Restaurant Break Even Point Explained
Calculate your restaurant break even point step by step, with fixed and variable costs, a worked example and what to do when sales do not reach it.
5 min read
On this page
Key takeaways
- Break even sales equal fixed costs divided by the share of each sale left after variable costs.
- Fixed costs are the bills you pay even on a quiet day; variable costs move with sales, such as food and packaging.
- Work out break even per month, per week and per day, so you can see it against real sales.
- Staff cost is semi variable: treat the core team as fixed and extra hours as variable.
In short: your break even point is the sales you need to cover all your costs. Divide your fixed costs by the share of each pound or dollar of sales that is left after variable costs, then compare the result with your real sales per month, week and day.
About 8 minutes to read. General information. All numbers are made up for illustration; use your own.
Most owners know their rent and roughly what they sell on a good Saturday. Fewer know the exact sales at which the month stops losing money. That number turns a gut feeling into a target, and it tells you quickly whether a new site, a lower price or a longer opening day makes sense.
The idea in one sentence
Every sale pays for the ingredients and packaging that go into it. What is left, the contribution, pays the fixed costs. When contribution has paid all fixed costs, you are at break even, and every sale after that adds to profit.
Step 1: List your fixed costs
Fixed costs are the bills that arrive whether you serve 20 guests or 200.
- Rent or the mortgage, service charge and business rates.
- Core staff wages, including the manager and a minimum team.
- Insurance. See restaurant insurance.
- Utilities that do not vary much, such as standing charges.
- Software, licences and accountant fees.
- Loan payments and leases.
- Marketing you commit to each month.
Add them up per month.
Step 2: List your variable costs
Variable costs rise and fall with sales.
- Food and drink: your food cost percentage.
- Packaging for takeaway and delivery.
- Card payment fees. See card payment fees.
- Platform commission on delivery orders.
- Extra staff hours and overtime in busy weeks.
- Cleaning supplies and consumables.
Express them as a percentage of sales, using your recent real numbers. If you do not have them yet, use your plan.
Step 3: Work out the contribution margin
Contribution margin = 1 minus total variable costs as a share of sales.
Step 4: Calculate break even sales
Break even sales = fixed costs divided by contribution margin.
Step 5: Turn it into guests and orders
Divide break even sales by your average spend.
If 67 guests a day sounds easy on weekends and impossible on Tuesdays, you can see where to focus.
Check the weekly and daily picture
Seasonality, opening days and quiet weeks matter. Make a simple table of expected sales by day, check which days you are above or below your daily break even, and see where the month is carried.
| Day | Expected sales | Daily break even | Result |
|---|---|---|---|
| Monday | closed | ||
| Tuesday | 900 | 1,333 | below |
| Friday | 2,600 | 1,333 | above |
| Saturday | 3,400 | 1,333 | above |
If a day is always below, test whether closing it, cutting hours or changing the offer saves more than it loses. See labour cost and rota.
Staff cost is semi variable
Split it in two. The core team you need to open the doors is fixed. Extra shifts for busy days are variable. When you build a rota from sales forecasts, you shrink the fixed part and reduce the risk of a quiet week.
What to do when you are below break even
There are only three levers.
- Raise sales. More guests, more orders, a higher average spend. See menu engineering, upselling without pushing and loyalty programmes.
- Raise the contribution margin. Review prices, recipes, waste and supplier prices; move to an ordering channel with lower fees. See stop paying delivery app commission.
- Cut fixed costs. Renegotiate rent, rationalise staff, shorten opening hours, cancel tools you do not use.
Work out the effect of each before you act, using the same formula.
Break even for a new site, channel or product
Use the same method for any decision.
- New location: add its rent, wages and extras to the fixed costs and its own variable costs; see concept and location and startup costs.
- Delivery: add driver costs, packaging and commission; see takeaway and delivery profit and ghost kitchen economics.
- A new brand or service: use the extra fixed costs and the contribution it brings.
Use real numbers, then check them
Break even is only as good as its inputs. Update it with real sales and costs every month. DineHarbor's reports show sales comparisons, top products and busy hours, and the Manager copilot can answer supported questions about your own sales in plain words. Use weekly numbers to keep the habit, and a budget to set the targets.
A short checklist
- Add up fixed costs per month.
- Express variable costs as a percentage of sales.
- Work out the contribution margin.
- Divide fixed costs by the contribution margin.
- Convert to weekly, daily and guests or orders.
- Compare with real sales.
- Pick a lever and test it.
Want your numbers in one place? Start the 30 day free trial with no card needed.
Questions and answers
What is a break even point?
The level of sales at which your total income equals your total costs, so you make neither a profit nor a loss.
What is the break even formula?
Break even sales equal fixed costs divided by the contribution margin, where the contribution margin is the share of each sale left after variable costs.
Is labour a fixed or variable cost?
Both. A salaried manager and a minimum team are fixed in practice, while extra shifts and overtime vary with trade. Split them in your model.
How often should I recalculate break even?
Whenever rent, wages, prices or supplier costs change, and at least once a quarter. Also recalculate when you add a new channel such as delivery.
What if I am below break even?
Look at three levers: raise sales, raise the contribution on each sale, or cut fixed costs. Our article lists practical actions for each.
See it in DineHarbor
About the author
Editorial team
The DineHarbor team writes this blog for restaurant owners and managers. Every article is checked against the product before it is published, so what we describe is what the software does.
All articles by DineHarbor team