Business Theft and Fraud

Detection and Prevention

James R. Youngblood

• Publisher: Routledge
• Year: 2016
• Print ISBN: 9781138426184
• eBook ISBN: 9781315352107
• Topic: Business
• Subtopic: Finance
• Index: Business

Business Theft and Fraud: Detection and Prevention offers a broad perspective on business-related theft, providing a detailed discussion of numerous avenues of theft, including internal and external fraud, organized retail crime, mortgage fraud, cyber fraud, and extortion. Combining current research and the author's extensive experience with loss prevention and security, this professional text identifies industry trouble areas and offers techniques to combat business theft, such as how to identify sales underreporting, track sales by shifts, and educate employees on computer-related fraud.

This publication is critical for those involved with loss prevention, security, or criminal justice. Business Theft and Fraud's accessible, franchise-oriented scope will help many professionals identify and thwart threats in the evolving business world.

III

UNDERSTANDING FRAUD/THEFT IN THE RETAIL INDUSTRY

Chapter 16

Understanding Differences between Franchise and Company-Owned Operations

Introduction

From an external perspective, many thieves/shoplifters do not know the difference between a company-owned and a franchised retail location. All they know is that a majority of retail locations offer a goldmine of opportunity for theft. For many individuals looking to commit retail theft, their only concern is being able to remove as much merchandise as possible while avoiding detection. They have little or no concern as to the foundation of the retail location or what individual or entity will suffer the loss.

As discussed in Section II, there is a difference in the ownership, loss responsibility, purchasing, hiring, training, etc. between traditional company-owned stores and franchise locations. In the traditional retail company-owned locations are individual retail stores that are owned and operated by the organizational or corporate entity. The owners of these retail organizations are responsible for the entire operation, to include:

Inventory purchasing

Location development and construction

Employee hiring and training

Advertising and marketing

Business expansion

Hiring and training of security/loss prevention personnel

Individual store access control and security

Loss prevention training and the development of procedures

Any losses related to shoplifting and employee theft

For the franchise-operated retail locations, there is a separation between the actual location owners and the parent organization. With franchised business operations, the franchisor owns the business name, but not the individual retail locations. With some franchise operations, a portion of the individual retail locations is actually owned and operated by the parent organization. These are referred to as company-owned locations. The retail locations in these types of operations that are not owned and operated by the parent organization are owned by franchisees.

With franchise operations, the individual location operators own everything but the business name. This is owned by the franchisor, which allows the franchisor the ability to dictate some of the operating requirements to the franchisees. Outside of the company name and franchisor-dictated operating requirements, the franchisee is responsible for the business operation. This responsibility includes:

Inventory and purchasing raw material

Development of raw material into retail products

Employee hiring and training

Scheduling and payroll

Day-to-day business operations

Location security for employees and customers

Loss prevention

With franchise operations the franchisor maintains the following responsibilities:

Building name design and display

Products to be sold, with pricing windows

Maintaining brand integrity

Dictating the royalty and advertising percentages to be paid by the franchisee

Although there is a separation of responsibilities between company-owned and franchised retail operations, they both offer products for sale to the public. Both types of operations have to open their doors, advertise, offer quality merchandise for sale, set competitive pricing, hire and train associates, etc. As previously referenced, on face value a large majority of the shopping public just sees a retail operation.

When looking at the two types of retail operations from a security/loss prevention aspect, there is a distinct difference. To address the two operations from a theft/fraud perspective, the following questions need to be answered:

Is there a difference in product/services offered between company-owned and franchised locations?

Would a company-owned or a franchised retail operation be more susceptible to shoplifting/theft?

Is a company-owned or a franchised operation more susceptible to internal theft?

Is There a Difference in Product/Services Offered by Company-Owned and Franchised Operations?

A majority of company-owned retail operations are just that: retail operations that sell clothes, electronics, grocery items, household goods, etc. If a random, off-the-street consumer were asked to provide retailer store names, many of the responses would be

Target

Sears

Bloomingdales

Macy’s

Walgreens

Safeway

Bed, Bath & Beyond

The provided list of names could go on, but the answers will be along the same lines. These types of retail operations are all company owned with many stores in shopping malls, strip malls, or large store stand-alone locations.

If the same off-the-street consumer were asked to provide the names and products offered by franchised operations:

Many would refer to fast food and restaurant operations.

Many would be hard pressed to name a franchised retail operation that offers products and services as the previously discussed and known company-owned Target-like stores.

For those answering the franchised question, they would be correct. When looking at franchise-based retail operations, the types of products and services offered are

Quick-service restaurants

Restaurants and sports bars

Automotive repair and oil change operations

Hardware stores

Vitamin and health-related stores

Package shipping operations

Hotels and motels

Education and child-learning operations

Hairstyling and haircut operations

Businesses offering financial and tax services

Pet product supplies

To answer the previously asked question, there is a difference between the two types of operations as far as products and services offered.

...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Dedication
• Table of Contents
• Foreword
• Author
• SECTION I INTERNAL EMPLOYEE THEFT AND FRAUD (NONRETAIL ORGANIZATIONS)
• SECTION II UNDERSTANDING FRAUD/THEFT IN THE FRANCHISEE/FRANCHISOR INDUSTRY
• SECTION III UNDERSTANDING FRAUD/THEFT IN THE RETAIL INDUSTRY
• SECTION IV EXTERNAL FRAUD/THEFT
• SECTION V  CYBER SECURITY AND CYBER FRAUD
• Appendix A: Organized Retail Crime Associations
• Appendix B: Examples of Phishing E-Mails
• Index