Gross profit and net profit are two different ways to look at your profit. Gross profit is what you keep after deducting your ingredients (food cost)...
Every restaurant owner who's ever stared at their P&L at 2 AM knows this feeling - great food costs, terrible bottom line. You're hitting 70% gross margins on paper, but your bank account tells a different story. The gap between gross and net profit holds the answer to why some restaurants thrive while others barely survive.
What is gross profit?
Gross profit is your revenue minus your direct production costs. In a restaurant, that's mainly your ingredients and beverages.
💡 Gross profit example:
You sell a pasta for €18.50 incl. VAT (€16.97 excl. VAT)
- Ingredient costs: €5.10
- Gross profit: €16.97 - €5.10 = €11.87
- Gross profit percentage: 70%
Gross profit formula:
- Gross profit = Revenue - Direct production costs
- Gross profit % = (Gross profit / Revenue) × 100
What is net profit?
Net profit shows what actually lands in your pocket after every single expense gets paid. This is the real money you keep as a business owner or can reinvest back into your operation.
💡 Net profit example:
Monthly revenue: €50,000 excl. VAT
- Ingredients: €15,000 (30% food cost)
- Staff: €20,000
- Rent: €4,000
- Energy: €2,500
- Other costs: €3,500
Gross profit: €50,000 - €15,000 = €35,000 (70%)
Net profit: €50,000 - €45,000 = €5,000 (10%)
Net profit formula:
- Net profit = Revenue - All costs
- Net profit % = (Net profit / Revenue) × 100
The difference in practice
The major difference lies in what expenses you're counting:
⚠️ Watch out:
High gross profit doesn't automatically guarantee strong net profit. You might achieve 70% gross margins but still operate at a loss due to excessive staff costs.
Gross profit focuses on:
- Only your direct production costs (ingredients)
- How effective your pricing and recipes are
- Individual dish profitability
Net profit considers:
- Your complete business operations
- Total business profitability
- What you actually take home as a business owner
Common percentages
For restaurants, these percentages serve as useful benchmarks:
💡 Benchmarks:
- Gross profit: 65-75% (food cost 25-35%)
- Net profit: 5-15% (depending on concept and location)
Note: these are guidelines, not absolute rules. Much depends on your concept, location, and operational efficiency.
Why both matter
You need both metrics to run your business effectively - that's the kind of thing you only learn after closing your first month at a loss. I've seen too many operators focus on just one number and miss critical issues.
- Gross profit helps you optimize your menu and pricing strategy
- Net profit reveals if your business model is sustainable
- If your gross profit looks good but net profit disappoints, your problems lie with operational expenses
- If both numbers are weak, you need to examine your pricing and recipe costs
How do you calculate gross and net profit?
Calculate your gross profit
Subtract your direct production costs (ingredients and beverages) from your revenue excl. VAT. This gives you gross profit in euros. Divide by your revenue and multiply by 100 for the percentage.
Make an overview of all costs
List all costs: staff, rent, energy, insurance, depreciation, marketing, accountant, etc. Add these to your production costs for your total costs.
Calculate your net profit
Subtract all costs from your revenue excl. VAT. This is your net profit in euros. Divide by your revenue and multiply by 100 for the net profit percentage.
✨ Pro tip
Review your labor cost percentage every 2 weeks alongside your gross profit margins. If labor creeps above 28-32% while gross profit stays strong, you've found the culprit behind weak net profits.
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In the KitchenNmbrs app you can do this in just a few clicks. 7 days free, no credit card.
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Frequently asked questions
What is good gross profit for a restaurant?
A solid gross profit typically falls between 65-75%, which corresponds to a food cost of 25-35%. This varies by concept - fine dining often carries higher food cost than fast casual operations.
Why is my gross profit high but net profit low?
Your operational costs are eating into your profits. Examine staff wages, rent, energy bills, and other fixed expenses. You might need to improve efficiency or raise your prices to cover these costs.
Should I calculate with prices including or excluding VAT?
Always exclude VAT from your calculations. The VAT isn't your money - you're just collecting it for tax authorities. For accurate profit calculations, only count your actual revenue and costs.
Can I have positive gross profit but negative net profit?
Absolutely, and it happens more often than you'd think. Your dishes might be profitable individually, but if your rent, staff costs, and other expenses exceed your gross profit, you'll still lose money overall.
How often should I calculate each type of profit?
Check gross profit weekly per dish to catch recipe problems early. Calculate net profit monthly since operational costs need time to average out over longer periods.
What's a realistic net profit margin for a new restaurant?
New restaurants should aim for 8-12% net profit once they're past the initial startup phase. Anything above 15% is exceptional, while below 5% means you're likely struggling to cover all costs properly.
📚 Sources consulted
- EU Verordening 852/2004 — Levensmiddelenhygiëne (2004) — Official source
- EU Verordening 853/2004 — Hygiënevoorschriften voor levensmiddelen van dierlijke oorsprong (2004) — Official source
- EU Verordening 1169/2011 — Voedselinformatie aan consumenten (2011) — Official source
- NVWA — Hygiënecode voor de horeca (2024) — Official source
- NVWA — Allergenen in voedsel (2024) — Official source
- Codex Alimentarius — International Food Standards (2024) — Official source
- FSA — Safer food, better business (HACCP) (2024) — Official source
- BVL — Lebensmittelhygiene (HACCP) (2024) — Official source
- Warenwetbesluit Bereiding en behandeling van levensmiddelen (2024) — Official source
- WHO — Foodborne diseases estimates (2024) — Official source
Food Standards Agency (FSA) — https://www.food.gov.uk
The HACCP standards shown in this application are for informational purposes only. KitchenNmbrs does not guarantee that displayed values are current or complete. Always consult the FSA or your local authority for the latest regulations.
Written by
Jeffrey Smit
Founder & CEO of KitchenNmbrs
Jeffrey Smit built KitchenNmbrs from 8 years of hands-on experience as kitchen manager at 1NUL8 Group in Rotterdam. His mission: give every restaurant owner control over food cost.
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