Understanding Gross Profit in Hospitality: Why GP% Is Your Most Important Number

What is Gross Profit?

Gross profit is the money left over after you subtract the direct cost of what you sell (food, drink, ingredients, room supplies) from your revenue. It's the foundation of your entire business — if your GP isn't healthy, nothing else matters.

The formula is simple: Revenue – Cost of Sales = Gross Profit. Express it as a percentage and you get your GP%, which is the metric that lets you compare performance over time and against industry benchmarks.

What Should Your GP% Be?

In hospitality, typical GP% targets vary by type of venue:

• Hotels: 70–80% on rooms, 65–70% on F&B
• Restaurants: 65–70% on food, 70–80% on drinks
• Pubs: 55–65% on food, 65–75% on wet sales
• Cafés: 65–75% on food and coffee

If you're consistently below these benchmarks, there's almost certainly money being left on the table — or worse, leaking out.

Common GP% Killers

We see the same issues come up time and again across hospitality businesses:

• Portion control drift — staff gradually serving larger portions without realising the cost impact
• Supplier price creep — not reviewing supplier invoices regularly enough
• Menu pricing lag — ingredient costs go up but menu prices stay the same
• Waste and spoilage — poor stock rotation or over-ordering
• Theft — unfortunately, it happens more than most owners think

How to Improve Your GP%

The good news? Even small improvements in GP% can have a dramatic impact on your bottom line. A 2% improvement on £500,000 of revenue is an extra £10,000 straight to profit.

Start with these practical steps:

• Run a full menu costing exercise — know the GP on every dish
• Review your top 3 suppliers quarterly and negotiate or benchmark
• Implement portion control standards and train your team
• Track waste daily, not monthly
• Use a 13-week rolling cashflow forecast to spot trends early