Restaurant break-even analysis: formula and worked example

A restaurant breaks even when its contribution, meaning revenue minus the costs that rise with sales, covers its fixed costs. The formula is break-even revenue = fixed costs ÷ contribution margin %. Divide that by your average ticket and operating days and you get the number that matters on the floor: customers per day needed to break even. This guide works through the calculation, then shows the second break-even that lenders look at: the point where the business stops consuming cash.

Step 1: Split costs into fixed and variable

Variable costs move with sales:

• food and beverage cost (as a % of revenue);
• marketing, if you budget it as a % of revenue;
• card processing fees and delivery-platform commissions, if any.

Fixed costs stay roughly the same whether you serve 80 or 180 customers a day:

• rent;
• salaried and rota staff, including payroll taxes and benefits;
• utilities, insurance, software, accounting;
• loan interest.

Some costs are in between: extra staff on busy days, for example. For a first pass, treat the core rota as fixed and add hours as a separate step.

Step 2: Contribution margin

Contribution margin % = 100% − variable costs as a % of revenue.

If food and beverage cost is 32% and marketing is 3%, the contribution margin is 65%. Every $1 of sales leaves 65 cents to pay rent, staff and everything else.

Step 3: Break-even revenue and customers per day

Illustrative inputs only; these are not benchmarks.

Break-even revenue = $23,000 ÷ 65% = $35,385 a month.

With an average ticket of $6.40 and 30 operating days, that is $35,385 ÷ ($6.40 × 30) = about 184 customers a day.

Now compare that with your estimate of traffic at maturity. If you expect 150 customers a day, this concept loses money every month, even when it is fully ramped up. That is exactly what a break-even analysis is for: finding it on paper, before the lease is signed.

Step 4: Pull the levers

The same formula shows which change helps most. From the example:

Ticket and labour usually move break-even more than shaving food cost. But each change has to be believable: a higher ticket needs a menu and a customer base that support it.

Step 5: The ramp-up and the months below break-even

New sites rarely open at mature traffic. If you open at 60% of full traffic and take six months to get there, the first months will be below break-even even if the mature month is comfortably above it. Add up the losses in those months: that is part of the cash you need on day one, on top of fit-out and equipment.

Step 6: Cash break-even, the one lenders care about

Profit break-even ignores three things that use cash:

1. Loan principal. Interest is a cost in the P&L; repaying principal is not, but it still leaves the bank account.
2. Capital spending. The fit-out is depreciated in the P&L over years, but it is paid for up front.
3. Working capital. Stock on the shelves and supplier payment terms shift when cash moves.

A business can be past profit break-even and still running down its cash. A lender asks a simpler question: from which month does the business generate enough cash to cover its repayments, and how deep is the cash dip before then? Answering that needs a monthly cash flow statement and a balance sheet, not just a P&L.

Doing this in a model instead of on a napkin

The napkin version is fine for a first look. Before you commit money, put it in a model where:

• every input sits in its own labelled cell;
• revenue is built from customers per day × average ticket × operating days, with a traffic ramp;
• payroll is built from roles and salaries, with taxes and benefits as a separate input;
• the monthly P&L shows the month EBITDA turns positive;
• the monthly cash flow shows the lowest cash point and when it occurs;
• a low / base / high switch shows how fragile break-even is.

StartupModel's café and restaurant model is built exactly this way. Light ($149) gives you the inputs, a monthly P&L and the scenario switch. That's enough to see when each scenario turns profitable. Full ($349) adds the cash flow statement, balance sheet, loan schedule and working capital: what you need for the cash break-even and for a lender.

Every model comes with a Checks sheet. Before release, every scenario and year is recomputed independently outside Excel and must match the workbook within $1.

Sample

Download the sample café model (.xlsx). Open the Monthly sheet, find the month EBITDA turns positive, then switch the scenario on the Dashboard and watch it move.

Common mistakes

• Leaving payroll taxes and benefits out of fixed costs. Break-even looks lower than it is.
• Using the menu price as the average ticket. Use the basket you actually expect.
• One break-even number for every scenario. In the low case it is higher, and that's the number to plan around.
• Stopping at profit break-even. A lender will ask about cash.

Build my restaurant model — from $149 · Restaurant pro forma guide · Financial projections for a bank loan