When the topic of theft in the restaurant industry is brought up, most people go straight to employee theft. But they’re not the only ones that can be shortchanging you. As a franchise owner, you also need to take these steps to ensure that your franchisees aren’t keeping more than they’re entitled to.
Collect Real-Time Sales Data
The vast majority of franchisee theft occurs at the front counter. Instead of entering an order into the POS, some franchisees might simply take an order by hand and accept a cash payment, which means that this order never existed as far as you’re aware. Some people will even go so far as to have a separate POS unit that they only use to process fraudulent transactions. Not only are they stealing royalties from you, but they’re likely also misrepresenting their income taxes.
An easy way to get around this is by using a system that allows you to collect real-time sales data from each location. You can then take this information and compare it to their stock/purchasing information. If there are any significant inconsistencies between how much pepperoni they have in stock or are regularly purchasing and the number of pizzas that they’re selling with pepperoni, then this is going to be a major red flag.
Even if it isn’t intentional fraud on the part of the franchisee, it could be that they aren’t seeing signs of obvious employee theft at their store. Either way, it’s something that needs to be stopped as soon as possible.
Conduct On-Site Visits
If you’re the head of a 30-location pizza chain, then it simply isn’t going to be possible to visit each store on a regular basis. However, this becomes much more feasible when you only have five or six franchised locations. Have someone at the head office who is responsible for onsite visits, and ensure they are trained to look for signs of fraud.
This will also give you the opportunity to check for another common source of franchisee theft, which is purchasing from unauthorized suppliers. There are certain suppliers that you are using and have likely spent years building relationships with. But sometimes, a franchisee will decide that they want to use a supplier that will offer them products for a discounted price.
It becomes a real issue if the ingredients aren’t up to your brand’s quality standards. Eventually, the lower quality ingredients at one location will affect the reputation of your entire brand. There’s also the issue that franchisees could not be reporting this difference in product cost. This means their menu items suddenly become more profitable for them while putting your brand reputation at risk.
To avoid this, you can make in-person visits to these locations on a semi-regular basis and check out the stock yourself. It also gives you the opportunity to look for other signs of mismanagement at these locations.
By keeping a closer eye on inventory, sales, and other important restaurant data, you can help better protect your brand against franchisee fraud. And while you’re at it, make sure to check out these tips on how to successfully reduce employee theft.
Posted on Thu, Dec 31, 2020 @ 08:12 AM.
Updated on December 31, 2020 @ 4:00 PM PST.