What GP Should a Pub Make?

Gross profit is one of the most important numbers in any pub, but there isn't one GP percentage that's right for every business. Wet sales, food sales, pricing, purchasing, waste and stock control can all have a significant effect. Here's how to understand what your pub's GP is telling you.

What Does GP Mean in a Pub?

Gross profit, usually shortened to GP, is the money left from your sales after deducting the direct cost of the products you've sold.

For example, if your pub generates £10,000 of net wet sales and the drinks sold cost £4,000 to buy, your gross profit is £6,000. That gives you a wet GP of 60%.

GP doesn't tell you the final profit your pub makes. Wages, rent, utilities, rates, entertainment and other operating costs still have to come out of that gross profit.

What GP Percentage Should a Pub Aim For?

There isn't one GP percentage that's right for every pub. The right target depends on your sales mix, pricing, purchasing terms and the type of operation you're running.

As a general guide, many pubs will aim for a wet GP of around 55% to 65%, while food GP is often targeted around 60% to 70%. The important thing is to set a realistic target for your own business and then understand why you're above or below it.

A pub achieving 60% GP consistently with good cost control may be in a stronger position than one targeting 65% but regularly missing it. Your GP should therefore be monitored alongside sales, wages and other operating costs.

Why Is My Pub GP Lower Than It Should Be?

A falling GP doesn't always mean your selling prices are too low. Small losses across several areas can quickly add up.

Common causes include poor portion control, over-pouring drinks, wastage, stock losses, supplier price increases, incorrect selling prices and products being entered incorrectly through the till.

Discounting and promotions can also reduce GP if the effect on margin isn't properly understood.

The key is to identify where the difference is coming from rather than simply increasing prices across the board.

How Often Should You Check Your Pub GP?

Waiting until your year-end accounts are produced is far too late to discover that your GP has slipped.

For most pubs, GP should be monitored regularly throughout the year. Looking at sales, purchases and margins monthly can highlight problems early, while higher-volume businesses may benefit from checking key figures weekly.

If your wet or food GP starts moving away from budget, you can then investigate the cause while there's still time to do something about it.

How Can You Improve GP in a Pub?

Improving GP isn't simply about putting your prices up. The best results usually come from tightening several areas of the business at the same time.

Start by checking your current supplier prices and making sure increases have been reflected in your selling prices. Review portion sizes, measures, wastage and stock variances. Make sure every product is correctly priced and programmed through your till.

For food, look closely at recipe costing, portion control and waste. For drinks, check purchasing costs, yields, over-pouring and unexplained stock losses.

Even a small improvement in GP can make a significant difference. On £500,000 of net annual sales, improving GP by just 2 percentage points could mean an additional £10,000 of gross profit before other costs.

GP Doesn't Tell the Whole Story

A strong GP percentage doesn't automatically mean a profitable pub. You also need to consider how much gross profit the business is actually generating and what happens to that money afterwards.

Wages, rent, utilities, entertainment, repairs, card charges and other overheads all have to be paid from your gross profit.

That's why we look at GP alongside wage percentage, sales, overheads, VAT and cash flow. A pub can have an excellent GP and still struggle to make money if the rest of the cost base isn't under control.

Need Help Understanding Your Pub's GP?

At Asturias Consultants, we work with pubs and hospitality businesses to understand the numbers behind their performance. We look at GP alongside sales, wages, VAT, cash flow and overheads to identify where profit is being made and where it may be getting lost.

If you'd like a clearer picture of how your pub is performing, get in touch for a free consultation.