Margins
The truth about gross profit
Gross profit percentage is the most quoted number in hospitality and one of the least useful on its own. It is an average of averages, and averages hide exactly the detail you need.
A good percentage can still mean lost cash
A business can improve GP percentage while making less money, simply by selling fewer high-value items. Cash margin per cover and cash margin per available seat hour tell you whether the business is actually better off.
Blended GP hides the losers
Split GP by category: food, wet, coffee, retail, rooms. Then split it again by menu section. It is normal to find one section running eight points below the rest and funding it out of everything else.
Theoretical versus achieved
The difference between the GP your costings predict and the GP you actually bank is the most valuable single number in the business. It is where waste, over-portioning, unrecorded staff food, giveaways and till errors live.
- Calculate theoretical GP from your costed specs and product mix.
- Compare with achieved GP from stock and sales.
- Investigate any gap above one and a half points.
The takeaway
Stop managing one blended percentage. Manage cash margin, category GP and the gap between theoretical and achieved, and the percentage looks after itself.