What McDonald's Approach to Biometrics says About the Future of Restaurants
Print Issue: December 2015
Once reactive in nature, loss prevention efforts in restaurants have been evolving over the past 15 years. Restaurant security directors are now tasked with more responsibilities by CEOs and executives. Instead of the traditional law enforcement approach of responding to crime and to incidents, executives expect their security departments to approach security more holistically, says Gene Smith, president of the Loss Prevention Foundation. Executives started asking their security departments to look for “ways to add more value to the bottom line…to use their skill sets to help the company move forward.”
And restaurant security professionals responded, taking a proactive approach to protecting the companies and facilities they worked for, says Robert Holm, senior director of safety and security for McDonald’s USA.
“At the end of the day, it’s all about the restaurant. Everything that we do every waking minute of the day is about the restaurant, starting with our people, starting with our employees and our customers,” Holm says. “Providing that safe and secure work environment for our employees and experience for our customers, and then beyond that, it’s really about the assets within the restaurant—it’s the food, then the supply chain, the transaction, the equipment, and everything else that follows.”
With this mindset, Holm—who is also the president of the Restaurant Loss Prevention and Security Association (RLPSA)—says that restaurant security has shifted to being proactive by focusing on both personnel and technology, “ensuring that we put measures, procedures, equipment, and training in place that ultimately keep good people from making poor decisions.”
Look behind the counter or among the tables at almost any restaurant in the United States and you might notice something different—teenage workers are disappearing. Since the Great Recession, the teen labor force in the United States has plunged from 41.3 percent in 2007 to just 34 percent in 2014, “a record low,” according to the National Restaurant Association (NRA). And only 16.6 percent of restaurant positions were held by 16- to 19-year-olds in 2014, a drop from 20.9 percent in 2007.
“The restaurant industry is still the economy’s largest employer of teenagers, providing jobs for 1.5 million individuals between the ages of 16 and 19,” the NRA said in a press release. “However, the shrinking teen labor pool has led many restaurant operators to look to alternative age cohorts to fill their staffing needs.”
Most new restaurant jobs now go to millennials, with 20- to 24-year-olds holding 24.2 percent of positions and 25- to 34-year-olds holding 23.7 percent of positions in 2015, an increase from 21.4 and 23.1 percent in 2007, respectively.
And it doesn’t stop there: the fastest growing demographic group in recent years in the restaurant industry is older adults. “In fact, the number of adults aged 55 or older working in the restaurant industry jumped 38 percent between 2007 and 2014, an increase of 218,000 individuals,” the NRA reported. “This trend is expected to continue in the years ahead, as older adults make up a larger share of the U.S. labor force.”
This gap between millennials and retirees can be vast. However, hiring millennials comes with additional challenges as companies struggle to retain them—a common problem in the restaurant industry, which has a high turnover rate, Holm says.
“For us we’re realizing that for millennials, it’s maybe not always pay that’s important. It’s having a purpose, making sure that the company is one they can be proud of working for,” he explains, adding that the average McDonald’s employee is 27 years old—smack in the middle of the millennial bracket.
One way restaurants are instilling pride in their employees is by using higher-quality ingredients—which restaurants like fast-casual chain Chipotle highlight—and responding to concerns from the general public about where ingredients are sourced. McDonald’s, for instance, recently announced it will use only cage-free chicken in its restaurants.
“That’s unheard of in our industry—our eggs are going to come from chickens that aren’t stuck in cages for their lives,” Holm says. “We know that that’s important to millennials, and to a lot of people. And decisions like that will help us attract those types of employees that feel that this is a company where I can stand up for what they believe. I have pride in working for them. And will continue to work for them.”
And retaining employees has a big impact on the restaurant’s bottom line. Holm estimates that every time a McDonald’s crew member needs to be replaced, it costs the restaurant approximately $3,000 to recruit, hire, train, and get a new employee up to speed. This cost goes up to about $7,500 for replacing maintenance staff or first-tier managers.
Additionally, the more trained and tenured employees in a restaurant, the better the food, the better the service, and the better the response to incidents. For instance, if a restaurant has newer employees that aren’t fully trained, safety incidents and workers’ compensation claims are likely to increase, Holm adds.
This is why from a safety and security standpoint, Holm says, he works with both operations staff and human resources to “do whatever we can to help minimize the amount of turnover.” McDonald’s is doing this by training employees and changing their behavior by putting in procedures and policies to help eliminate accidents and opportunity for fraud or theft.
“If you help reduce the possibility of incidents from happening…that’s going to do nothing but directly affect turnover in a positive way,” he adds.
