Week 1: Understanding Food GP% – Why It’s Vital for Profitability
What is Food GP%?
Food Gross Profit Percentage (GP%) is a key metric in hospitality, measuring how much profit is made on food sales after deducting ingredient costs. A strong GP% ensures your business covers operational costs and remains profitable.
How to Calculate Food GP% (Ex. VAT)
One of the most common mistakes in calculating Food GP% is including VAT—remember, food GP% is always calculated excluding VAT.
Use this formula:
(Selling Price Ex. VAT – Cost of Ingredients) ÷ Selling Price Ex. VAT × 100
For example, if a dish sells for £15 including VAT (at 20%), the ex-VAT price is:
£15 ÷ 1.2 = £12.50
If the ingredient cost is £5, then:
(£12.50 – £5) ÷ £12.50 × 100 = 60% GP
What’s a Good GP%?
- Pubs: 70%
- Restaurants: 70%
- Hotels: 70%+
There will of course be variances depending on the style of food and the style of the the restaurant.
Common Mistakes That Reduce Food GP%
- Over-portioning – Serving more than intended eats into profits.
- Incorrect pricing – If you include VAT in calculations, your GP% will be artificially low! Always work with ex-VAT prices.
- Food waste – Spoilage and over-ordering cut into margins.
- Poor stock management – Without accurate stock control, GP% can fluctuate.
Regular stocktaking helps maintain a strong GP% by identifying hidden losses and inefficiencies.
Want to improve your GP% and keep your stock under control? Let’s talk about how we can help – get in touch today! 📞