The “Friendly Fraud” Chargeback Scheme
Friendly fraud rates rose roughly one-fifth globally during recent years, with restaurant chargebacks comprising nearly four-fifths of all fraud cases affecting the industry. This sneaky scam happens when customers eat their meal, get delivery, or pick up takeout – then later claim they never received the order or dispute the charge with their bank. The pandemic turbo-charged this behavior, with restaurants reporting massive surges in what industry insiders call “digital dine-and-dash” schemes, while chargeback rates on food delivery orders jumped by nearly a third in early 2023. What makes this particularly devastating is that these disputes can eat up roughly three percent of total restaurant revenue – which represents about one-fifth of already razor-thin delivery profits.
A shocking revelation from recent industry data shows that two-fifths of Americans actually know someone who’s committed friendly fraud, while social media platforms have started promoting “chargeback hacks” that teach users how to dispute legitimate transactions. The consequences are real and brutal – Los Angeles Korean eatery Spoon by H permanently closed its doors, with chargeback fraud being one of several reported challenges facing restaurants, while other restaurants have resorted to photographing every order and demanding customer ID verification just to survive.
Fake Vendor Invoice Manipulations
A recent explosion in back-office fraud involves criminals sending emails that appear to come from known vendors, requesting changes to payment details for invoices, with money then getting diverted to criminal accounts instead of legitimate suppliers. Shocking statistics reveal that many businesses have received fraudulent invoices in recent years, with successful attempts potentially costing companies substantial amounts. These sophisticated scams often look completely legitimate, featuring authentic company logos, proper formatting, and even reference numbers that match previous business dealings.
Fraudsters have become incredibly sophisticated, deploying the same advanced tools used by legitimate businesses – including chatbots and AI language models – to create scam emails and requests that look authentic, with generative AI now making it possible for cybercriminals to create realistic fake invoices in mere minutes. One particularly crafty example involved criminals creating an entire fake email thread between a CEO and vendor, complete with a fabricated discount offer that encouraged quick payment, followed by a spoofed reply from the company’s own CEO enthusiastically directing the accounting team to “take advantage of the savings.”
Account Takeover and Digital Impersonation
The numbers are absolutely staggering – account takeovers surged by over seventy percent across North America in one year, while the food and beverage industry specifically experienced a significant increase in these attacks. The sophistication of fraudsters, combined with advanced fraud technology used to scale their schemes, has created a situation where criminals operate with industrial-level precision – and the most crucial factor in fraud prevention is matching their speed through automated detection systems. These attacks happen when criminals steal login credentials and gain access to restaurant networks, customer accounts, or vendor systems.
Industry data shows the average cost of data breaches across industries reached approximately $4.45 million according to IBM’s 2023 report, with costs varying by sector between recent measurement periods, while high employee turnover creates additional vulnerabilities since restaurants constantly hire new staff who have less familiarity with internal controls and vendor relationships. Restaurant operators need to stay alert for promotional abuse schemes where bad actors use advanced fraud technology to exploit offers like percentage-off discounts for new signups, driver fraud involving verified delivery personnel who rent out their accounts or spoof locations, and collusion schemes where customers and drivers work together to claim non-delivery for refunds.
