Quick answer
The break-even point is the revenue level where income equals total costs: below it you lose money, above it you profit. You calculate it by dividing fixed costs by the contribution margin percentage (1 minus the variable-cost share). It's the first number any restaurant or bar operator should know by heart, because it tells you exactly how much you must take in to avoid closing the month in the red.
What the break-even point is and why it matters
The break-even point (BEP) is the revenue level at which total income equals total costs. It isn't a business-plan exercise — it's the single most important operating number you have.
A venue that doesn't know its break-even runs blind. Saturday looks great with a full room, but if Monday through Thursday you trade below break-even, the month closes at a loss even with a busy weekend. Knowing the BEP means knowing, every day, whether you're above or below the waterline.
The logic is identical for a restaurant and a bar: the numbers differ (food cost vs pour cost, a different average check), but the formula is the same.
The break-even formula
The base formula is:
BEP = Fixed costs ÷ (1 − % variable costs)
The denominator — 1 − % variable costs — is the contribution margin percentage: the fraction of every euro you take in that's left to cover fixed costs after paying the variable costs of that sale.
You only need two figures:
- Monthly fixed costs — expenses you pay regardless of sales.
- Variable-cost share — expenses that grow in proportion to sales, as a percentage of revenue.
For quick numbers use the restaurant break-even calculator or, if you run a cocktail bar or pub, the bar break-even calculator.
Fixed vs variable costs: the distinction that counts
Getting this classification wrong is the fastest way to a false break-even. The rule is simple: if the item changes when you sell more, it's variable; if it stays the same even with the shutters down, it's fixed.
| Type | Restaurant examples | Bar examples | |---|---|---| | Fixed costs | Rent, base payroll, loan repayment, insurance, accountant, depreciation, POS software | Rent, base payroll, licences, insurance, bar and equipment depreciation | | Variable costs | Food cost (28-35%), beverages, variable utilities, card fees, delivery packaging | Pour cost (18-24%), coffee, ice, fruit, card fees, consumables |
In an average restaurant, variable costs run between 35% and 45% of revenue; in a well-run bar they often stay between 25% and 35% because the margin on drinks is higher. That difference is exactly why a bar's break-even tends to be lower at the same level of fixed costs.
Worked example: a restaurant
Take a restaurant with these numbers.
Monthly fixed costs:
| Item | Amount | |---|---| | Rent | €4,000 | | Payroll (base) | €14,500 | | Loan repayment | €1,200 | | Accountant and insurance | €800 | | Utilities (fixed portion) | €900 | | Depreciation | €600 | | Total | €22,000 |
Variable costs: 40% of revenue (food cost 30% + variable utilities 3% + extra weekend staff 3% + card fees 1% + sundries 3%).
Calculation:
BEP = 22,000 ÷ (1 − 0.40) = 22,000 ÷ 0.60 = €36,667 per month
The restaurant must take in at least €36,667 to cover everything. Every euro above that threshold generates €0.60 of margin, because €0.40 goes to variable costs.
Worked example: a bar
Same formula, different numbers. A bar with a coffee offer and evening cocktails:
Monthly fixed costs:
| Item | Amount | |---|---| | Rent | €2,500 | | Payroll (base) | €6,500 | | Licences, insurance, accountant | €700 | | Utilities (fixed portion) | €500 | | Bar and machine depreciation | €300 | | Total | €10,500 |
Variable costs: 30% of revenue (pour cost and raw materials 26% + card fees 1% + sundries 3%).
BEP = 10,500 ÷ (1 − 0.30) = 10,500 ÷ 0.70 = €15,000 per month
With a typical bar average check of €8, that's 1,875 tickets a month, around 72 a day across 26 days. The bar break-even calculator lets you rerun these numbers with your own data.
From break-even in money to covers (or tickets)
The BEP in money is useful, but the floor thinks in covers. The conversion is immediate:
Covers needed = BEP ÷ average check
Back to the restaurant with a €30 average check:
36,667 ÷ 30 = 1,222 covers a month, i.e. 1,222 ÷ 26 = 47 covers a day.
If the room seats 55, 47 covers on a single seating means 85% occupancy. With two seatings (lunch and dinner) you only need 24 at lunch and 23 at dinner — far more achievable. Now you have a concrete number: if you serve 40 covers a day today, you're seven covers below break-even and you know exactly the gap.
Monthly vs annual break-even
The monthly BEP is the operating reference, but the annual one matters for two reasons.
Seasonality. A seaside venue earns 60% of its year in four months. January's break-even differs from August's if you use seasonal staff. The annual BEP absorbs these swings.
Once-a-year costs. Year-end bonuses, major maintenance, some insurance: ignore them and your monthly break-even is optimistic. Better to calculate fixed costs annually and divide by twelve.
Using the restaurant example: 22,000 × 12 + €8,000 of extra annual costs = €272,000. Annual BEP = 272,000 ÷ 0.60 = €453,333, i.e. €37,778 a month — about €1,100 more than the plain monthly figure.
Five levers to lower break-even
1. Cut fixed costs. With variable costs at 40%, every €1,000 of fixed costs removed lowers the BEP by 1,000 ÷ 0.60 = €1,667. Renegotiate rent, review policies, drop unused software.
2. Improve the contribution margin. If variable costs fall from 40% to 35%, the restaurant's BEP drops from €36,667 to 22,000 ÷ 0.65 = €33,846 — nearly €3,000 less revenue needed. You get there with portion control, supplier negotiation and menu engineering.
3. Raise the average check. It doesn't change the BEP in money, but it cuts the covers needed. At a €36,667 BEP: €28 check → 50 covers/day; €32 → 44; €35 → 40. A glass of wine and a dessert in upselling make the difference.
4. Add revenue with low fixed cost. Catering, aperitivo, brunch, private events: they use the same structure and produce near-pure margin. A €2,000/month catering stream at 45% variable costs adds €1,100 of margin.
5. Optimise opening hours. If Tuesday lunch takes €400 but costs €160 in variables plus €500 of allocated fixed costs, you lose €260 that day. Consider closing for lunch on weak days.
Common mistakes
- Forgetting hidden fixed costs. Accountant, routine maintenance, depreciation, food-safety training, contingencies (2-3% of revenue) are worth €2,000-4,000 a month on their own. A break-even without them is understated by 10-15%.
- Putting food cost among fixed costs. Raw materials are variable by definition. Listing them as fixed inflates the denominator and gives you an unrealistic BEP.
- Using a single dish's margin instead of the average. Break-even works on the overall sales mix, not the most profitable item.
- Calculating it once and forgetting it. Fixed costs change and suppliers raise prices. Recalculate on every fixed-cost change and review variables each quarter.
- Confusing break-even with health. Sitting at break-even means zero profit: no buffer for surprises and nothing to repay the initial investment. The goal is to stay steadily above it.
Related resources
- Restaurant break-even calculator — break-even, covers needed and contribution margin for your restaurant.
- Bar break-even calculator — minimum revenue and tickets needed for a bar or pub.