What it is
It is the minimum revenue at which the restaurant neither makes nor loses money: it covers all its costs and the result is zero. Below it, you lose money every month.
The formula
Break-even = fixed costs ÷ (1 − variable cost %)
Fixed costs are the ones you pay whether you open or not: rent, staff, utilities, insurance, accountant. The main variable cost is food and drink: the more you sell, the more you buy.
A step-by-step example
| Rent | €6,500 |
| Staff | €24,000 |
| Utilities and other fixed costs | €8,500 |
| Fixed costs per month | €39,000 |
| Cost of goods (food cost) | 3% |
| Break-even: 39,000 ÷ 0.70 | €55,714 a month |
Turn it into dining-room occupancy
A revenue figure means little until you turn it into full tables. First work out the most you could sell with the place full:
60 seats × 1.4 turns × 2 services × 26 days × €28 average spend = €122,304 a month
Break-even occupancy = 55,714 ÷ 122,304 = .%. You need to fill almost half the restaurant, on average all year round, just to avoid losing money.
What is reasonable?
Above 65% average break-even occupancy, the project is very demanding. Above 80%, any slow month leaves you in the red.
If it comes out too high
- Negotiate the rent before signing: it is the only cost you won't be able to change later.
- Review the average spend against your menu and local prices.
- Adjust the food cost with proper dish costings.
- Size your team by time slot, not by gut feeling.