Restaurant Break-Even Analysis — How to Find Your Magic Number

Break-even is the sales figure where your restaurant stops losing money. Every dollar above it is profit. Here's how to calculate it and use it.

The Break-Even Formula

Break-Even Sales = Total Fixed Costs ÷ (1 − Variable Cost %)

Two inputs, one output. Fixed costs are what you pay regardless of sales. Variable cost percentage is the share of every sales dollar consumed by variable expenses. The formula tells you how much you need to sell before what's left over from each sale finally covers all the fixed costs.

What Counts as Fixed vs. Variable

Fixed costs — the bills that don't change with sales

Rent, management salaries, insurance, loan payments, software subscriptions, base utilities, depreciation. These hit whether you sell 100 covers or 500. Add them all up for one month — that's your total fixed cost figure.

Variable costs — the ones that scale with sales

Food cost, hourly labor, credit card processing fees, delivery commissions, takeaway packaging, cleaning supplies that scale with volume. Express these as a percentage of sales. For most restaurants, this is roughly your prime cost (food + labor) plus 3–5% for card fees and other variable overhead.

Example — Casual Dining Restaurant

Monthly Fixed Costs:
Rent: AED 35,000
Manager salaries: AED 18,000
Insurance: AED 2,000
Utilities (base): AED 4,000
Software & subscriptions: AED 1,500
Total Fixed: AED 60,500

Variable Cost % of Sales:
Food cost: 31%
Hourly labor: 22%
Card fees: 2.5%
Packaging & delivery: 3%
Total Variable: 58.5%

Break-Even: 60,500 ÷ (1 − 0.585) = 60,500 ÷ 0.415 = AED 145,783 / month

This restaurant needs to sell roughly AED 145,800 per month — about AED 4,860 per day — before it starts making any profit.

Plug your numbers into the calculator.

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What Moves Your Break-Even Point

Higher rent = higher break-even

This is the biggest fixed-cost lever. A location with AED 10,000 more in monthly rent raises your break-even by roughly AED 24,000 in required sales (at 58.5% variable cost). Before signing a lease, run the break-even to see if the location can realistically generate the sales needed.

Lower variable cost % = lower break-even

Improving your prime cost from 58% to 53% (through better food cost control or tighter scheduling) drops your contribution margin from 42% to 47%. On AED 60,500 of fixed costs, that moves break-even from AED 144,000 to AED 128,700 — a AED 15,300 difference in required sales, from a 5-point improvement in cost control.

Adding a revenue stream = effectively lowering break-even

Catering, private events, delivery, and retail products don't change your fixed costs much but add revenue that contributes to covering them. This is why many restaurants that can't break even on dine-in alone become profitable once they add a meaningful delivery or catering channel.

Daily Break-Even — The Number Your Managers Should Know

Monthly break-even is useful for planning, but a daily number is what actually drives behavior. Divide monthly break-even by the number of trading days to get a daily target. Post it in the kitchen. When the team can see a number they need to hit today, decision-making gets sharper — managers cut a staff member when it's slow, push upsells when they're close, and don't over-order for a quiet Tuesday.

Break-Even for a New Restaurant

Pre-opening break-even analysis is one of the most valuable exercises you can do before committing to a location. Estimate your fixed costs from the lease, buildout financing, and staffing plan. Estimate your variable cost % from your menu costing and labor model. Then ask: can this location realistically generate enough sales to break even within 3–6 months? If the answer isn't a confident yes, the location might not be viable regardless of how good the concept is.