Know what it leaves out
Gross profit is net sales minus the direct cost of what you sold. It is a measure of the menu, not the business. Labour, rent, rates, energy and repairs all sit below it.
That is why a venue can boast a strong food margin and still struggle to pay the bills.
Work backwards from your overheads
Instead of borrowing a number from an industry article, build your own. Total your fixed costs, estimate labour at realistic covers, decide the profit you need, and the required gross margin falls out of the sum.
Now every dish target has a reason behind it.
Every dish target should have a reason behind it.
Percentages flatter, pounds pay
A steak at a lower percentage margin can return more cash per cover than a pasta dish at a higher one. Guests pay in pounds and so does your landlord.
Read percentage and cash margin side by side before you remove or promote anything.
Split it, then review it
One blended margin hides problems. Separate food, drink and events. Review them weekly against what your specifications say they should be.
- Write down your weekly fixed costs in one place.
- Calculate the gross margin you actually need at your average covers.
- List cash margin per dish for your top ten sellers.
Eight Rabbits Intelligence reports margin by category every week in the same format, so the conversation moves from what happened to what we change.
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