A restaurant's break-even point: how much must you sell daily to avoid a loss?
Before opening a restaurant, opening a new branch or accepting a higher rent, ask: how much must I sell not to lose money? The answer is a simple formula needing two figures.
The formula
Break-even sales (in dinars) = monthly fixed costs ÷ contribution margin. Contribution margin = 1 − (variable costs ÷ sales). Fixed costs include rent, fixed salaries, insurance and subscriptions; variable costs mainly food, packaging and delivery commissions.
An illustrative example
Hypothetical figures: fixed costs 6,000 JOD a month and variable costs equal to 40% of sales (60% contribution margin). Monthly break-even = 6,000 ÷ 0.60 = 10,000 JOD. Working 26 days that means about 385 JOD a day before any profit. Each dinar above that adds 0.60 JOD of profit.
How to track it daily
You need your daily sales and your actual — not estimated — food cost. In RAWA the daily sales report and profit and loss give you both figures, so you know every day whether you are above the break-even line. Try it and compare with your numbers.
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What is the most important figure in break-even?
The variable-cost percentage; any rise in it raises the sales you need.
Is rent a fixed cost?
Usually yes, and it is the biggest driver of the break-even point.
Do delivery commissions count?
Yes, as a variable cost tied to sales.
How do I lower my break-even?
By cutting fixed costs or raising contribution margin (pricing, recipes, less waste).