GP Calculator for Restaurants and Bars: How to Work Out GP with VAT

Gross profit (GP) percentage is the share of your selling price, excluding VAT, that is left after the cost of the food or drink: GP% = (net selling price − cost) ÷ net selling price × 100. In the UK you must strip 20% VAT out of the menu price first, and use ingredient or bottle costs that also exclude VAT. To work backwards from a target, the VAT-inclusive menu price is cost × 1.2 ÷ (1 − target GP). Our free menu price calculator does both directions for you.

GP% and cash margin

Two numbers describe every item.

• GP%: the percentage of the net price you keep after the cost of the item.
• Cash margin (cash GP): the pounds you keep, which is net price minus cost.

For a dish costing £4.10 and sold at £16.50 on the menu: net price = £16.50 ÷ 1.2 = £13.75. Cash margin = £13.75 − £4.10 = £9.65. GP% = £9.65 ÷ £13.75 = 70.2%.

GP% is the mirror image of food cost percentage: 70.2% GP is 29.8% food cost.

If you are not VAT-registered, you do not strip VAT. Cold takeaway food is zero-rated, so for that item the net price is the price you charge. Everything else you sell for eating in, and hot takeaway, is standard-rated at 20%; see restaurant VAT in the UK.

The reverse calculation: from target GP to menu price

Pricing is usually done backwards. Decide the GP you need, then work out the price.

1. Net price = cost ÷ (1 − target GP).
2. Menu price = net price × 1.2.
3. Round to a price that looks right, then recheck the GP.

Example: a dish costs £3.00 and you want 70% GP. Net = £3.00 ÷ 0.30 = £10.00. Menu price = £12.00. Because 1.2 ÷ 0.30 = 4, at 70% GP the menu price is simply four times the cost.

GP-to-price lookup table

The table shows the VAT-inclusive menu price you need for each cost (ex VAT) at four GP targets. Round up to the nearest sensible price point, and check the GP afterwards.

The multiplier on cost to get the VAT-inclusive price is 3.00 at 60%, 3.43 at 65%, 4.00 at 70% and 4.80 at 75%. This assumes 20% VAT applies to the item. If it is zero-rated, divide the multiplier by 1.2.

Food and wet GP examples

"Dry" GP is food. "Wet" GP is drinks. They behave differently, and you should track them separately. These examples use illustrative costs, not market prices, so substitute your own.

Wine by the bottle and by the glass

A bottle costs £10.00 ex VAT and sells for £36.00 with VAT. Net = £30.00. GP = (£30 − £10) ÷ £30 = 66.7%, cash margin £20.00.

A 175ml glass uses 175 ÷ 750 = 0.233 of the bottle, costing £2.33. At £8.00 with VAT, the net price is £6.67, GP = 65.0% and cash margin is £4.33. A bottle holds 4.29 glasses, so selling every drop by the glass earns £18.57 cash in total, a little less than the £20 from selling the bottle. Glass pricing must also allow for spillage, spoiled wine and over-generous pours.

Draught beer

A 50-litre keg costs £150 ex VAT. A pint is 568ml, so the keg holds about 88 pints, but line cleaning, foam and spillage mean you might sell closer to 84. Cost per pint = £150 ÷ 84 = £1.79. At £5.80 with VAT (net £4.83), GP = 63.1%. If you only sold 76 pints, the cost per pint rises to £1.97 and GP drops to 59.2%, which shows why yield tracking matters.

Spirits and cocktails

A 70cl bottle of gin costing £16.00 ex VAT gives 28 measures of 25ml, so £0.57 each. At £4.50 with VAT (net £3.75), GP = 84.8%. A gin and tonic with £0.57 gin, £0.35 tonic and £0.15 garnish costs £1.07. At £7.50 with VAT (net £6.25), GP = 82.9%.

Targets for drinks vary widely by venue type, so we have not quoted a benchmark. Work out your current wet GP from a full stock take, then set targets from your own accounts.

Typical GP ranges for restaurants

Lightspeed's UK guide puts overall restaurant gross margin at around 60 to 70%, and food cost at 28 to 35% of food sales, which equals a food GP of 65 to 72%. Its source does not publish the underlying data, so treat these as a rule of thumb rather than a standard. A venue with high rent or labour needs a higher GP to be viable than one with low overheads.

Why GP% alone can mislead

A high percentage is not always more money. Compare two dishes:

The steak has a lower GP% but earns £5.83 more per plate. If you push a menu to chase percentage alone, you can lose cash. Look at both numbers, and at how many of each dish you actually sell (the menu mix).

Keeping GP intact when costs rise

When supplier or wage costs go up, GP quietly falls. A salmon dish costing £5.00 sold at £19.50 (net £16.25) has a GP of 69.2%. If the fish rises to £5.60, GP drops to 65.5%. To restore 69.2%, the net price needs to be £5.60 ÷ (1 − 0.692) = £18.20, so £21.84 with VAT, say £21.95. Recost whenever an invoice price changes, which is the job that software handles well. TablePort's stock module links recipes to supplier prices, so recipe cost and GP follow your latest invoices and a price rise shows up before it eats into your margin. See also restaurant profit margin for how GP fits into the whole P&L.

This guide is general information, not tax or financial advice; speak to an accountant about your own VAT position.