What is a restaurant break-even point?
Your break-even point is the sales level where your restaurant covers all costs (fixed + variable) with zero profit and zero loss.
How to Calculate Your Restaurant Break-Even Point
Understanding Break-Even Point
Your restaurant's break-even point is the sales level where you cover every cost of running the business - no profit, no loss. Think of it as the line you need to cross before your sales start turning into actual profit. Until you hit break-even, you're effectively "paying to be open" because your costs are higher than what you're bringing in.
In restaurant terms, break-even matters because your costs aren't all the same type. Some costs stay relatively steady whether you sell 50 meals or 500 meals. Those are fixed costs - things like rent, insurance, loan payments, software subscriptions, certain management salaries, and baseline utilities. Then you have variable costs, which rise as sales rise - food and beverage costs, packaging, credit card processing fees, and often parts of hourly labor depending on how your operation is staffed.
Most owners feel break-even in the real world as a pattern - you have a certain level of sales where the business finally "breathes." Below that level, you're stressed because every slow day creates a hole. Above it, you can cover expenses, rebuild cash, and reinvest. That's why break-even is more than a math exercise. It gives you a concrete answer to questions like -
- How much do we need to sell per day to stop losing money?
- How sensitive are we to food cost increases or wage changes?
- If we discount items or run a promo, how much extra volume do we need?
- Are our slow days structurally unprofitable, or just inconsistent?
Break-even can be calculated in different ways depending on what you want to manage. The most common is break-even sales in dollars (monthly, weekly, or daily). But you can also convert it into guests, orders, or average tickets, which makes it easier to coach your team - "We need 120 tickets today at a $28 average check," instead of "We need $3,360."
The 3 Inputs You Need
Before you calculate your restaurant break-even point, you need three inputs. If these are realistic, your break-even number will be useful. If they're sloppy, you'll end up with a "paper break-even" that doesn't match what your bank account is telling you.
1) Fixed Costs (usually monthly) - Fixed costs are expenses that don't move much with sales volume - at least in the short term. Whether you sell $20,000 this month or $80,000, these costs mostly show up anyway. Common restaurant fixed costs include -
- Rent or lease payments
- Insurance (general liability, workers' comp base, etc.)
- Loan payments
- Licenses and permits
- Software subscriptions (POS, scheduling, accounting, loyalty)
- Salaried management or admin payroll (often fixed)
- Baseline utilities and internet
- Accounting, legal, and other professional services
Not every "fixed" cost is perfectly fixed. Some are semi-fixed (utilities, repairs, some salaried overtime). For break-even, you can still treat them as fixed if they're predictable month-to-month - but don't ignore them.
2) Variable Cost Percentage - Variable costs increase as sales increase. In restaurants, the big one is COGS (Cost of Goods Sold) - food and beverage. But don't stop there. Other variable costs often include -
- Credit card processing fees
- Third-party delivery commissions (if applicable)
- Packaging (especially for takeout/delivery)
- Certain supplies that rise with volume
- Hourly labor if staffing scales up and down with sales
To use break-even formulas, you usually convert variable costs into a percentage of sales. Example - if variable costs average 62% of sales, then for every $1.00 you sell, about $0.62 goes to variable expenses.
3) Contribution Margin (the "leftover" portion) - Your contribution margin is what's left from each sales dollar after variable costs - this is the portion that contributes toward paying fixed costs (and then profit once fixed costs are covered).
- Contribution Margin % = 1 - Variable Cost %
- If variable costs are 62%, contribution margin is 38%
This number is the engine behind break-even. The higher your contribution margin, the less sales you need to cover fixed costs. If your contribution margin is thin - because food costs are high, labor is heavy, or delivery fees are crushing - you'll need a lot more sales just to break even.
Once you have these three inputs (fixed costs, variable cost %, contribution margin %), the actual break-even calculation becomes straightforward.
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Step 1. List and Total Your Fixed Costs (Monthly)
Start with fixed costs because they create the "weight" your sales have to carry every month. If you underestimate fixed costs, your break-even point will look lower than reality, and you'll keep wondering why you're still short on cash even when sales seem decent. The easiest way to do this is to pick a time period - monthly is best for most restaurants - and build a simple fixed-cost list you can reuse.
