Gross margin

Gross margin is the flip side of food or pour cost. If a dish runs a 30% food cost, its gross margin is 70% — the share of each ex-tax sale left once the ingredients are paid for. In currency: selling price ex-tax minus ingredient cost. It's the pool that has to cover labour, rent, energy and, finally, profit.

On the plate, kitchens usually hold 65 to 75% gross margin and bars 76 to 82%. Note this is ingredient-level gross margin, not the P&L gross margin that also nets out labour — that combined figure is prime cost. Both matter, but conflating them hides where the money is actually made or lost.

Two traps. First, computing margin on the tax-inclusive (TTC) price instead of ex-tax, which flatters the number. Second, confusing margin with markup: a 75% margin is not a x1.75 markup — it's a coefficient of 4 on cost. Keep the two straight.