Thinking of opening a restaurant part five
Gross profit or GP
Gross profit or GP it is the most common thing that you will come across as a chef and it is one that seems to cause the most confusion. The classic GP target was for 65% but in my time it has amazed me how many people have not understood what that means.
The most common mistake is just to stick 65% on to the cost price.
Why because 65% of £1.00 is £0.65 giving you a selling price of £1.65.
If you are looking for a GP of 65% then the cost price is 35% of the final price. Now some of you will look at this and say no you are wrong but I have rounded up the fractions of pennies to make it easy.
So the cost of something is the cost percentage of the cost, and if I was you I would give yourself some help against waist and look for a 30% cost and a 70% Gross profit.
Now some thing will look very cheap if you just go by percentages and some will look very expensive, it is a matter of getting the balance right and getting your menu to balance so that you can get the right money for the right dish.
The final price that is charged is important. If you get it wrong then you go under and for anyone who thinks that eating out is so expensive then this is why
You have direct food costs, Wages to cover, Overheads in rent or mortgage , heat light and power, insurance to name a few. And all the miscellaneous things like napkins, linen, candles and cleaning products as well .So if your dinner cost £25.00 what goes where well its cost probably goes like this
Cost of the food £6.00
Staff wages £6.00
To the overhead contribution £4.00
The profit £2.40
Total bill £25.00
If you take away the Vat then it looks a little more like this and that is why you need to get the right GP if you cannot get that then you are in trouble.