How to Prevent Gift Certificate Fraud & Abuse

A gift certificate sale is like an interest free loan. Think about it. Customers give you hard cash in exchange for a piece of paper that may or may not be redeemed at some future date. In the meantime, you have free use of their money to purchase inventory, pay the rent, or help make payroll. Too bad your banker isn't as generous.

So why do so many restaurateurs shy away from aggressively marketing gift certificates? I suggest that many operators view gift certificate sales as a high risk, low benefit venture. Consequently they budget little or no advertising dollars to promoting gift certificates, and they make purchasing them as convenient for their customers as a trip to the Department of Motor Vehicles.

Yes, a certain amount of risk is involved in selling gift certificates. In fact, there are almost as many ways to embezzle money using gift certificates as there are espresso carts in downtown Seattle. And with high tech printing as nearby as the neighborhood copy center, the risk has become even greater.

According to Frank Abignale a one time forger turned security consultant [made famous recently by the movie "Catch me if you Can"], gift certificates are an easy target for color copiers - especially if the buyer can persuade the restaurant to leave the payee's name blank.

The bottom line is that gift certificates are equivalent to CASH, and should be treated accordingly. But don't let their vulnerability frighten you. A few simple controls will help ensure that gift certificates don't become the Nightmare Before Christmas: