Restaurant Profit Margin in the UK: Benchmarks and a Worked P&L
What is a good restaurant profit margin in the UK? Sourced net, gross and prime cost ranges, a worked £600k P&L and nine ways to improve yours.
By the TablePort teamFacts checked 7 min read
A typical UK restaurant makes a net profit margin of roughly 3 to 6%, meaning £3 to £6 kept from every £100 of sales after all costs. Gross margin, which only deducts the cost of food and drink, is much higher at around 60 to 70%. The gap between the two is eaten by labour, rent, utilities and everything else it takes to open the doors. This guide defines each margin, shows the commonly quoted UK ranges with their sources, and walks through an illustrative P&L for a restaurant turning over £600,000.
Gross, net and prime cost: what each margin measures
| Measure | Formula | What it tells you |
|---|---|---|
| Gross profit margin | (Net sales − cost of goods sold) ÷ net sales | How well you price and control food and drink |
| Prime cost | (Cost of goods sold + all labour cost) ÷ net sales | The two biggest, most controllable costs together |
| Net profit margin | (Net sales − all costs) ÷ net sales | What the business actually keeps |
"Net sales" always means sales excluding VAT, since VAT belongs to HMRC. Cost of goods sold (COGS) is the food and drink you used, found from opening stock plus purchases minus closing stock. Labour includes wages, employer National Insurance, employer pension contributions and holiday pay, not just the net pay on the payslip. Prime cost matters most because it is the part you can change month by month. Rent is fixed for years.
For the detail behind each input, see our guides to food cost percentage, GP and labour cost percentage.
Typical UK restaurant profit margins
There is no single official UK figure, and published numbers come from industry bodies and software vendors. These are the ones we could trace to a source, as published when we checked in October 2026:
| Benchmark | Figure | Source |
|---|---|---|
| UK average net profit margin | about 4.2% | Sage |
| Full-service restaurants, net | 3 to 5% | Sage |
| Quick-service and fast casual, net | 6 to 10% | Sage |
| Net margin, general range | 3 to 6% | Lightspeed UK |
| Gross margin | 60 to 70% | Lightspeed UK |
| Food cost | 28 to 35% of sales | Lightspeed UK |
| Labour cost | 30 to 35% of sales | Lightspeed UK |
| Prime cost | 55 to 65%, with 70% a warning sign | Lightspeed UK |
Treat the Lightspeed ratios as rules of thumb: the article does not cite underlying data. The Sage article also reports that UK restaurants had an average annual turnover of £307,736 in 2024, from a study by Lumina Intelligence covering 323,004 restaurants. At a 4.2% net margin, that average restaurant keeps about £12,900 a year, before any owner pay that is not already in the labour line. The takeaway is how thin the cushion is. A two-point slip in food cost wipes out half of it.
A worked P&L for a £600,000 restaurant
This is a modelled example, not real data from any business. It describes a mid-market restaurant with food and drink sales of £600,000 excluding VAT (about £720,000 taken across the till with 20% VAT). Substitute your own numbers.
| Line | £ | % of net sales |
|---|---|---|
| Food sales | 400,000 | |
| Drink sales | 200,000 | |
| Net sales | 600,000 | 100.0% |
| Food cost (31% of food sales) | 124,000 | 20.7% |
| Drink cost (28% of drink sales) | 56,000 | 9.3% |
| Cost of goods sold | 180,000 | 30.0% |
| Gross profit | 420,000 | 70.0% |
| Labour (wages, employer NIC, pension, holiday) | 210,000 | 35.0% |
| Prime cost (COGS + labour) | 390,000 | 65.0% |
| Rent and business rates | 84,000 | 14.0% |
| Utilities | 24,000 | 4.0% |
| Card and payment fees | 10,200 | 1.7% |
| Repairs, cleaning, laundry | 18,000 | 3.0% |
| Marketing and software | 15,000 | 2.5% |
| Insurance, licences, accountancy, bank | 12,000 | 2.0% |
| Other (delivery commission, waste, uniforms, music) | 16,800 | 2.8% |
| Total overheads | 180,000 | 30.0% |
| Net profit before tax | 30,000 | 5.0% |
The restaurant earns £30,000 on £600,000 of sales, a 5% net margin, which sits inside the quoted 3 to 6% range. Corporation tax and the owner's drawings come after this line.
