Break-even is the level of sales where the restaurant covers every cost and makes no profit. Turned into covers per day, it becomes a number the whole team understands. Work it out for each month, compare it with the covers you expect, and the gap tells you how much room you have.
The break-even formula
Split your costs into two groups. Food and drink cost and card fees rise and fall with sales. Labour, rent and the other fixed costs are paid whatever you sell. With a rota set in advance, labour sits in the second group for planning.
Break-even sales = (labour + fixed costs) ÷ (1 − food & drink cost % − card fees %)
Break-even covers per day = break-even sales ÷ average spend ÷ days open
Use sales and average spend net of VAT. VAT only passes through the till on its way to the tax office.
Why month by month
Rent and most fixed costs stay flat through the year. Days open, average spend and labour move. A short month spreads the same rent over fewer days, so each day has to carry more of it. February is short. The landlord does not notice.
A worked example
Our sample bistro runs a food and drink cost of 30% and card fees of 1.5%, so every euro of sales leaves 68.5 cents for labour and fixed costs. Fixed costs cover rent of €6,300 a month, utilities, insurance, marketing, repairs, accounting, loan repayments and other costs. Here are six months from its budget.
| Month | Labour + fixed | Break-even sales | Days open | Average spend | Break-even covers/day | Budget covers/day | Headroom |
|---|---|---|---|---|---|---|---|
| January | €26,800 | €39,124 | 26 | €26.00 | 57.9 | 55 | −2.9 Below |
| February | €26,800 | €39,124 | 24 | €26.00 | 62.7 | 58 | −4.7 Below |
| March | €27,100 | €39,562 | 27 | €26.00 | 56.4 | 62 | +5.6 OK |
| July | €30,200 | €44,088 | 27 | €27.50 | 59.4 | 85 | +25.6 OK |
| November | €26,700 | €38,978 | 25 | €26.50 | 58.8 | 58 | −0.8 Below |
| December | €28,800 | €42,044 | 27 | €30.00 | 51.9 | 70 | +18.1 OK |
January and February have the same costs, yet February needs 62.7 covers a day, the highest of the year, because it has two fewer days open. Both months plan fewer covers than break-even, and both show a budgeted loss. November misses by less than one cover a day. December has the lowest break-even of the year, 51.9 covers, thanks to a €30.00 average spend over the festive season.
Across the year, the busy months carry the quiet ones. The budget shows sales of €590,541 and an operating profit of €66,521, or 11.3% of sales, with three months below break-even.
Headroom: the number to watch
Headroom is budgeted covers per day minus break-even covers per day. When it is small, one wet fortnight or a road closure turns the month into a loss. A practical rule: fewer than five covers a day of headroom counts as tight. March, at 5.6, is only just clear.
Check the plan against actual results every month. To the end of September, the bistro took €447,500 against a budget of €448,193, almost exactly on plan. Operating profit was €49,640 against €52,012 budgeted, €2,372 behind. Labour ran at 35.1% of sales against 34.6% in the year's budget, and food and drink at 30.7% against 30%. Small slips on cost add up even when the sales arrive on time.
How to raise the headroom
- More covers in the weak months: set menus, private events, local partnerships.
- Higher average spend: a starter, a dessert or a second drink per table raises sales without extra guests.
- Lower food and drink cost %: every point saved leaves more of each euro for fixed costs, and lowers break-even sales.
- Shorter hours in the quietest months: only where the labour and energy saved outweigh the sales lost.
- Fixed costs: review energy, insurance and service contracts once a year.
Plan the year in one sheet
The Annual Budget & Break-Even Planner builds each month's sales from days open, covers per day and average spend, then deducts food and drink cost, labour, eight fixed cost lines and card fees to give operating profit. For every month it shows break-even sales, break-even covers per day and the headroom, marked OK, Tight or Below. An Actual tab takes the monthly figures from your accounts and marks each month On plan or Below plan, and the summary charts budget against actual sales. It works in Excel, Google Sheets and LibreOffice.
Related
- Read: What Labour Cost % Should a Café or Restaurant Run At?
- Read: Restaurant Cash Flow: Why Profitable Restaurants Run Out of Cash
- Also useful: Labour Cost & Rota Planner, plan the hours behind the labour line in your budget
Every template in Restaurant Notes is in the Complete Restaurant Collection: 25 tools in one download.