Restaurant break-even point: how to calculate it (with an example)
· 7 min read
Your break-even point is the number of guests (covers) you need to serve before the business stops losing money. It is the most useful number you can know when you open, when you are deciding whether to stay open on a quiet day, or when costs go up. Here is how to work it out.
Step 1: split your costs into two kinds
- Fixed costs stay roughly the same whether you serve 10 guests or 300: rent, salaried staff, insurance, loan repayments, software, utilities standing charges.
- Variable costs rise with every guest: food and drink ingredients, packaging, card fees, delivery commissions, and hourly staff if you schedule them to match demand.
Be honest about wages. If you pay the same team every week regardless of how busy it is, treat those wages as fixed.
Step 2: work out what each cover contributes
Take your average spend per guest (your average check) and subtract the variable costs of serving that guest. What is left is the contribution per cover: the money that goes towards your fixed costs.
| Line | Amount |
|---|---|
| Average check per guest | $22.00 |
| Food and drink cost (30%) | $6.60 |
| Card fees (3%) | $0.66 |
| Contribution per cover | $14.74 |
Step 3: divide fixed costs by contribution
Break-even covers per month = fixed costs per month ÷ contribution per cover. With fixed costs of $24,000 a month:
- 24,000 ÷ 14.74 = 1,628.2, so you need 1,629 covers a month.
- Open every day (30 days): 1,629 ÷ 30 = 54.3, so about 55 covers a day.
- Open six days a week (26 days): 1,629 ÷ 26 = 62.7, so about 63 covers a day.
Every cover above that line contributes $14.74 of profit. Every cover below it is $14.74 of loss.
How the answer moves
Small changes to price and food cost move break-even a lot, which is why pricing matters so much:
| Average check | Food cost | Contribution | Covers per month |
|---|---|---|---|
| $20.00 | 30% | $13.40 | 1,792 |
| $22.00 | 30% | $14.74 | 1,629 |
| $22.00 | 28% | $15.18 | 1,582 |
| $24.00 | 30% | $16.08 | 1,493 |
Raising the average check from $22 to $24 means needing 136 fewer guests a month to break even. Lowering food cost by two points saves 47 covers. Both are usually easier than finding new customers. See how to price a menu item and how to calculate food cost percentage.
Use it to make decisions
- Quiet days: if opening on Monday adds extra staff and energy costs, compare them with the contribution Monday's covers bring in. Opening is only worth it if contribution beats the extra costs.
- Rent and big purchases: divide the new monthly cost by contribution per cover to see how many extra guests it needs. A $1,500 a month increase at $14.74 per cover needs about 102 more covers a month.
- Delivery: commissions are a variable cost. Work out contribution per delivery order separately, because it is often much lower than for a guest in your dining room.