Helen started this topic @ 21:33 on 15/09/2006
I am trying to put together a business plan for a restaurant but am confused about gross profit margins. I understand that gross profit is whatever you have made after the cost of sale, but is this calculated against gross sales i.e. including VAT or against net sales excluding VAT?
Restaurants vary on what they try and achieve for their GP - anything between 65-75% seems to be the norm. I'm just not sure if this is calculated to include VAT.
Feedback gratefully received.
RE: Gross Profit Margins
Jonny | 15/09/2006 09:42 PM
Assuming you will be VAt registered, you should exclude VAT from all your calcs.
So on your business plan, all your costs should be ex-VAT and your sales ex-VAT.
Otherwise you'll always end up with a skewed number.
James Smith the resident guru of all things number related will be able to advise more.
J
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RE: Gross Profit Margins
RichC64 | 15/09/2006 10:34 PM
Hello Helen
Gross profit as already stated is calculated after vat on sales rev is removed.
When it comes to costing your menus be very careful to cost correctly as its not a question of aiming at blanket 65 to 75 % mark up on all items but assessing the menu sales mix and working an average out that meets your gp % target...for example a plate of soup that costs £.35 to put in front of your guest will be marked higher than your targeted 65% otherwise you d be selling it for £1.50 ish but likewise a fillet steak that costs up to £8.00 to put on the plate would never sell at a price of £32.00 to achieve your gp% ......but using the cheaper foods to subsidise the more expensive items without overpricing either is a very good practice to keep yourself competative in whsat is a very demanding marketplace
good luck with your venture and if i can help with any other queries on the food production side let me know as i ve spent the last 25 years as a pro chef and only too happy to help if i can
best wishes Rich