While reducing turnover and improving employee engagement is important, technology also has a role to play in loss prevention. However, experts note that few loss prevention departments have their own purchasing budget to buy security equipment. Instead, they must rely on convincing another department to purchase and install the technology for them.
Because of this, loss prevention professionals “need to be very, very good influencers to our people in operations because ultimately, they’re the ones that will pay for what you want to have done,” Holm says. Meaning, loss prevention departments have to convince operations managers that the technology will increase profitability and will also promote a safe and secure environment for employees and customers.
“If you can’t provide the numbers and justification for return on investment in a way for them to understand, you’re really fighting against a lot of other priorities that they have to take into consideration,” Holm explains.
One way McDonald’s is doing this is by testing the use of biometrics on its point-of-sale (POS) system, which requires a fingerprint scan to use the registers. Implementing this system can not only help the loss prevention team detect fraud, but it may also help the operations and management team keep track of who has access to what register, determine who made which sale, and monitor revenue.
In its test phase now, the biometric system is expected to replace the current system McDonald’s is using, Holm says, which has employees and managers use four-digit passwords that allow them to either just access the POS system or to go in and approve promotion coupons, reductions, and corrections.
When the manager’s password becomes compromised, “which in our industry is not uncommon, now a crew person has the ability to do some fraud,” Holm says. “So with the introduction of biometrics, that could eliminate that potential right off the bat, and it’s going to allow for more strict accountability.”
While some critics have raised concerns about using biometrics in the workplace, Holm says he’s found that many employees and managers actually prefer using them as opposed to the password system.
“They know now that nobody else will be able to jeopardize that register by using their password, which helps create a black cloud for an honest person” who might be blamed for a fraudulent transaction but is not the real offender, Holm says.
Additionally, McDonald’s is exploring the use of a biometric scanner for time and attendance to combat time and attendance fraud. “There’s a lot of times people just punch in their buddies because their buddy is running late,” Holm says. “It’s very difficult to manage if you’ve got 60 or 70 employees under one roof in one restaurant, so we’re also using biometrics to manage our labor hours and we’re seeing some really, really good results.”
The efforts of McDonald’s are part of a broader industry trend of businesses that want more real-time actionable data when it comes to loss prevention, says Pedro Ramos, vice president of sales for Agilence, a company that provides consulting and intelligence reporting software to the retail sector.
“Identifying fraud only gets part of the way there,” Ramos says of exception reporting systems. “The real value, or the sustainable value, that these systems deliver, is the ability to analyze ongoing operational issues that are really a result of the restaurants or the provider dealing with the ever-changing marketplace.”
Ramos is also seeing this trend in technology play out through the combination of using video analytics to enhance POS data and exception reporting. These tools are yielding enhanced customer service and increased revenue.
For instance, if there’s a restaurant that has a high-volume customer entry point, but wait times are also high because the kitchen isn’t producing food fast enough, creating long lines, customers will go elsewhere.
The operations staff might not be aware of why sales are down, but by combining video analytics with POS data, they could identify the problem and drill down to see what’s causing it, Ramos explains. “So you make an adjustment to whatever you need to allocate, more labor, or improve efficiencies, or evaluate the performances in the kitchen, in the prep area,” he adds. “That’s just an interesting way of using multiple data sources with an exception reporting or analytics system to provide more actionable and sustainable data.”
McDonald’s is making its own changes by testing a new exception-based reporting system in 13 restaurants to better respond to exceptions and possible fraud. While he couldn’t reveal details of the pilot program, Holm says McDonald’s wanted to implement a system that gave its managers more up-to-date data that they could easily act on.
Currently, McDonald’s sets thresholds that allow for certain variances for different POS actions, including reductions before and after total, over rings, refunds, manager meal discounts, employee meal discounts, and promotions.
“We know by looking at our reports that we have a lot of opportunity where we’re over the thresholds in those categories,” Holm adds. However, the current system reports data that is usually seven days old, and “to go after what caused those exceptions when they’re seven days old, it’s not very effective.”
Instead, with the new pilot system, managers and supervisors will have the ability to look at real-time reporting on thresholds that McDonald’s has established. If there’s an exception—meaning the threshold has been exceeded—managers and supervisors will receive an instantaneous e-mail or text, allowing them to go to the employee responsible and find out what happened.
This will offer managers a chance to train their employees and discuss problems when they happen, as opposed to a week later. “We will be keeping good people from making poor decisions, and can train, if it was an honest mistake, right on the spot,” Holm says.
At the end of the day, these elements—engagement, retention, and technology—all come together to help loss prevention professionals be proactive in creating a safe and secure environment for both employees and customers within their restaurants.