Restaurant Finance
What is gross profit versus net profit in a restaurant?
Direct answer
Gross profit is sales minus cost of goods sold. Net profit is what remains after operating expenses, labor, occupancy, fees, interest, taxes, and other applicable expenses are also deducted.
Key points
- Gross Profit = Net Sales - Cost of Goods Sold.
- Net profit includes the broader expense structure and is the final profitability result for the period.
- Strong gross profit does not guarantee net profit when labor, occupancy, fees, or overhead are too high.
What to do next
- 1Start with net sales and subtract food and beverage cost of goods sold to find gross profit.
- 2Subtract operating and non-operating expenses according to your accounting statement.
- 3Divide each profit figure by net sales to compare gross margin and net margin without confusing them.