Begin by pulling the last 2-3 months of expenses from your P&L (profit and loss statement) or bank transactions. Then group fixed costs into categories so you're not hunting line-by-line every time.
Common fixed-cost buckets -
1. Occupancy - rent/lease, CAM charges, property taxes (if applicable)
2. Insurance - general liability, workers' comp base, property insurance
3. Salaried payroll - GM salary, admin, bookkeeping, any fixed salaries
4. Subscriptions & services - POS software, scheduling, accounting tools, pest control, linen contracts (if flat), security monitoring
5. Debt & financing - loan payments, equipment leases (the fixed portion)
6. Utilities baseline - internet, phone, alarm system, and the "minimum" portion of gas/electric that exists even during slow periods
7. Professional fees - accounting, legal retainers, HR services (if consistent)
Here's the key - separate "fixed" from "semi-fixed" without overcomplicating it. Semi-fixed costs are expenses that change over time but not directly with each sale - repairs and maintenance, some utilities, smallwares replacement, and certain labor expenses (like management overtime). For break-even, you have two practical options -
Conservative approach - include an average monthly amount for semi-fixed costs in fixed costs (safer).
Lean approach - keep semi-fixed separate, but then you must remember break-even is a baseline, not your full cash need.
Also decide what to do with owner pay. If you need the business to pay you consistently, treat your owner draw or salary like a fixed cost. If you don't, break-even might look better on paper but won't match your personal reality.
At the end of this step, you want one clean number -
Total Monthly Fixed Costs = $____
Once that number is solid, the rest of the break-even math becomes much easier - and more accurate.
Step 2. Calculate Your Variable Cost Percentage
Once you've totaled fixed costs, your next job is to figure out how much of every sales dollar gets "consumed" by costs that rise with volume. That's your variable cost percentage, and it's the number that separates a realistic break-even calculation from a fantasy one.
Start with the biggest and most familiar variable cost -
1) Calculate COGS % - COGS (Cost of Goods Sold) includes food and beverage costs (and often paper/packaging, depending on how you track it). The basic formula is -
COGS % = COGS / Total Sales
Example - If your monthly sales are %60,000 and your COGS is $18,000
COGS % = 18,000 / 60,000 = 0.30 - 30%
If you don't have clean COGS yet (common with new or fast-growing restaurants), use your most recent complete month or an average of the last 2-3 months.
2) Add Other Variable Costs Most Owners Forget - COGS isn't the only variable cost that scales with sales. Depending on your model, you may need to add -
- Credit card processing fees (often roughly 2%-4% of card sales)
- Third-party delivery fees/commissions (can be significant)
- Packaging and disposables (especially for takeout-heavy concepts)
- Sales-based marketing fees (some programs charge based on revenue)
- Spoilage and comps tied to volume (not perfectly variable, but often rises with busy periods)
To include these, convert them into a percentage of sales the same way -
Variable Cost Item % = Item Total / Total Sales
Then add them together -
Total Variable Cost % = COGS % + (Fees % + Packaging % + etc.)
3) What About Labor - Variable or Fixed?
Labor is tricky because some labor is fixed-ish (salaried management), and some scales with volume (hourly staff). For break-even, many owners treat hourly labor as semi-variable. Here are two practical approaches -
Simple approach (recommended) - keep break-even based on COGS + direct variable fees, then use labor targets separately as a weekly control.
More accurate approach - include the portion of hourly labor that truly rises with sales (for example, if your hourly labor averages 22% of sales, include it).
Either way, be consistent. Break-even is most useful when you can update it monthly without turning it into a complicated accounting project.
At the end of this step, you should have one number -
Total Variable Cost % = ____ %
Next, you'll use that to calculate contribution margin - the key input that unlocks break-even sales.