What moves the result
| Change | Effect on profit |
|---|---|
| Food cost rises 2 points (£12,000 of extra COGS) | Profit falls from £30,000 to £18,000 |
| Labour rises 2 points (£12,000) | Profit falls to £18,000 |
| Prime cost falls from 65% to 62% | Profit rises by £18,000 to £48,000 |
| 5% price rise, covers unchanged | About £29,500 extra profit (£30,000 of sales less roughly 1.7% card fees) |
The last row assumes guests do not leave, which is a big assumption. It shows why price and mix matter as much as cost control.
Pressure points in 2026
Two statutory costs rose in April 2026, and both land in the labour line.
- The National Living Wage for workers aged 21 and over is £12.71 an hour from April 2026, up from £12.21 (about 4.1%). The 18 to 20 rate is £10.85, and the under-18 and apprentice rate is £8.00 (gov.uk).
- Employer National Insurance is 15% on earnings above £5,000 a year per employee for 2026/27. The Employment Allowance, which reduces your annual bill, is £10,500 (HMRC rates and thresholds).
Our labour cost guide shows how these combine into a true hourly cost. Ingredient inflation, energy bills and business rates also vary by site, so check your own invoices.
Nine ways to improve your margin
- Engineer the menu. Feature dishes with a high cash margin that guests like, and review those with low margin and low sales.
- Price to a target GP. Use the menu price calculator when costs change.
- Schedule labour to demand. Match staffing to forecast covers by day and hour.
- Cut no-shows. Empty tables cost fixed overheads with no sales. See how to reduce no-shows.
- Track waste. Log what is thrown away and why, and count stock regularly.
- Check supplier prices. Compare prices on your top 20 ingredients every quarter.
- Upsell by habit. A drink on arrival, a side or dessert suggestion, trained and consistent.
- Fill quiet slots. Private hire, set menus and midweek offers use capacity you already pay for.
- Win direct bookings. Booking through your own channel avoids third-party commission where you pay it.
Software helps most on the first, third and fifth. TablePort's restaurant management platform brings sales, rota and stock data into one platform, so you can check food and labour costs more often than at month end. Some restaurants manage the same with a spreadsheet and discipline.
This guide is general information, not tax or financial advice; speak to an accountant about your own accounts.
Frequently asked questions
- What is a good profit margin for a restaurant in the UK?
Sources commonly quote a net margin of about 3 to 6%, with full-service restaurants at 3 to 5% and quick-service formats at 6 to 10%. A margin in the high single digits is strong for a sit-down restaurant. Your own consistency over time tells you more than a benchmark does.
- What is the difference between gross and net profit margin?
Gross margin deducts only the cost of food and drink from sales. Net margin deducts every cost, including labour, rent, utilities, fees and marketing. Gross margin is typically 60 to 70% and net margin is in single digits, which is why gross margin alone can give false comfort.
- What is prime cost in a restaurant?
Prime cost is cost of goods sold plus total labour cost. It is usually quoted as a percentage of net sales, with 55 to 65% as a common target and anything above 70% a warning sign. It is the figure to watch weekly.
- Is a 50% profit margin realistic for a restaurant?
Not as a net margin. A 50% to 70% figure may be gross margin, before labour and overheads. Net margins in the sector are in single digits.
- Should I calculate margin on sales including or excluding VAT?
Excluding VAT. If you are VAT-registered, VAT is collected on behalf of HMRC and is not revenue. Use net sales and net costs throughout. See restaurant VAT in the UK.
- How much profit does the average UK restaurant make?
Using Sage's figures, an average turnover of £307,736 and an average net margin of about 4.2% implies roughly £12,900 a year. That is an arithmetic illustration from two published averages, not a reported profit figure, and individual results vary widely.