. 

“Our up-to-date bar inventory software paired with the outside video-auditing service from Glimpse has benefited the business greatly,” says Lecroc. Adding Glimpse (www.glimpsecorp.com) to the daily routine encouraged employees to improve their performance. The business, Lecroc says, has seen a 6x ROI, and “our team is selling more and earning better tips with faster service.” 

Exception-Based Reporting 

Restaurants typically have more data sitting in more places than they know what to do with. True value can come from implementing an exception-based reporting system that makes it easy to sort and filter data to quickly identify outliers from normal behavior. Restaurants using exception-based reporting have found it can help, among other things, to aid loss prevention and to reduce inventory shrinkage.

Envysion (https://envysion.com) works with restaurant and retail owners/operators to craft loss prevention software solutions that meet their business challenges. These systems make it possible to identify suspicious activities in restaurants, but identifying data outliers is not enough to detect fraud. It takes more than just POS transaction data. To confirm fraudulent behavior, restaurants must also review specific keystrokes, video footage, and the audio behind those keystrokes. Restaurant operators must implement an exception-based reporting tool that integrates surveillance video with transaction data and video clips played side-by-side. A trend is to deliver flagged incidents, including transaction data and video footage, in a way that makes them easy to review, validate, and resolve quickly.

To best utilize an exception-based reporting tool, restaurants need to be clear on what is important to them. This will help in selecting the most appropriate tool.  Because exceptions have to be manually established in order to be tracked, these tools can be time consuming initially. Restaurants should  periodically review numbers to confirm exceptions are, in fact, just that. Some operators want to be told what the problem is and how to fix it rather than looking for exceptions themselves. Exception-based reporting requires more time from management to understand data accuracy.

Lee Holman, lead retail analyst for IHL Group (www.ihlservices.com), a global research and advisory firm specializing in technologies for retail and hospitality, cautions against putting blind trust in numbers pumped out by IT systems. 

“Restaurateurs need to periodically review business rules that go into reporting mechanisms,” Holman says, warning against haste when judging employees. “If they are an otherwise good employee who is simply making a mistake in procedure, then you have the opportunity to correct their actions. If it’s a not-so-good employee, then you can either rehabilitate them, or learn what it was they were doing to prevent it in the future.”

Bill Valentas, vice president of finance, Freddy’s Frozen Custard & Steakburgers was experiencing problems with managers deleting things inadvertently from count sheets. To address the issue, Freddy' s deployed Restaurant365 software in all stores so that managers could do their inventory counts online.

"This not only helped to speed up inventory, but it gives managers more time to determine what they’re buying for the week and make better decisions," Valentas says.

He notes that the theory behind adding automated features not only reduces human error, but gives managers more time to spend with guests. Using a business intelligence tool offers transparency and insights into inventory and P&L.   

Tools today to automate as any things as can – but needs to be ROI. Take human factor out – become more efficient.

With the many tools available to them, restaurants have an opportunity to use data to reduce loss. Utilizing the right system will enable restaurants to detect fraud and retain more of their profits.