Loss Prevention Services for restaurants

EY teams help franchisors and chain restaurant owners create uniform loss prevention programs to generate cost efficiency and consistent risk controls. The scope of risks includes both operating losses in individual restaurants and underreporting by franchisees or restaurant managers.

What EY can do for you

Dishonest workers cost the restaurant industry billions of dollars every year. Employee theft accounts for roughly 75% of inventory shortages and 4% of sales, according to the US National Restaurant Association. Even honest workers can create significant losses by making mistakes, especially new hires who are in training. Turnover estimates for fast-food restaurants range from 100% to 150%, which means that many restaurants must train nearly every employee over the course of a year.

Franchisors also face a fraud risk from their franchisees. It’s estimated that 15% to 20% of franchisees underreport sales by at least 15%. Underreporting could increase with the growing use of third-party delivery services, especially during the COVID-19 crisis. If third-party aggregator apps aren’t integrated with a restaurant’s point-of-sale system (POS), the franchisee may be able to exclude some delivery orders in its sales reports.

EY Loss Prevention Services for restaurants

EY teams help franchisors and chain restaurant owners create uniform loss prevention programs across all locations to generate cost efficiency and consistent risk controls. EY services are provided on two levels: operating losses in individual restaurants and underreporting by franchisees or restaurant managers.

A consultative and data-driven approach

Using interactive surveys or in-person workshops, EY professionals help kick off each project by working with business stakeholders to evaluate existing processes and controls, as well as the fraud and loss scenarios for each restaurant. The resulting risk profile is used to build a business case and serves as the basis for loss diagnosis.

Using data from various systems (e.g., POS, billing), EY teams help determine the root causes for various loss categories (e.g., process errors, data manipulation) and quantify risks using AI and other advanced analytics technologies. In parallel, a data- and analytics-based infrastructure is built for ongoing risk analysis and monitoring.

Remediation efforts typically are carried out in a staged approach designed to provide early return on investment. At the end of each stage, remediation results are assessed and used to plan for the next stage. Finally, insights gained from risk analysis and remediation efforts are combined into one comprehensive report, and fed into an ongoing program review and improvement process.

The use of analytics is expanded to provide estimates for total losses from theft and fraud in a given restaurant or chain by physical location, type of employee, promotion or other criteria. The loss quantification function also can be used to calculate losses from franchisee underreporting of revenue, training errors and accounting issues, such as inaccurate cost analysis of menu items and poor inventory management.

Technology that powers EY Loss Prevention Services

Powered by EY Virtual Analytics Infrastructure (EY Virtual), EY Loss Prevention Services for restaurants can be deployed on premises or via the cloud and have the scalability to be implemented in multiple locations. EY Virtual works with a wide range of enterprise resource planning systems, POS systems and data management applications, as well as inventory, payroll and case management tools. 

EY teams regard broad and sufficient data as the key to safeguarding against theft and fraud. EY Virtual will give you the ability to ingest and analyze a wide variety of data, such as POS transactions, payment types, promotions, discounts, employee performance records, shift schedules, inventory management and video feeds from in-store surveillance systems.

The EY Virtual case manager puts relevant information needed for the investigation into one readily available, central location. Its executive dashboard helps operational leaders monitor the performance of multiple locations in one consolidated view in real time. The reports can be programmed with an easy-to-use configuration function showing key performance indicators and loss recoveries for identified frauds, such as check voids and walkouts. Besides risk insights, business owners also can gain additional operational measurements, such as revenue performance and sales projections.

EY Virtual

An AI and forensic data analytics platform available through cloud or on premises.

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Continuous risk assessment enhanced by AI

At the core of the EY offering is a library of proprietary, sector-specific antifraud schemes that draw on employee behavioral patterns from historical incidents. EY teams also work with clients to develop customized antifraud schemes based on their unique business models and risk profiles. Each scheme is translated into machine learning scoring models that generate indicators predicting high-risk transactions and behavior, identifying the riskiest regions, stores, employees and promotions. The models also estimate monetary damages and the probability of recovery.

The results are used to determine appropriate remediation efforts with the goal of creating a culture of integrity and consistent customer experience across locations. Employees are trained on actual risk factors and receive targeted communications from all levels of management.

Remediation activities are monitored to gain further insights that are used to retrain machine learning algorithms, leading to continual improvement in detecting and preventing dishonest behavior.

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