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Gross Profit % for a Pub?

Gross Profit % for a Pub?

What is typical Gross Profit Margin (GP divided by Sales)expected by Inland Revenue and HMCE for pub doing beer, wine and spirits(no food)?

Obviously overall % needed. What would it be incl/not incl Direct Wages.?

Many Thanks for any help
david

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20th Apr 2004 09:25

Typical GP% for Pubs
The Pub Industry supply chain has so many significantly different cost prices and the pubs have so many different selling prices that there can NOT be a TYPICAL GP% that any one can expect.

Our company owns & operates 53 public houses and we see GP%’s varying from between 43% to 67%. The are a number of reasons for the variance the main two are:
a. Is your client a “freehouse” does he receive “healthy” discounts off of the wholesale price form the brewery supplier (in the order of 40% off full wholesale price)
b. Is your client a tenant\lessee of a Pub Co or Brewer and therefore does he pay full wholesale price without discount.
In my experience the revenue test is fairly simple, that is, take the invoiced cost price of a pint of ale, lager and other “draught dispensed” products, (which typically will account for 75-85% of the total wet sales of the pub and do a gross profit % calculation against the selling prices, if this is similar to the declaration then it would seem to stand up. If however the discrepancy is significant i.e. 4-5% out on say typically £250k turnover per annum then the revenue may want to challenge you to prove where the deficit has gone.
This may be in operating allowances or sampling, wastage etc. or may be as a result of the “split of draught dispense” products to the overall mix i.e. spirits wine and soft drinks sell less in volume but are significantly more profitable in % terms so there may be a sales weighting calculation to prove. There is no substitute for stocktakes!!

I also agree with John Mackay that wages should not be included within the GP calculation.

Should you wish for any further discussion please contact me.

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By Ria
zeofiles
18th Apr 2012 11:18

GP

I do not agree with that... The bar staff are a direct expense and must be deducted in order to get your GP... I dont care of you want to make your margin look bigger, the fact is if you dont deduct the direct salaries and wages then your GP is wrong... End of

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cretanlover
14th Dec 2012 23:53

Gross Profit

Ria wrote:

I do not agree with that... The bar staff are a direct expense and must be deducted in order to get your GP... I dont care of you want to make your margin look bigger, the fact is if you dont deduct the direct salaries and wages then your GP is wrong... End of

With all respect Rita, You are making a common mistake and treat gross profit as NET PROFIT. As a bookkeeping practice we will NEVER include employee wages in calculation of GROSS PROFIT.

Wages are taken away from gross profit together with other expenses to calculate NET PROFIT. !!!!!!!!!

NET PROFIT is the amount you are being taxed on

I think that is the simplest way I can explain

How to calculate GROSS PROFIT:

SALES - (PURCHASES - PURCHASES RETURNS) = GROSS PROFIT

Above is the simplest calculation. We will have to include stock takings in that as well but I think I explained the Difference between GROSS and NET PROFITS 

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19th Apr 2004 17:35

investigations
at the Digita tax conference someone asked a similar question and the reply we were given (no names no packdrill) was that pubs are always looked at individually and as an eg 2 pubs within 100 yds of each other had very diferring GP expectations (in the IR files), so the answer is you never know but you should be able to work it out fairly easily if you separate the wet from dry.

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By RimBoy
19th Apr 2004 20:59

Public House GP
John's figures at 52-58% are rather worrying, as I have a client currently under enquiry where the GP% is just 47%

This is however a community pub, where the majority of sales derive from Beer. No Cocktails here!

Is 47% reasonable? Believable?

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By Bryden
20th Apr 2004 08:53

Pub GP%
I have specialised in pubs/small hotels for amny years.

GP% can and does vary from early 40%s to late 60% Certainly the low 40's will trigger alarm bells at the local Revenue office.

Brewers discount can affect margins considerably, a high barrelage can get you £100/barrel discount, a low one or a brewery loan, no discount at all.

If the pub is leased from one of the new pub companies, then purchase prices are considerably higher than free trade.

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By Abacjm
14th Apr 2004 00:51

Pub GP Margin
It would depend on whether it was a Public Bar or Lounge/cocktail bar, wher margins would be higher, based purely on drinks sales.

You should be able to get a download on this website of a Focus report which will show expected GP margins, but in my experience "raw drinks" margins could be anything between 52 and 58%, depending onthe quality of the stocktake figures used. Lounges/cocktail bars could get up to 62%. I never included Wages pre GP, however much a direct cost they may play, as staff deployment can play havoc with margins.
Hope that helps.

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29th Mar 2016 14:18

Gross Profit

We expect a gross profit between 52%-55% on pub trade. There are number of factors involved

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