Profitability
How to Read Your Restaurant's GP%: A Manager's Field Guide
GP% is the most important number in your restaurant. But most managers read it wrong. We explain how to calculate it, what good looks like, and where the leaks hide.
Gross Profit Percentage (GP%) is the single most important number in your restaurant. It tells you whether your pricing, purchasing, and portion control are working. But most managers calculate it wrong, benchmark it wrong, and act on it wrong.
First, calculate it correctly. GP% = (Revenue - Cost of Goods Sold) / Revenue x 100. COGS includes food, beverages, and direct consumables. It does NOT include labour, rent, or overheads. A common mistake is including labour in COGS, which makes GP% look worse than it is.
Second, know what good looks like. For South African restaurants: fine dining should target 68-72%. Casual dining 62-68%. QSR 65-70%. Hotels 60-65% (lower due to breakfast costs). Winelands 65-70% (higher wine margins offset food costs). If you're 5+ points below these benchmarks, you have a leak.
Third, find the leaks. The five most common GP% killers in South African restaurants: (1) Supplier price creep — prices rise 2-3% quarterly, but menus don't. (2) Over-portioning — no photographic standards, no scales, no consistency. (3) Waste — prep errors, spoilage, returned dishes. (4) Theft — usually small, frequent, and systematic. (5) Menu engineering failure — high-cost, low-margin items outselling low-cost, high-margin items.
Fourth, act on it monthly. Review GP% by category (mains, starters, desserts, beverages). Review GP% by supplier. Review GP% by menu item. Discontinue items below 55% GP unless they're strategic loss-leaders. Renegotiate supplier contracts quarterly. Introduce portion control with photographic guides.
Fifth, don't panic over monthly fluctuations. A 2-3% swing is normal (seasonality, supplier changes, menu mix). A 5%+ swing is a leak. A consistent decline over 3 months is a structural problem.
Use our Profit Leak Calculator to estimate what poor GP management is costing your venue. Or book an operational audit for a forensic analysis of every leak and a 30/60/90 fix plan.
Want the full framework?
Book an operational audit and get the same 40-point framework, profit-leak register, and 30/60/90 action plan we use with every client.
Questions
The honest answers.
What's the difference between GP% and net profit?
GP% measures food and beverage profitability. Net profit includes all costs (labour, rent, overheads). A restaurant can have 70% GP and still lose money if labour and rent are too high.
How often should we review GP%?
Weekly for high-volume venues. Monthly for most restaurants. Quarterly for low-volume or seasonal venues. The more frequently you review, the faster you catch leaks.