How do you calculate a restaurant profit margin?

Subtract cost of goods sold from revenue to get gross profit, then subtract operating expenses to get operating profit. Divide each by revenue and multiply by 100 for the margin percentages.

What is the difference between gross and net margin?

Gross margin only accounts for the cost of what was sold. Operating (or net) margin also accounts for rent, payroll, utilities and the other costs of running the restaurant.

What is a typical restaurant profit margin?

It varies widely by concept, location and model, and full-service restaurants often run on thin operating margins. Track your own trend rather than comparing to a headline figure.

Can Restovax show this?

Restovax reports sales against logged expenses per branch and for the group, which gives you the inputs for this calculation without assembling them by hand.

Restaurant profit margin calculator

Enter your revenue, cost of goods sold and operating expenses for the period to see gross profit, operating profit, and the margin each represents. The calculation runs in your browser and nothing is saved.

Revenue for the period

Cost of goods sold (food & beverage)

Operating expenses (rent, payroll, utilities…)

Gross profit

Gross margin:

Operating profit

Operating margin:

Enter revenue to get margin percentages

The formula

Gross profit = Revenue − Cost of goods sold
Gross margin % = Gross profit ÷ Revenue × 100
Operating profit = Gross profit − Operating expenses
Operating margin % = Operating profit ÷ Revenue × 100

Gross vs operating profit

Gross profit is what is left after the direct cost of what you sold (food and beverage). Operating profit takes out everything else it costs to run the place for the period — rent, payroll, utilities, marketing, repairs. Operating margin is the one that tells you whether the business made money.

What counts as cost of goods sold

The cost of the food and drink actually used in the period (opening stock + purchases − closing stock). It does not include kitchen wages or equipment — those are operating expenses.

Reading the result

A positive gross margin with a negative operating margin means the menu is priced above ingredient cost but overheads are too high for the sales volume. Compare the same period across months rather than judging a single figure.

Frequently asked questions

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