A friend of mine runs a gelato shop in Surrey. Over the bank holiday weekend I went to visit him, and we spent some time going through his numbers.
He charges £3.99 per scoop. Customers complain about it regularly. They look at a cup of gelato and think it's just milk, cream, sugar and flavouring. None of those things cost much on their own. What they're not seeing is everything else that has to happen before the scoop lands in the cone.
His rent is £12,500 a year. Business rates add another £4,000. His electricity bill runs to £15,000 a year, driven largely by the refrigeration units and freezers keeping the gelato at the right temperature. That's £31,500 before a single member of staff clocks in.
His turnover is somewhere between £280,000 and £300,000 a year. Decent numbers on paper. His wage bill runs at 35% of revenue, which is actually on the better end for hospitality. A lot of food businesses are sitting closer to 40%.
So we broke down what happens to that £3.99 once a customer hands it over.
VAT takes £0.80 straight away. He doesn't keep that. It goes to HMRC.
Rent, rates and electricity account for roughly £0.40 per scoop when spread across his annual sales volume.
Wages take £1.40.
The gelato itself costs around £0.60 to £0.80, depending on the flavour and ingredients. The cone adds another £0.19.
That leaves £0.39 per scoop.
Corporation tax at 20% takes £0.08 of that. What remains has to service the debts he took on to fit out the shop, buy the equipment, pay his accountant, and cover the various bits of software a business like his needs to run.
He's losing around £80,000 a year at the moment. That figure doesn't include paying himself a wage for running the place seven days a week.
None of this is unusual. It's just how the numbers work in food retail, and most customers have no idea.
What the business actually needs to survive
Let's make that concrete. At £0.39 profit per scoop before tax and debt repayment, he needs to sell a lot of ice cream to make the numbers work.
His fixed costs, rent, rates, electricity, come to £31,500 a year. That's roughly £606 a week just to keep the lights on and the doors open, before he's sold a single scoop. At £0.39 margin per scoop, he needs to sell around 1,550 scoops a week just to cover those three costs alone. That's 220 scoops a day, seven days a week.
Then wages. At 35% of revenue on £290,000 turnover, that's around £101,500 a year in staff costs. Add that to fixed costs and he needs his entire revenue just to cover staff and premises. The gelato, the cones, the packaging, the card machine fees, the insurance, the accountant, all of that has to come out of what's left.
On a good summer Saturday he might do £2,000 to £4,000. That sounds healthy. But those days carry the quiet ones. A wet Tuesday in February might bring in £300. The annual average is what matters, and the annual average is brutal.
His average transactional value sits at around £14. That means most customers are buying for two or three people at once, which is typical for an ice cream shop. He needs roughly 20,700 transactions a year to hit £290,000 in revenue. Spread across 365 days, that's around 57 transactions a day on average. On a July bank holiday he might do ten times that. In January he might do a tenth of it.
The seasonality is the killer. The costs don't go away in winter. The rent doesn't pause. The rates don't pause. The freezers keep running whether there are customers or not.
What can actually be done about it
The VAT problem is real and we'll come back to it. But there are things within a business owner's control that make a meaningful difference, and most food businesses underuse them.
The first is average transactional value. At £14, he's doing reasonably well, customers are buying for the table rather than just themselves. But there's usually room to push that further. A loyalty scheme that rewards a free scoop after a certain number of visits brings people back. A second visit that might not have happened adds another £14. The maths on repeat customers compounds quickly when your margins are this tight.
The second is the off-season. An ice cream shop in winter feels like a lost cause but it doesn't have to be. Hot chocolate, warm waffles, seasonal specials, anything that gives the existing customer base a reason to come back in November. If he has 500 loyal customers on a database and can send them a message when he launches a winter menu, some of those people will come in. That's revenue that would otherwise not exist. Most ice cream shops have no way to reach their customers once summer ends because they never collected any contact details in the first place.
The third is cost control. At 35% wages, he's doing better than most. But food costs are the other variable worth watching closely. At 60p to 80p per portion, gelato is not cheap to make. Flavours that use expensive ingredients but don't sell in volume are a drain. A tight menu of high-margin, high-volume flavours will always outperform a wide menu with slow lines sitting in the freezer.
The fourth takes more thought: the business model itself. You know going in that seasonality is baked into an ice cream business. Summer is crucial. Winter is what breaks you. But you have two assets sitting largely idle during those quiet months. Your staff's knowledge and skill, and your premises.
Ice cream making courses are a natural fit. Run them during January and February when the shop would otherwise be quiet. The customer database you've built over summer becomes the marketing list. Send the offer out in November, into December, when people are thinking about January plans and looking for something different to do. It costs almost nothing to promote and the margin on a course is far better than the margin on a scoop.
A more significant move is to shift the business model for winter entirely. A coffee shop or bakery operates during exactly the months an ice cream shop struggles. Busier when it's cold, complementary to the existing setup, and the equipment overlap is manageable. The reverse works too. If you run a coffee shop or café and find summer quieter than you'd like, a gelato freezer outside can change that completely. Sacrifice an outdoor table, sell directly off the street, and you're capturing the passing trade that summer brings. Check with your local authority first. They can be more helpful than people expect, particularly if you phone rather than email.
None of these things fix the fundamental problem, which is that running a food business in the UK in 2026 is genuinely hard. But they're the levers that are actually in reach.
The VAT problem
The UK charges 20% VAT on food sold in hospitality. Other countries have taken a different view.
Ireland currently charges 13.5% for hospitality and is dropping that to 9% on 1 July. France, Spain and Italy charge 10%. Germany charges 7%.
If the UK rate dropped to 10%, that £0.80 VAT on a £3.99 scoop becomes £0.36. The extra £0.44 per scoop stays in the business. On 20,700 annual transactions, that's over £9,000 a year. Not a fortune, but it's the difference between a business that's losing money and one that isn't.
Gloucester-raised celebrity chef Tom Kerridge has been running a campaign called Vat's The Problem, pushing for the UK rate to be cut to 10% for hospitality businesses. He has a petition you can sign at vatstheproblem.co.uk.
There's also a campaign group called Hospitality Together running on Instagram, which you can find at @hospitality.together.
Whether the government will act on any of this is another question. But the next time you're standing at a counter thinking the price seems steep, it's worth knowing where the money actually goes. The person behind the till isn't pocketing £3.99 every time you buy a scoop of ice cream. They're keeping about 30p of it. Then working out how to make that add up to a living.
