What is the Gross Profit on Food?

Question

I would say around 60% but I am not too sure. I am buying a Cafe-Baar and it take £1250 per week - what could I expect to take home from that? Any advice would be great even if its 'DON'T DO IT!'

Thanks

Answer 1

You're right in your additional comments about the second answer. Net is after everything, and if THAT is 40%, you are immediately enshrined in the Restaurant Hall of Fame!!!

Here's my comment: If you don't know what an acceptable gross margin is for this kind of business, are you sure you have the experience to buy it? At the very least, I think you should have some sort of adviser who knows that sort of thing.

Answer 2

60% gross profit sounds right and in theory it should be 40% net profit, but it depends on how many expenses the business has. e.g: loans, utility bills, food costs etc.

Answer 3

Your theory is not far off what it should be - a third for materials, a third for overheads and a third for profit.  However, ask to see the books of the business you're thinking of buying.  Why is it up for sale?  Are the current owners not making it pay?  Involve an accountant if you're not sure you can understand everything that's in the accounts.  He or she may spot indicators of financial problems.

Business link is also a great help.  Contact your local office for free help and advice on setting up your business.  They're very good for making sure you have all the right food hygiene certificates and complying with all the other legislation involved in your business.

The hospitality trade is known for being a hard business to be in.  I worked in it years ago very closely with the business owners.  I still advise a particular sector of it.

Before you start, make sure you're buying a viable business and plan your marketing carefully so that you keep attracting customers.  There's a lot of competition and cafe bars come and go every day.

Best of luck!

Answer 4

Well perhaps not hat much  but depends on the overheads  as to what net profit there is,   you can only spend and use net profit  which might only be about   £300or £400.