Step 3. Compute Contribution Margin
If fixed costs are the weight your restaurant carries each month, contribution margin is the "muscle" that lifts it. Contribution margin tells you how much of each sales dollar is available to pay fixed costs - after you cover variable costs like food, packaging, and sales-based fees. It's the single most important number in break-even math because break-even isn't really about sales volume - it's about how much money your sales actually contribute once variable costs are removed.
Contribution Margin - The Simple Definition
- Contribution Margin ($) = Sales - Variable Costs
- Contribution Margin (%) = (Sales - Variable Costs) / Sales
- Shortcut. Contribution Margin % = 1 - Variable Cost %
So if your total variable cost percentage is 62%, your contribution margin percentage is -
1 - 0.62 = 0.38 = 38% contribution margin
That means for every $1.00 you sell, you have $0.38 available to cover fixed costs (rent, insurance, subscriptions, salaried payroll, etc.). Once fixed costs are fully covered, that same $0.38 per sales dollar becomes profit - at least in the simplified break-even model.
Many restaurant owners focus on gross profit or food cost alone. Those are important, but they can miss the point if you have heavy delivery fees, high card processing, or labor that scales with volume. Contribution margin forces you to look at the true "leftover" after all variable costs that move with sales - so you're not accidentally treating a busy but low-margin channel as if it's equally profitable.
Contribution margin turns vague operational questions into math you can act on -
- If food costs rise 3%, how much does break-even increase?
- If you run a 10% discount, how much extra sales do you need to cover the same fixed costs?
- If third-party delivery takes a large commission, is that channel actually helping you reach break-even - or pushing it away?
Even small shifts matter. If you improve your contribution margin from 38% to 42%, your break-even sales drop dramatically because every sales dollar contributes more to covering fixed costs.
At the end of this step, lock in this number -
Contribution Margin % = ____%
In the next section, we'll plug your fixed costs and contribution margin into the core formula to calculate your restaurant break-even sales.
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Step 4. Calculate Break-Even Sales
Now that you have your two critical inputs - monthly fixed costs and contribution margin percentage - you can calculate your restaurant's break-even point. This is the moment everything clicks, because the formula is simple -
Break-Even Sales ($) = Fixed Costs / Contribution Margin %
That's it.
If your fixed costs are $24,000 per month and your contribution margin is 40%, your break-even sales are-
24,000 / 0.40 = $60,000 per month
This means your restaurant must generate $60,000 in monthly sales just to cover all costs. At $59,999, you're still losing money. At $60,001, you've officially crossed into profit territory - even if that profit is only a dollar.
Sanity-Check the Result
When you calculate break-even for the first time, pause and ask -
- Does this number feel close to the sales level where we usually "stop bleeding"?
- In months where we felt stable, were sales around this range?
- In months where cash was tight, were sales below this number?
If your break-even is wildly higher or lower than your lived experience, one of your inputs is likely off - most often fixed costs are understated or variable costs are incomplete.
Turn Monthly Break-Even into Operating Targets
A monthly number is useful, but restaurants are run day by day. Convert it into -
Weekly break-even. Monthly / 4.33
Daily break-even. Monthly / number of operating days
Example -
Monthly break-even. $60,000
Weekly. $60,000 / 4.33 = $13,860
Daily (30-day month) - $60,000 / 30 = $2,000 per day
Now break-even becomes operational -
- "We need to average $2,000 per day to stop losing money."
- "A $1,400 Monday means we need stronger Tuesdays and Fridays to recover."
- "If a promo drops average check, we need more volume to hit $2,000."
This is where break-even stops being a finance concept and starts becoming a management tool. You're no longer asking, "Did we have a good day?" You're asking, "Did today move us closer to, or farther from, break-even?"
Step 5. Translate Break-Even into Guests, Tickets, or Orders
A dollar-based break-even is powerful, but most restaurant teams don't think in revenue targets - they think in guests, tickets, and orders. Translating your break-even sales into these operational units makes the number actionable on the floor.
Start with your average check (sometimes called average ticket). The cleanest way to calculate it is-
Average Check = Total Sales / Total Tickets
Use a full month of data if possible. Short windows can skew the number if you had a promo, holiday spike, or unusual mix of large orders.
