Disclosure: This article is written by Shaun McManus, founder of SmartPubTools and creator of the Restaurant Console. All operational claims reflect genuine experience at Teal Farm Pub, Washington.
Key Takeaway
UK restaurant menu pricing formula: Selling Price (net, ex-VAT) = Ingredient Cost ÷ Target Food Cost%. To hit 70% food GP, divide ingredient cost by 30% (0.30). Add VAT at 20% to get the menu price. Example: ingredients cost £4.50, target GP 70% → net price = £4.50 ÷ 0.30 = £15.00 → VAT-inclusive menu price = £18.00. Always calculate GP% against your net (ex-VAT) selling price — calculating against the VAT-inclusive price overstates GP by approximately 17%.
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The UK Restaurant Menu Pricing Formula
Menu pricing in UK restaurants follows a straightforward formula once you understand the relationship between ingredient cost, food cost percentage, and gross profit percentage.
Step 1 — Calculate your net selling price:
Net Selling Price = Ingredient Cost ÷ Target Food Cost%
Step 2 — Add VAT:
Menu Price = Net Selling Price × 1.20
The relationship between food cost% and GP% is direct: if your target food cost is 30%, your target GP is 70%. If your target food cost is 32%, your target GP is 68%.
| Target GP% | Food Cost% | Divide cost by | Example: £4.50 cost | Menu price inc. VAT |
|---|---|---|---|---|
| 70% | 30% | 0.30 | £15.00 net | £18.00 |
| 68% | 32% | 0.32 | £14.06 net | £16.87 |
| 65% | 35% | 0.35 | £12.86 net | £15.43 |
| 75% | 25% | 0.25 | £18.00 net | £21.60 |
UK Restaurant Menu Pricing Targets by Category
| Category | Target GP% | Target Food Cost% | Notes |
|---|---|---|---|
| Food (kitchen) | 65–70% | 30–35% | UK industry benchmark |
| Draught beer/lager | 65–70% | 30–35% | Margin varies by tie arrangements |
| Wine (by glass) | 70–75% | 25–30% | Highest margin category |
| Spirits and cocktails | 70–80% | 20–30% | High margin — price to market |
| Hot drinks | 75–85% | 15–25% | Very high margin — underpriced in many venues |
| Desserts | 70–75% | 25–30% | Often underpriced — low-cost ingredients |
The VAT Trap in Menu Pricing
The most common menu pricing mistake is calculating GP% against the VAT-inclusive menu price. This overstates your GP% by approximately 17% and makes every dish look more profitable than it is.
Example: A burger on the menu at £15.95 inclusive of VAT. Ingredient cost £4.50.
Wrong calculation (against VAT-inclusive price): GP% = (£15.95 – £4.50) ÷ £15.95 = 71.8% — looks great.
Correct calculation (against net price): Net price = £15.95 ÷ 1.20 = £13.29. GP% = (£13.29 – £4.50) ÷ £13.29 = 66.1% — still within target, but 5.7 points lower than the wrong calculation suggested.
If your food cost target is 32% and you calculate against gross, you think you are achieving 32% when your real food cost is 38.4%. At £500,000 net food revenue annually, that 6.4% error is £32,000 of profit disappearing undetected. For a full guide to GP% calculation methodology see our restaurant GP% calculator guide.
How to Price When Ingredient Costs Rise
When a supplier increases ingredient costs, you must recalculate your menu price to maintain your target GP%. Many operators absorb supplier increases by not updating menu prices — they assume customers will notice a price change. The result is a slow erosion of GP% that does not show up in the P&L until the damage is significant.
At Teal Farm we review GP% per dish quarterly using the Restaurant Console Pricing Engine. When a key ingredient goes up — beef, chicken, cooking oil — we recalculate the affected dishes immediately and decide whether to update the price or reduce the portion size. Waiting for month-end to notice the impact is not an option at the margins UK restaurants operate on.
See our restaurant food cost percentage guide for how supplier cost increases feed through to your weekly food cost% and what to do when it rises above target.
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Frequently Asked Questions
How do you calculate menu prices for a UK restaurant?
UK restaurant menu pricing formula: Net Selling Price = Ingredient Cost ÷ Target Food Cost%. To hit 70% GP (30% food cost), divide ingredient cost by 0.30. Then multiply by 1.20 to add 20% VAT for the menu price. Example: ingredients cost £4.50, target GP 70% → net price £15.00 → menu price £18.00.
What is a good GP percentage for restaurant food in the UK?
UK food GP% targets: 65–70% on food, 65–75% on drinks, 63–68% combined. These are industry benchmarks calculated against net (ex-VAT) revenue. If you are below 63% combined GP, your pricing or portion control has a problem. Above 70% combined GP is excellent for a full-service restaurant.
Should I calculate restaurant GP on net or gross price?
Always net (ex-VAT). Calculating GP% against the VAT-inclusive menu price overstates GP by approximately 17% and makes every dish look more profitable than it is. All UK restaurant industry benchmarks — food cost under 32%, GP 63–68% — are calculated against net revenue after VAT is deducted.
How do I update menu prices when ingredient costs rise?
Recalculate immediately using the formula: New Selling Price (net) = New Ingredient Cost ÷ Target Food Cost%. Then multiply by 1.20 for VAT. Do not wait for month-end P&L to see the impact — by then you have already served weeks of under-priced dishes. Review affected dishes as soon as you receive a supplier price change notification.
Which restaurant dishes have the highest GP%?
Hot drinks (75–85% GP), spirits and cocktails (70–80%), desserts (70–75%), and wine by the glass (70–75%) are typically the highest-margin categories. Many operators underprice hot drinks significantly — a coffee with ingredient cost of 30p that sells for £3.00 net has a GP of 90%. Starters and sharing plates often outperform main courses on GP% due to lower ingredient complexity.
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By Shaun McManus | Last Updated: May 2026
Shaun McManus is the licensee of Teal Farm Pub, Washington, Tyne and Wear. He has 15+ years in hospitality management and built the Restaurant Console for his own operation.
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