How to Calculate Your Restaurant's Break-Even Point

Your break-even point tells you exactly how much revenue you need to cover every fixed and variable cost. Here's how to calculate it — and how to use it to make smarter decisions about staffing, hours, and pricing.

Every restaurant has a number — the exact revenue level where you cover all your costs and start generating profit. Below that number, every dollar of revenue is paying down losses. Above it, every dollar is contributing to profit.

Most operators don't know their number. Here's how to find it.

The Formula

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

Where:

Fixed costs are costs that don't change with revenue: rent, insurance, salaried management, debt service, software subscriptions.
Variable costs are costs that scale with revenue: food cost, hourly labor, credit card fees, supplies, packaging.
Variable Cost % is your total variable costs as a percentage of revenue.

A Real Example

Let's say your restaurant has:

Rent + CAM: $8,500/month
Salaried managers: $6,200/month
Insurance, utilities (fixed portion): $2,300/month
Total fixed costs: $17,000/month

And your variable costs run:

Food cost: 32% of revenue
Hourly labor: 28% of revenue
Credit card fees + supplies: 4% of revenue
Total variable cost %: 64%

Break-even = $17,000 ÷ (1 − 0.64) = $17,000 ÷ 0.36 = $47,222/month

That's your number. Below $47,222 in monthly revenue, you're losing money. At $80,000 in revenue, you're generating ($80,000 × 0.36) − $17,000 = $11,800 in operating profit.

Why This Number Changes Everything

Once you know your break-even, a lot of decisions become cleaner:

Hours of operation: Is Sunday brunch actually profitable, or does the staffing cost eat the revenue? Run the math: if Sunday does $4,000 in revenue and variable cost is 64%, you're generating $1,440 in contribution. If your fixed cost allocation for that day is $2,000, you're losing $560 every Sunday you're open.
Catering and events: If an event requires $3,000 in food and labor and pays $5,000, the contribution is $2,000 — which reduces the revenue you need from regular covers that week to hit break-even.
Staffing decisions: Adding a floor manager at $4,500/month raises your break-even by $4,500 ÷ 0.36 = $12,500/month in required revenue. Is that hire going to drive $12,500/month more in revenue? Be honest.

The Common Mistake: Treating All Labor as Variable

Most operators put all labor in the variable bucket. But your salaried GM, kitchen manager, and any fixed-hour staff don't actually scale with revenue in the short term — if you do $20,000 one week versus $30,000 the next, you're paying those people the same either way.

Separating fixed and variable labor gives you a more accurate break-even and reveals how exposed you are on slow weeks.

Break-Even Per Cover

A useful second calculation: divide your break-even revenue by your average check to find the number of covers you need to break even. If your break-even is $47,222 and your average check is $22, you need 2,146 covers per month to cover your costs. That's 71 covers per day for a 30-day month — a concrete, operational target your team can actually track.

OperatorIQ calculates your contribution margin and break-even automatically from your connected financial data, and updates it monthly as your cost structure changes. See the demo →