Once you have your average check -
Break-Even Guests (or Tickets) = Break-Even Sales / Average Check
Example -
- Monthly break-even. $60,000
- Average check. $30
- Break-even tickets. 60,000 / 30 = 2,000 tickets per month
From there -
Weekly. 2,000 / 4.33 = 462 tickets
Daily (30 days). 2,000 / 30 = 67 tickets per day
Now your break-even point sounds like operations, not accounting -
- "We need about 67 tickets per day to cover costs."
- "A 40-ticket Monday means we need 90+ on Friday to balance the week."
- "If average check drops to $27, we need 74 tickets per day instead of 67."
Break-Even by Channel
If you operate across multiple channels - dine-in, takeout, delivery, catering - you can take this one step further. Each channel often has -
- A different average check
- A different contribution margin
Delivery might have a higher ticket but lower margin. Catering might be high-margin but irregular. Dine-in may be your most predictable.
You can allocate your break-even across channels -
- "We need 45 dine-in tickets, 15 takeout orders, and 7 delivery orders per day."
- "Catering covers 12% of fixed costs when it hits - everything else must cover the rest."
This translation does two things -
1. It turns break-even into something your managers and supervisors can coach toward.
2. It exposes where volume assumptions are unrealistic - if your dining room physically can't produce that many tickets, the business model needs adjustment.
Break-even becomes not just a number, but a capacity and strategy check.
How to Use Break-Even to Make Better Decisions
Once you know your break-even point, the real value is how you use it. Break-even is a decision tool - something you can apply to pricing, labor planning, promotions, and cost control without relying on gut feel.
1) Use Break-Even to Pressure-Test Pricing Changes - If you raise prices, your contribution margin often improves (as long as costs don't rise at the same pace). That lowers your break-even sales. If you discount heavily, your contribution margin shrinks and break-even rises - meaning you need more volume just to stay even. Before you run a discount, ask - Will we realistically sell enough extra tickets to make up the margin loss? Break-even helps you answer that in plain math.
2) Use It to Set Sales Targets That Match Staffing Plans - A schedule is basically a bet - you're betting labor dollars that sales will show up. Break-even gives you a baseline to plan against. If your daily break-even is $2,000, then staffing like it's a $1,400 day is risky - you'll likely fall behind. Staffing like it's a $3,200 day without demand is also risky - you'll pay for labor you can't afford. Pair break-even with a weekly sales forecast and you'll see where you need tighter coverage, shorter shifts, or smarter prep.
3) Focus on the Levers That Move Break-Even Fastest - Break-even changes in two ways -
- Lower fixed costs (renegotiate rent/CAM, remove unused subscriptions, refinance expensive debt, adjust salaried structure)
- Improve contribution margin (reduce waste, tighten portions, raise prices strategically, optimize menu mix, reduce delivery dependency, control sales-based fees)
Small changes to contribution margin often move break-even faster than owners expect. A 2-3 point improvement in variable cost % can reduce required sales meaningfully - especially for high-volume concepts.
4) Create a Simple Operating Rhythm - To make this practical, use a lightweight routine -
Monthly - update fixed costs and variable cost % using the most recent month
Weekly - compare actual sales vs weekly break-even target
Daily - track sales and tickets vs your daily break-even pace (even a whiteboard works)
The goal isn't perfect accounting - it's better decisions. When you know your break-even point, you stop arguing with opinions and start managing with numbers. That clarity is what turns "busy" into "profitable."
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Frequently Asked Questions
What counts as fixed costs for a restaurant?
Typically rent, insurance, subscriptions, loan payments, licenses, and salaried/admin payroll - costs that don't change much with sales volume.
What counts as variable costs?
Costs that rise with sales, like COGS (food/beverage), packaging, credit card fees, delivery commissions, and sometimes hourly labor.
What is the contribution margin?
Contribution margin is the portion of sales left after variable costs. It's what pays fixed costs. Higher contribution margin lowers your break-even point.
What's a common mistake owners make when calculating break-even?
Leaving out variable fees (card processing, delivery commissions, packaging) or underestimating fixed costs like subscriptions, insurance, and admin payroll.
