Net profit is the amount remaining after a business has deducted all applicable expenses from its revenue over a defined accounting period. For a restaurant, these expenses may include cost of goods sold, labour, rent, utilities, insurance, marketing, administration, interest, depreciation and taxes, depending on the accounting measure being reported.
Net profit = Total revenue − Total expenses
Net profit margin = Net profit ÷ Net revenue × 100
If a restaurant records $1,000,000 in net revenue and $950,000 in total expenses for the period, net profit is $50,000. Its net profit margin is 5%.
Gross profit is revenue less cost of goods sold. Operating profit deducts operating expenses from gross profit, before certain non-operating items and taxes. Net profit is the final accounting result after all expenses and other applicable items have been included.
Net profit shows whether the restaurant’s total revenue is sufficient to cover its full cost structure. It helps owners evaluate business performance, plan investment and assess whether pricing, sales volume and operating costs are sustainable.
Chef’s tip: Review net profit alongside cash flow. A profitable restaurant can still experience cash shortages because of inventory purchases, debt repayments, capital expenditure or timing differences in receipts and payments.
Key distinction: Net profit is the final accounting result after all expenses; it is not the same as sales, gross profit or cash available in the bank.
This term is one of hundreds covered in depth across OCS courses, learning paths, and 1-on-1 coaching with Chef Eric.
