Restaurant Break-Even Analysis: How to Calculate and Use It

You know your restaurant is busy. You know money is coming in. But are you actually making a profit, or just covering costs?

That’s the question break-even analysis answers. It tells you exactly how much revenue you need before a single dollar hits your pocket as profit. Below, we’ll walk through the formula, show you how to calculate your own break-even point, and cover practical ways to use that number to make smarter decisions about pricing, staffing, and growth.

What is break-even analysis for restaurants?

A restaurant’s break-even point is the amount of revenue where total sales exactly cover all fixed and variable costs. At this point, you’re not losing money, but you’re not making profit either. It’s the line between red and black on your P&L.

Every dollar you bring in before hitting break-even goes toward paying bills. Every dollar after that is profit. Knowing this number tells you exactly how many covers you need on a slow Tuesday to keep the lights on, and how many you need to actually put money in your pocket.

Break-even analysis isn’t just a one-time calculation for your business plan. It’s a tool for setting menu prices, planning staffing levels, and deciding whether a second location makes financial sense.

Fixed costs vs. variable costs in restaurants

Before you can calculate your break-even point, you need to separate your expenses into two categories. The formula depends on getting this right.

Fixed costs

Fixed costs stay the same whether you serve 50 guests or 500. Your landlord doesn’t care if you had a slow week.

Common fixed costs include:

• Rent or mortgage payments
• Insurance premiums
• Equipment leases
• Salaried manager wages
• Loan payments
• Software subscriptions
• Property taxes

Variable costs

Variable costs rise and fall with your sales. The more customers you serve, the higher the bill.

• Food and beverage costs
• Hourly staff wages
• Credit card processing fees
• Takeout packaging
• Cleaning supplies
• Linens and laundry

If you serve twice as many covers, you’ll use roughly twice as much food and schedule more labor hours.

Mixed costs

Some expenses don’t fit neatly into either category. Utilities, for instance, have a base charge (fixed) plus usage fees that increase when you’re busier (variable). For break-even purposes, you can either split the cost or assign it to whichever category makes up the larger portion.

The break-even point formula

Here’s the formula:

Break-Even Point (in customers) = Fixed Costs ÷ (Average Revenue Per Customer − Variable Cost Per Customer)

Each piece breaks down like this:

• Fixed costs: Your total monthly fixed expenses added together
• Average revenue per customer: Your average check size (total revenue ÷ total covers)
• Variable cost per customer: What it costs to serve each guest (food cost per cover + allocated labor per cover)

The bottom part of that equation is called your contribution margin. It’s the amount each customer contributes toward covering your fixed costs and, eventually, profit. A higher contribution margin means you reach break-even faster.

How to calculate your restaurant break-even point

The math isn’t complicated, but gathering accurate numbers takes some work.

1. Add up your fixed costs

Pull your P&L statement or accounting records and total every expense that stays constant month to month. Include rent, insurance, loan payments, salaried wages, and any subscriptions or leases. Be thorough here. Missing a $500 monthly expense throws off your entire calculation.

2. Calculate your variable cost per customer

Start with your food cost percentage. If your food cost runs 30% and your average check is $40, that’s $12 in food cost per guest.

Then estimate labor cost per cover. If you spend $3,000 on hourly wages during a week when you serve 600 customers, that’s $5 per cover in labor. Add food cost per cover plus labor cost per cover, then include any other variable expenses like credit card fees (typically 2-3% of the check).

3. Determine your average revenue per customer

Your POS system likely tracks this already. Look for “average check” or “average ticket.” If you don’t have that data, divide your total monthly revenue by the number of customers served.

4. Apply the break-even formula

Plug your numbers into the formula. If your monthly fixed costs are $25,000, your average check is $45, and your variable cost per customer is $20, the math looks like this:

$25,000 ÷ ($45 − $20) = $25,000 ÷ $25 = 1,000 customers

You need 1,000 customers per month to break even.

5. Convert to daily and monthly targets

Now make that number actionable. If you’re open 26 days a month, you need about 39 customers per day just to cover costs (but of course, account for slow days and busy days). Anything above that is profit.

Break-even point in revenue dollars

You can also express your break-even point as a dollar figure instead of a customer count — handy for checking your POS totals at the end of a shift.

Start by figuring out what percentage of each dollar of revenue is left after variable costs. This is your contribution margin ratio. In our example, the contribution margin is $25 and the average check is $45, so: $25 ÷ $45 = 55.6%. That means for every dollar that comes in, 55.6 cents goes toward covering fixed costs.

From there, divide your fixed costs by that percentage: $25,000 ÷ 0.556 = $44,964 in monthly revenue to break even. Split across 26 open days, that’s roughly $1,730 in daily sales before you’re turning a profit.

As a gut-check: 1,000 customers × $45 average check = $45,000 — right in line with the revenue figure above.

