How to Calculate a Restaurant’s Break-Even Point

How many orders does the restaurant need in a month before the costs we have listed are covered? It is the question behind a lease renewal, a new hire, a menu or price change, a second service. Break-even does not say whether those decisions are good. It says how high the bar is.

You need one period (a month is easiest), the costs of that period sorted into the types below, and an average check if you want orders as well as dollars. You get a number of sales dollars, a number of orders, and a margin of safety if you also know your sales.

Everything here is arithmetic on figures you type. The restaurant in the examples is invented, and none of its figures is an average or a target. For the same method as a tool, see the Restaurant Break-Even Calculator; for the result below the break-even line, the profit and prime cost guide.

Six terms carry the whole method. The right-hand column shows each one in the café of Example 1.

A cost can be a mix of two behaviors, such as a utility bill with a base charge plus usage. Split it: the base goes in fixed costs, the usage in variable costs. Do not force it into one box.

A fictional neighborhood café, one month, invented figures. The three variable costs are all typed as a share of sales; the “extra hourly labor” line is the part of payroll that follows busy days, while the core crew is fixed.

At an average check of $22 the café needs 1,232 orders in the month, about $903.23 of sales on each of 30 open days. Enter the same lines in the Break-Even Calculator (Studio, Break-even tool) and it shows $27,096.77 and 1,232 orders.

Read it as a bar, not a goal. Sales exactly on the bar leave the operating result at $0, with nothing for owner pay beyond what is in the cost lines, nothing for depreciation, interest or taxes, and nothing for loan principal.

The same café, but now the plate cost is typed the way it really behaves: $6.80 of ingredients and packaging per order, plus card fees at 3% of sales and the same $16,800 of fixed costs. Raising the average check from $22 to $24 changes the contribution ratio, because the $6.80 does not grow with the price.

With the cost typed per order, break-even sales fall from $25,419.53 to $24,466.02 and the orders from 1,156 to 1,020. Typed as a percentage of sales, the plate cost would rise with the price, the ratio would not move, and the model would show $25,419.53: the same threshold in dollars, and 1,060 orders only because each order is larger. The difference between $24,466.02 and $25,419.53 is the cost of one wrong choice in the sorting step.

The model keeps the number of orders the same when the price changes. Whether guests keep coming at $24 is a question the arithmetic cannot answer: the Menu Price Calculator’s “raise a price” tool shows how much volume a price increase could lose before it stops paying, with the cost per portion held constant.

Back to Example 1. Suppose you want the month to leave $3,000 after the costs listed. The target adds to the fixed costs: ($16,800 + $3,000) ÷ 62.0% = $31,935.48 of sales, or 1,452 orders at $22.

At $34,000 the operating result is $34,000 × 62.0% − $16,800 = $4,280.00, and the margin of safety is 20.3%: sales could fall by about that share before the result reaches $0, if nothing else changed. At $26,000 the café is below break-even and the margin is negative. “If nothing else changed” is the important part: costs, mix and average check are assumed to stay put.

Four versions of Example 1, changing one thing at a time. Fixed costs move the bar; variable costs change the ratio it is divided by.

A $1,200 rise in rent raises the bar by $1,935.48, more than the $1,200 itself, because each sales dollar only contributes 62.0%: to pay $1,200 more you need $1,200 ÷ 0.62 more in sales. Moving variable costs by three points of sales moves the bar by about $1,250.62 one way and $1,377.80 the other. The effect is not symmetrical, because the ratio is in the denominator.

Suppose a delivery-only channel on a $12.00 check has costs of 45% of sales (platform commission and fees) plus $6.60 per order for ingredients and packaging. The per-order cost is $6.60 ÷ $12.00 = 55% of the check. Variable costs add up to 45% + 55% = 100%: the contribution ratio is zero.

Each sale pays only for itself. No volume of sales covers the fixed costs, so dividing by the ratio has no meaningful answer, and the Break-Even Calculator shows “none” instead of a number. The fix is a price, a cost or a commission, never more volume. If variable costs are above 100% of the check, every extra order loses money.

The number is only useful if it is turned into something you can compare with what happens in the restaurant.

• Turn it into days and orders. $903.23 of sales a day, or about 41 orders on each of 30 open days, is a figure the team can recognize. Compare it with your own order counts for the same period and the same definition of an order.
• See which side is carrying the bar. If fixed costs are a large share of total costs, the bar moves a lot with rent or schedule decisions. If the contribution ratio is thin, small changes in food cost or fees move it a lot. Example 1 and the scenario table show both.
• Check that the room can serve the orders. A break-even that needs more covers than your tables can seat is not a plan. The Table Capacity Calculator estimates the covers a service could serve from your own tables and times.
• Check how payroll was sorted. Pay that does not follow sales behaves like a fixed cost; the Labor Cost Calculator separates gross wages, employer costs and overtime before you type them.
• Update it when a cost, a price or the mix of what you sell changes. A break-even point built on last year’s invoices describes last year.

• It counts only the costs you list, and only as you sort them. It does not find forgotten costs.
• It is an operating threshold, not cash flow. Loan principal, equipment purchases, owner draws, inventory and the timing of payments are not in it.
• It assumes each cost behaves the same at every sales level: a rent step, a second shift or a volume discount are not modeled.
• A price change moves the average check with the same number of orders. It does not model how guests react.
• It covers one period and one average check. Several channels with different checks and costs need separate treatment (the Break-Even Studio has a Channels tool).
• It is an estimate from the figures you enter, not tax, legal or accounting advice. For your own books, ask your accountant which costs belong in which line.

The method is standard cost-volume arithmetic, written with the definitions the Break-Even Calculator uses: fixed costs, percentage costs, costs per order, contribution ratio, margin of safety and orders rounded up. The restaurant, the cost lines and the amounts are invented for teaching; they are not data from a real restaurant and not benchmarks.

Every result in the examples was recomputed with independent exact arithmetic and compared with the Break-Even engine on the same inputs. This guide cites no external statistics and states no industry percentage, because none is needed to explain the method and none would apply to every restaurant. Rules about what you may deduct or how to report costs depend on your situation: ask your accountant or the relevant tax authority.

Related: the Restaurant Profit and Prime Cost Guide for the result below the break-even line, and the Food Cost Guide for the plate cost that feeds Example 2.