01
Gross profit is not profit.
GP% is what is left after the cost of the product and nothing else. Wages, rent, utilities, breakages and finance all come out of it afterwards. A 72% GP site can still lose money.
Free tools · margin
GP calculator: work out your gross profit %.
GP (gross profit) % = (selling price without VAT minus cost) divided by selling price without VAT, times 100. So a £7.50 drink with 20% VAT is £6.25 without VAT, and if it costs you £2.10 the GP is 66.4%.
Put in what you sell an item for, what it costs you to make, and the calculator gives you the gross profit percentage the way a hospitality P&L actually measures it — on the net, ex-VAT selling price. It also works backwards: tell it the GP you need and it gives you the price that gets you there.
The calculator
Your numbers, your result.
Nothing is sent anywhere. The maths runs in your browser and we never see what you type. Every field starts at a deliberately ordinary default rather than a flattering one.
Before you quote the figure at anyone
What this number does and doesn’t tell you.
02
It ignores waste, over-portioning and theft.
This is theoretical GP — the margin you would make if every portion were exactly to spec and none of it went in the bin. Actual GP measured from stocktake is almost always several points lower, and the gap between the two numbers is the most useful figure in the building.
03
One item tells you very little on its own.
Menu profitability is a weighted average: a 78% GP item nobody orders does less for you than a 62% GP dish that sells forty covers a night. Run your best sellers through this before you run anything else.
Questions
Gross profit (GP%) calculator, answered.
Getting a number you don’t recognise from your own accounts is usually worth a conversation rather than another spreadsheet.
How do you calculate GP% in hospitality?
Take VAT out of the selling price, subtract the cost price of the item, then divide what is left by the net selling price and multiply by 100. On a £7.50 pint including 20% VAT, the net price is £6.25; if the liquid costs £2.10 the cash gross profit is £4.15, which is a GP of 66.4%.
Should GP be calculated on the price including or excluding VAT?
Excluding VAT, always. The VAT you charge is not your money. It belongs to HMRC. Working GP out on the price with VAT makes every margin look better than it is: the £7.50 drink with a £2.10 cost shows 72% instead of the real 66.4%. Every hospitality P&L (profit and loss report) measures GP on sales without VAT for this reason.
What is a good GP percentage for a restaurant or pub?
UK operators commonly budget around 68-72% on food and 72-80% on wet sales, with cocktails higher and premium spirits lower. Those are conventions rather than rules: the number that matters is whether your GP covers your fixed costs at the volume you actually trade, which is a question about your own P&L and not about the sector.
What is the difference between gross profit and net profit?
Gross profit is sales minus the cost of the product. Net profit is what remains after every other cost — wages, rent, rates, utilities, marketing, repairs and finance. Hospitality businesses fail with strong GP surprisingly often, because labour and occupancy costs sit between the two figures.
How do I work out the selling price I need for a target GP?
Divide the cost price by one minus the target GP expressed as a decimal, then add VAT back on. A £2.10 cost at a 70% target is £2.10 ÷ 0.30 = £7.00 net, which is £8.40 on the menu at 20% VAT. The calculator on this page does that for you as you change the target.
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