How break-even works
Some costs stay the same however busy you are: rent, salaries, most of the electricity bill. Others grow with every sale: ingredients, packaging, card fees. From each ₹100 you sell, what's left after the variable costs is what pays the fixed costs.
Break-even sales = fixed costs ÷ the share of each sale you keep. With ₹5 lakh of fixed costs and 38% variable costs, you keep ₹62 of every ₹100, so you need about ₹8.06 lakh of sales a month. Divide by days open and your average spend, and you get the covers you need each day.
Three levers that move break-even
- Average spend. A starter, a drink or a dessert on more tables lowers the covers you need more than almost anything else. Suggest add-ons at the right moment.
- Food cost. Two points off food cost on ₹8 lakh of sales is ₹16,000 a month straight to profit. Use the food cost calculator on your best sellers.
- Fixed costs. Rent is hard to change after you sign, so run this calculator before you sign a lease, not after.
Planning a new outlet?
Run three versions: a slow month, a normal month and a great month. If the slow month still covers your fixed costs, or comes close, the plan is safer. Remember the months before you open, when you pay rent and salaries with no sales.
Questions
What is a cover?
One guest served. A table of four is four covers. For takeaway and delivery, use orders instead of covers and your average order value as the spend.
Should I include my own salary?
Yes, if you'd pay a manager to do your job. Otherwise the restaurant can look profitable while you work for free.
Do I include GST in sales?
No. Use spend before GST, because GST you collect goes to the government.
