Combatting fraud in the hospitality industry.

In June of this year the Guardian reported on what it called “The diabolical rise of dine and dash.” Dine and dash is a colloquial term meaning to order a meal in a restaurant and then leave without paying the bill. The spiralling cost of living and police reluctance to attend for minor crimes (such as shoplifting which rose by 30% in the 12 months leading up to March 2024) could both be behind a noticeable increase in customers making off without paying.

Sadly, hospitality fraud is a broad and multi-faceted threat to the industry. Below, we consider some of the more common types of offences committed against the hospitality industry, and consider what can be done to protect against these threats.

Common types of hospitality fraud:

Dine and Dash

As explained above, this happens when patrons of a restaurant order and eat a meal, and then leave without paying. Many become repeat offenders and can rack up extraordinary sums in unpaid bills, such as Bernard and Ann McDonagh, who were ordered to pay compensation of £1,168 in unpaid restaurant bills when they were jailed in May.

There are various ways to guard against this type of offending:

• Consider the amount or value of food/drinks being ordered – does it seem disproportionate to either the number of people present, or the occasion? Dine and dash-ers often order more than they could possibly finish, because they know they won’t be paying for it!
• Be on the lookout for suspicious behaviour, which could manifest as nervousness (e.g., insisting on sitting near the door, acting restless or distracted, etc) or, conversely, an overtly relaxed attitude (being inordinately nonchalant about the bill, taking an unusually long time to gather their things, etc.)
• Have a firm policy regarding inability to pay. Many dine and dash-ers will present a card that does not work and then claim they need to leave to fetch another method of payment. Request that one adult member of the party stay at the restaurant until the other returns.

Unfortunately, if you do experience a dine and dash, you may not be able to secure police assistance as, unless there has been violence or the threat of the same, a dine and dash is unlikely to be seen as a priority. CCTV both inside and outside the business can be helpful, and larger businesses may want to investigate having door security, or services like My Local Bobby. It is always a good idea to report the matter, as the police may identify a pattern of behaviour.

Negative Review Blackmail

Reflecting the steady growth of online frauds, a new threat to the industry demonstrates the power of online reviews. Normally a useful tool to help diners find the right spot for them, last month a trio of restaurateurs were targeted by criminals who threatened them with numerous negative reviews unless they were paid £2,000. When the group refused, demonstrably fake reviews began to appear on Google and TripAdvisor.

If your business is threatened in this way, the following steps may be helpful:

• Save or screenshot all evidence, including the messages demanding money and the negative reviews.
• Make a report to the review website. Flag the reviews as fraudulent and prepare a standard submission that you can send in respect of each one, referring to the unwarranted demands you have received.
• Develop a response strategy. It will be time-consuming but make sure to address the negative reviews. If there are signs that would show your average consumer that they are false (e.g., they refer to something on the menu that your business does not serve or provide an account of a visit that you can disprove) then set it out, clearly.

Supplier Fraud.

The relationship between a business in the hospitality industry and their suppliers is critical, but if insufficiently thorough due diligence is undertaken, or even if an existing supplier is infiltrated by a scammer, then you could be liable to many different variants of fraud, such as:

• False or duplicate invoices. Criminals may rely on busy owners not examining the invoices carefully enough to spot duplicates or unmerited charges. If your business is large enough to have a dedicated employee dealing with suppliers, then ensure they are trained to spot this kind of fraud. If the business is small and suppliers are handled by the GM, consider having a second member of staff spot-check invoices before payment is made.
• Over-billing/under delivery. Keep a careful eye on stock and double-check hours for any agency staff. As above, if you don’t have a dedicated team member handling suppliers then use spot-checking to make sure you are getting what you pay for. 
• Unauthorised charges. The scope of a contractual relationship should always be clearly defined. Guard against suppliers extending the scope of their role and charging for it without authorisation. Ensure regular monitoring is taking place and address any issues quickly.
• Unauthorised substitution. If you start to notice that you are being supplied with inferior products, but still being charged the same, this should be challenged right away.

Mandate fraud

Any business is vulnerable to the type of increasingly sophisticated phishing scams seen today. Highly believable emails, text messages, WhatsApps or even phone calls from criminals masquerading as a member of staff can result in losses to the business or its employees. Such communications frequently ask staff members to purchase gift cards, either for other staff members or for clients of the business. Guard against this by ensuring:

• Rigorous anti-fraud training. This type of scam is developing all the time, and staff need to be actively on the lookout. Anti-fraud training cannot be something that is suffered through as part of the on-boarding process, it should be regularly updated. Combining it with a social event or awards for high-achieving staff can turn this into something that makes employees feel that they have a stake in protecting the business.
• Clear processes. All staff should be aware of the stages needed to authorise payments, either from the business or personally, and should be encouraged to check if they are even the slightest bit unsure.

Whilst all of the hospitality frauds, outlined above, can and should be reported to Action Fraud and your local police force, fraud continues to be woefully under-investigated and under-prosecuted. As such, if you think you’ve uncovered hospitality fraud, here at Edmonds Marshall McMahon, our specialised investigations team is well-equipped to meticulously review the evidence and swiftly provide concise and clear advice on your options. 

Carolina Cabral. August 2024.