Why Did My Restaurant's GP Drop This Week?

On $40,000 of weekly food sales, a slide from 70% to 66.5% GP is $1,400 gone in seven days. That restaurant gross profit drop nearly always breaks down into price rises, sales mix, waste, yield and count error, plus a small remainder, and putting a dollar figure on each until they add up tells you what to fix.

The usual experience is less tidy. The accountant or the weekly report says GP fell from 70% to 66.5%. The owner asks the head chef why. The head chef says chicken went up, the new kitchen hand over-trims, and Sunday’s count was rushed. All three might be true, and nobody knows which one matters.

What does GP mean for a restaurant?

For a restaurant, GP (gross profit) is food or beverage sales minus the cost of the stock used to make them, usually shown as a percentage of sales. It is the mirror of food cost %: a 30% food cost means a 70% GP.

What counts as a normal GP depends on the format. The ATO’s small business benchmarks for restaurants put cost of sales at 31% to 39% of turnover in 2023-24 tax data, averaging 34% to 35%, which works out to a GP of roughly 65% to 66% for a typical restaurant (our calculation). Pubs and bars run higher cost of sales. So compare your GP with your own recent weeks, not with a number from a different kind of venue.

The cost of stock used comes from your stocktake, not your invoices:

• Cost of goods used = opening stock + purchases − closing stock
• Food cost % = cost of goods used ÷ food sales
• GP % = 1 − food cost %

In Excel, put opening stock in B2, purchases in B3, closing stock in B4 and food sales in B5:

That means a GP figure is only as good as two counts and a week of invoices. Our guide on how to calculate food cost percentage goes through the formula in more detail.

What are the usual reasons restaurant GP falls?

Restaurant GP usually falls because of price rises, billing errors, a shift in sales mix, waste, poor yield or a count error, and each needs a different fix.

1. Price rises. A supplier puts up the price per kilo or per carton and your menu price stays the same. Costs are still moving: the ABS reported meals out and takeaway prices up 4.1% in the 12 months to August 2026, which it put down to higher operating, ingredient and other input costs. Fresh lines can move fastest; the ABS lists fruit and vegetables as one of its volatile items. Our guide to catching supplier price rises before they eat your margin covers the invoice checks.
2. Billing that doesn’t match the agreed price. Related, but not the same. The rep agreed $18 a kilo, the invoice says $19.50, and nobody compared the two because the bill was paid on the total. Unless someone checks invoice lines against the agreed price, this one looks exactly like a price rise.
3. Sales mix. If the week sold more of the 38% food cost steak and fewer of the 22% pasta, GP falls even if every recipe was followed perfectly.
4. Waste. Spoiled stock, over-prep, returned plates, a cool room door left open overnight. ReFED’s Restaurant Food Waste Action Guide found that across US restaurant concepts, guests leave on average 17% of the food on their plate, and plate waste is only one of several places waste happens.
5. Yield. The brisket loses more weight than the recipe assumes, or a new cook trims salmon heavier.
6. Count error. A carton of oil counted twice on Sunday, or an open bottle counted as full. This isn’t a real loss, but it moves GP and hides the real causes.

Whatever’s left after those six is unexplained. A small unexplained number is normal. A large one points to missing invoices, unrecorded staff meals or comps, or theft.

How do you break a restaurant GP drop into dollars?

You work out each cause in dollars and check that they add up to the total drop. Here is a worked example with made-up numbers.

Say a bistro sells $40,000 of food in a week and targets 30% food cost (70% GP), so it expects to use $12,000 of stock. This week’s count shows opening stock $9,000, purchases $13,800 and closing stock $9,400, so cost of goods used is $13,400: a 33.5% food cost and a 66.5% GP. The gap is $1,400.

Price rises come from comparing each invoice line with the last price paid. With the old price in B2, the new price in C2 and the quantity bought in D2, copy this down the sheet and sum the column. In the example, chicken thigh up $1.20/kg on 250 kg is $300, and herbs and leaves add $220.

How the other lines are found:

1. Mix. Recalculate theoretical food cost (recipe cost × quantity sold, from the POS) at this week’s actual sales mix. The gap between theoretical and actual is its own subject; see why actual food cost is higher than your recipes say.
2. Waste. Total the waste log.
3. Yield. Compare cooked yield with the recipe. More raw brisket bought per portion sold makes up the difference.
4. Count error. Recount the areas that moved most. A faster, shelf-order stocktake makes this kind of miss less likely.
5. Unexplained. Whatever is left once the others are costed.

Check: 520 + 160 + 340 + 210 + 120 + 50 = $1,400. If your causes don’t add up to the gap, you either missed one or one of them is wrong. Don’t move on until they reconcile.

This is the bit most venues skip, because it means comparing every invoice line, matching POS sales to recipes and checking the count, every week. It’s tedious by hand, which is exactly why GP drops so often go unexplained.

What should you fix first?

Fix the biggest dollar cause that you can act on this week, then the ones that will repeat. In the example above, that order would be:

• Price rises ($520): call the rep. Ask whether the chicken price is permanent, check it against what you agreed, and request a credit for any line billed above that. If the rise is real and lasting, re-cost the dishes that use it and decide whether to change portion, garnish or menu price.
• Waste ($340): a one-off equipment fault is a maintenance job, not a menu problem. But if waste is high every week, look at prep pars and order quantities before blaming the cooks.
• Yield ($210): retrain on trim, check the supplier’s spec (fat cover, size), or update the recipe so your costings reflect reality.
• Mix ($160): this is a menu engineering question. Is the high-cost steak being pushed by the floor? Is it priced right for its food cost?
• Count error ($120): fix the method. Count in shelf order, record open bottles and part cartons properly, and recount anything that moves wildly week to week.

One more rule: track the same breakdown every week. A single week tells you what happened. Four weeks tell you what keeps happening, and that’s where the money is.

How Restaurant AI Manager helps with a restaurant gross profit drop

Restaurant AI Manager, Open Pantry’s AI restaurant operations software, does most of this matching for you. (Open Pantry is an Australian ordering and operations platform for food and beverage suppliers and the restaurants they supply, founded in 2018.) It reads your supplier invoices, deliveries, counts, waste and POS sales, and works out GP per dish and per venue, live.

When GP slips, it splits the drop into price rises, waste, yield and count error, in dollars that add up. Price rises and substitutions are flagged on invoices before you pay, and shorts at the door become drafted credit requests for you to send. See profit and reporting insights and food cost variance, or ask "why is GP down?" yourself in the free live demo, no sign-up needed.

In summary: why restaurant GP drops and what to do

A restaurant gross profit drop is a total of smaller causes: price rises, mix, waste, yield and count error, plus a little that can’t be explained. Split the drop into dollars for each until they add up, fix the biggest one you can act on now, and repeat the same breakdown every week.