Break-Even
How Do You Calculate Restaurant Break-Even Sales?
Turn fixed costs and variable-cost assumptions into a monthly sales floor, then translate it into daily sales and covers.
Direct answer
Restaurant break-even sales equal fixed costs divided by the contribution margin ratio. The result is the sales volume needed to cover fixed costs before the restaurant earns profit.
Formula
Contribution margin ratio = (Sales − Variable Costs) ÷ Sales
Break-even sales = Fixed Costs ÷ Contribution Margin Ratio
Break-even sales = Fixed Costs ÷ ((Sales − Variable Costs) ÷ Sales)
Key points
- Break-even sales show the weekly or monthly revenue floor.
- Contribution margin ratio is sales minus variable costs, divided by sales.
- Break-even should be translated into covers, orders, or average daily sales.
What to do next
Start by separating fixed costs from variable costs. Calculate the contribution margin ratio, divide fixed costs by that ratio, and compare the resulting sales floor with actual sales.
- 1Separate fixed costs from variable costs.
- 2Calculate contribution margin ratio.
- 3Divide fixed costs by contribution margin ratio, then compare it with actual sales.
Worked example
Suppose fixed costs are $28,000 per month and variable costs are 58% of sales. The contribution margin ratio is 42%, so break-even sales are $28,000 ÷ 0.42 = $66,667 per month. If sales are spread evenly across a 30-day month, that is about $2,222 per day. At an illustrative $30 average check, the target is about 74 covers per day. Replace the illustrative average check with your own. Break-even is a sales floor, not a guarantee of profit.
Test your own figures
Use the Restaurant Break-Even Calculator to test your own figures. Then compare the result with the Restaurant Profit Margin Calculator and review How to Calculate Food Cost Percentage to inspect a major variable-cost input.