Start with two dishes on the same cost basis
Assume dish A has a £12 customer price and £3 cost per sold portion. Dish B has an £18 customer price and £6 cost per sold portion. Both prices include an explicitly assumed 20% sales VAT. This is an arithmetic assumption, not a VAT classification of either dish.
Costs include the same chosen direct-cost categories for both dishes, exclude recoverable purchase VAT and include non-recoverable VAT. Assume portion costs already allow for unsold food where needed; do not add another waste allowance. Prices and unit costs remain fixed throughout the comparison.
These assumptions matter: comparing an ingredients-only cost for one dish with ingredients plus packaging for another would give an inconsistent comparison.
Calculate each dish’s pounds and percentage
Net sale = customer price ÷ (1 + VAT percentage ÷ 100). Gross profit = net sale − portion cost. GP margin = gross profit ÷ net sale × 100.
For dish A, net sale is £12 ÷ 1.20 = £10. Gross profit is £10 − £3 = £7, giving a 70% GP margin.
For dish B, net sale is £18 ÷ 1.20 = £15. Gross profit is £15 − £6 = £9, giving a 60% GP margin.
Dish A has the higher margin, but dish B contributes £2 more gross profit per sale against the entered costs. Neither percentage is a recommended target. Preparation time, capacity and expenses outside these costs still matter.
Add the sales before calculating the combined margin
Suppose you sell 80 portions of A and 20 of B in one review period.
Dish A contributes £800 of net sales, £240 of entered costs and £560 of gross profit. Dish B contributes £300 of net sales, £120 of costs and £180 of gross profit.
Together, that is £1,100 net sales, £360 costs and £740 gross profit. Combined GP margin is £740 ÷ £1,100 × 100 = 67.27%.
Simply averaging 70% and 60% gives 65%, which is incorrect for this sales mix. Weighting percentages by portion counts also fails when the dishes have different net selling prices. The reliable method is to divide total gross profit by total net sales.
Test a different mix with the same number of sales
Now assume 40 portions of A and 60 of B sell: still 100 portions overall, with unchanged prices and unit costs.
Dish A produces £400 net sales, £120 costs and £280 gross profit. Dish B produces £900 net sales, £360 costs and £540 gross profit.
The combined result is £1,300 net sales, £480 costs and £820 gross profit. Margin is £820 ÷ £1,300 × 100 = 63.08%.
Compared with the first mix, gross profit rises by £80 while the margin falls from 67.27% to 63.08%. Average gross profit per sale rises from £7.40 to £8.20. A lower combined percentage therefore does not, by itself, show a worse result.
This is a controlled comparison, not a prediction that customers will switch dishes or spend more. It assumes the kitchen can deliver the second mix without changing unit costs.
Use the calculator, then combine your actual sales
Open GP Calculator UK at / and choose Check my GP. Enter cost 3, customer price 12 and assumed VAT 20 for dish A. Repeat with cost 6, price 18 and VAT 20 for dish B. Check GP pounds alongside GP percentage, and save each dish if useful.
For your period review, multiply each dish’s unrounded net sale, cost and gross profit by its actual quantity sold. Add those amounts across the menu, then calculate total gross profit ÷ total net sales × 100. Keep full precision until the final totals rather than multiplying rounded displayed percentages.
The input explanations at /#guide help you keep costs consistent. Record the period and quantities alongside your calculation so you can distinguish a recipe-cost change from a sales-mix change.
Check what the comparison leaves out
Before promoting a dish because it brings more GP pounds, check the work and resources each sale needs. Extra preparation, limited equipment capacity or additional unsold batches may change the comparison. Gross profit still has to cover remaining wages, rent, energy and other expenses; it is not net or take-home profit.
Use the VAT rate applicable to each actual sale. Different rates can be handled by calculating each item’s net sales separately before adding them. HMRC’s catering and takeaway guidance explains the relevant distinctions: https://www.gov.uk/guidance/catering-takeaway-food-and-vat-notice-7091
Purchase VAT recovery has conditions and exceptions. Use costs excluding recoverable VAT and including non-recoverable VAT, following the treatment applicable to your purchases: https://www.gov.uk/charge-reclaim-record-vat/reclaim-vat-business-expenses
This example explains menu arithmetic, not personalised tax advice.
Sources
Try the tools
Try your own figures
Use the free GP calculator to check selling prices, compare margins and save menu items on your device. Gross profit is before remaining business expenses.
Open GP Calculator UK →