Break-even point calculator example

Here’s a sample scenario for a full-service restaurant:

Fixed Cost	Monthly Amount
Rent	$8,000
Insurance	$1,200
Salaried wages	$6,500
Equipment leases	$1,800
Loan payments	$2,500
Software/subscriptions	$500
Total fixed costs	$20,500

Variable Cost	Amount
Average check size	$42
Food cost per customer (32%)	$13.44
Labor cost per customer	$6.00
Credit card fees (2.5%)	$1.05
Total variable cost per customer	$20.49

Now the calculation:

$20,500 ÷ ($42 − $20.49) = $20,500 ÷ $21.51 = 953 customers

In this case, this restaurant needs 953 customers per month, or an average of about 37 per day if open 26 days, to break even. Customer 954 is where profit begins.

Tip: Online break-even calculators can speed this up, but running the numbers manually at least once helps you understand what’s actually driving your costs.

How to use break-even analysis in your restaurant

Knowing your break-even point is useful. Using it to make better decisions is where the real value lies.

Set menu prices that cover your costs

If your contribution margin is too thin, you’ll need an unrealistic number of customers to break even. Run the break-even calculation before finalizing prices on a new menu. If a dish has a 40% food cost instead of your target 30%, it’s dragging down your contribution margin and making profitability harder to reach.

Make smarter staffing and scheduling decisions

Your break-even number tells you how many covers you need. Your reservation book and historical data tell you how many you’ll likely get.

On a Tuesday when you’re projecting 25 covers but need 37 to break even, you know you’re operating at a loss that day. Schedule lean. On Saturday, when you’re projecting 80 covers, staff up. Those extra 43 customers above break-even are pure profit territory.

Tracking labor costs against projected sales becomes easier with scheduling software. Tools like 7shifts show your labor spend in real time as you build the schedule, so you can see whether you’re staffing for profit or loss before the week even starts.

Evaluate new location viability

Before signing a lease on location number two, run a break-even analysis with that location’s projected costs. If the new location’s break-even point requires 1,400 customers monthly but you’re projecting 1,200, the math doesn’t work. Better to know that before you’re locked into a five-year lease.

Plan for seasonal revenue fluctuations

Your break-even point doesn’t change much month to month, but your ability to hit it does. January might bring half the traffic of December.

Calculate how many customers you typically serve during slow months. If that number falls below break-even, you have two choices: cut costs during slow periods or build cash reserves during busy months to cover the gap.

How to lower your restaurant break-even point

A lower break-even point means you reach profitability faster and have more cushion during slow periods. There are three ways to get there.

Reduce your fixed costs

Every dollar you cut from fixed costs is one less dollar you need to earn before making profit.

• Lease renegotiation: Especially if you’ve been a reliable tenant for years
• Insurance shopping: Get quotes annually instead of auto-renewing
• Equipment financing: Refinancing at lower rates reduces monthly payments
• Subscription audits: Cancel tools you’re not actively using

Even small reductions add up. Cutting $1,000 from monthly fixed costs means you need roughly 40-50 fewer customers to break even, depending on your contribution margin.

Control your variable costs

Tighter variable cost control increases your contribution margin, which lowers break-even.

On the food side, focus on portion consistency, inventory tracking, and menu engineering. On the labor side, schedule to demand rather than worst-case scenarios, reduce overtime, and cross-train staff so fewer people stand around during slow periods.

Increase your average check size

Higher revenue per customer means a bigger contribution margin without adding variable costs proportionally.

Train servers on upselling. “The brussels sprouts are incredible with that steak” adds $9 to the check. Dessert and coffee add another $12. That’s $21 more contribution margin from the same customer. Menu design matters too. Strategic placement of high-margin items, appetizer pairings, and drink suggestions all nudge the average check upward.

Turn break-even analysis into daily profit

Break-even is your baseline, not your goal. Once you know the number, the real work is staying above it consistently.

Track your daily covers against your break-even target. Celebrate the days you crush it. Dig into the days you miss it. Was it a staffing issue, a slow night, or something you can fix?

The restaurants that thrive aren’t the ones with the lowest costs or the highest prices. They’re the ones that know their numbers and make decisions accordingly.

Ready to get better visibility into your labor costs? Tools like 7shifts help you monitor labor spend in real time, making it easier to stay on the right side of your break-even point. Start a free trial

Also watch: What should your restaurant labor cost be?

FAQs about restaurant break-even analysis

What is a good break-even point for a restaurant?

There’s no universal “good” number. It depends entirely on your concept, location, and cost structure. A fine-dining spot with $50 average checks and high fixed costs will have a different break-even than a fast-casual place with $15 tickets and lower overhead. The goal is reaching break-even as early in the month as possible so the remaining days generate profit.

How often should restaurant owners recalculate their break-even point?

Recalculate whenever your costs change significantly. A rent increase, minimum wage hike, new loan payment, or major menu price change all affect the formula. At minimum, review it quarterly.

What is the difference between break-even point and profit margin?

Break-even point is the sales level where revenue exactly equals costs. Zero profit, zero loss. Profit margin measures how much of each revenue dollar you keep as profit after all expenses. You hit break-even first, then everything above that contributes to your profit margin.

Can break-even analysis help with seasonal restaurant planning?

Yes. Calculate your break-even point, then compare it to historical customer counts for each month. If January typically brings 800 customers but you need 950 to break even, you know you’ll operate at a loss that month. Plan accordingly by cutting costs, running promotions to drive traffic, or building cash reserves during busy months.