Break even point: the covers you need by Tuesday

On Monday morning, a restaurant owner looks at the week's bookings and wonders whether it will be a good week. She knows the rent, the wages and the loan repayment, roughly. She knows guests spend about forty pounds each. What she does not know is how many guests the week needs before it stops losing money. That number is the break even point, and once she has it, every Monday's bookings tell her something specific: how far the week has to go.

The break even point is the level of trade at which a business covers all its costs and makes neither a profit nor a loss. For a restaurant, it is most useful expressed in covers: the number of guests needed in a week to pay the week's fixed costs. Below it, the week loses money; above it, every extra cover adds profit.

This guide covers how to work out the break even point in covers, how fixed and variable costs feed into it, how to read it by day and by service, what it says about your opening hours and capacity, and how to move it in the right direction. Every venue and figure in it is an example.

A break-even point is where total income equals total costs. Some costs stay the same however busy the week is; others rise with every guest. Break even is the level of trade at which the money left over from each guest, after their own costs, has paid all the fixed costs.

For a restaurant, it answers a practical question: how many guests do we need this week before we start making money? It is one of the most useful numbers an owner can know, and one of the least often worked out.

Break even can be expressed in sales, but covers are often more useful in a restaurant. The team thinks in covers: how many are booked, how many walked in, how many the kitchen can handle. A break even of 330 covers a week means something to everyone; one of 13,200 pounds means something mainly to the accountant.

Covers also connect directly to bookings. Each morning, the booked covers for the week can be set against the break even covers, which shows at a glance how the week is going.

The sum depends on splitting costs into two kinds. Fixed costs stay the same whether the week is busy or quiet: rent, business rates, insurance, salaries, loan repayments, subscriptions. Variable costs rise and fall with trade: food, drink, card fees, packaging and some hourly labour.

Getting the split right is the foundation of the whole sum. Our guide to fixed and variable costs: the split that decides covers how to sort each cost into its bucket.

Start by adding up the week's fixed costs. Take the monthly or annual figures for rent, rates, insurance, salaries, loan repayments, equipment leases, software and other regular costs, and convert them to a weekly amount. Include the costs that come quarterly or annually, such as insurance or licences, as a weekly share.

Be thorough. A figure built on half the fixed costs will look comfortably low and be dangerously wrong. Our guide to restaurant operating costs, listed and ranked lists the costs that are easy to forget.

Next, work out the variable cost of an average cover: the food and drink a typical guest consumes, at cost; the card fee on their payment; and any other cost that comes with each guest, such as takeaway packaging or a share of laundry.

If an average guest spends forty pounds and the food and drink they consume costs about fourteen pounds, with card fees and other variable costs adding about two, the variable cost per cover is about sixteen pounds, or forty per cent of spend.

Labour is the hardest cost to place. Salaried staff are fixed: they are paid whether the week is busy or quiet. Hourly staff are partly variable, because a busier week needs more hours, but partly fixed, because a minimum team is needed to open at all.

A practical approach is to treat the minimum team for each service as fixed and the extra hours added for busy services as variable. Whatever you choose, be consistent, and note the choice, because it changes the result.

Contribution per cover is what each guest leaves behind after their own variable costs: spend per cover minus variable cost per cover. If guests spend forty pounds and the variable cost is sixteen, each cover contributes twenty-four pounds towards the fixed costs.

Contribution is the key number. Every cover's contribution goes first towards paying the fixed costs, and once those are paid, it becomes profit.

Break even in covers is the weekly fixed costs divided by the contribution per cover. If the week's fixed costs are 8,000 pounds and each cover contributes 24, the venue needs about 333 covers a week to break even.

That is the number to know. Below 333 covers, the week loses money; above it, each extra cover adds about 24 pounds of profit. It turns a vague worry about whether the week is good enough into a target the team can see.

Once break even is passed, profit per cover is simply the contribution per cover. In the example, the 334th guest of the week adds about 24 pounds of profit, and so does every guest after that, until extra variable costs, such as additional staff, kick in.

That is why busy weeks are so valuable. A week of 400 covers, 67 above break even, makes around 1,600 pounds of profit; a week of 300 covers, 33 below, loses around 800. The difference between the two is only 100 covers, but it swings the week by 2,400 pounds.

A weekly break even figure can be split across the week, to see what each day needs to contribute. Some days, such as Friday and Saturday, will usually carry more of the fixed costs than others; Monday and Tuesday may barely contribute.

Divide the weekly figure roughly in proportion to each day's usual trade. That gives a daily target, which can be set against each day's bookings. A day that is far below its target early in the week is a signal to act, through an invitation to regulars or a promotion for that night.

By Tuesday, much of a typical week's trade is already visible: the bookings for the weekend are mostly in, and the early-week services have happened. Add the covers already served to the covers booked for the rest of the week, plus the usual walk-ins and late bookings, and you can see whether the week is likely to pass break even.

If the forecast is well short by Tuesday, there is still time to act: an email to regulars about a midweek supper, a word to a nearby office, a push for walk-ins on the weekend. If it is comfortably ahead, the week is on track. Knowing by Tuesday turns the figure from a sum in the accounts into a decision in the week.

The same idea works for a single service. Opening for a quiet Tuesday lunch has its own costs: the staff on shift, the energy, some preparation that would otherwise not be needed. Divide those extra costs by the contribution per cover, and you have the covers that lunch needs to pay for itself.

If opening Tuesday lunch costs 300 pounds in extra staff and energy, and each cover contributes 24 pounds, the lunch needs about 13 covers to break even. If it usually does 30, it is worth opening. If it usually does 8, it costs money every week.

Break even for each service is one of the clearest guides to opening hours. Services that regularly fall below their break even covers lose money every time they open, even if the venue as a whole is profitable. Closing them, or shortening them, can raise the week's profit.

Before closing a service, consider what it does beyond its own covers: regulars who come only at that time, staff who need the hours, the impression of a venue that is always open. If you change your hours, update every listing at once. Our guide to opening hours online: the detail that loses guests covers how.

Capacity utilisation, how full the venue is compared with how full it could be, puts break even in context. If the venue can seat 600 covers a week and needs 333 to break even, it must run at more than half its capacity just to cover its costs.

The lower that share, the safer the venue. A venue that breaks even at a third of capacity has plenty of room to make money; one that breaks even at nine tenths of capacity has almost none, and a quiet week will put it into loss.

If break even is close to the venue's capacity, the business is fragile. It needs almost every seat filled, almost every week, to cover its costs, and any dip, from a quiet season to a closure for repairs, turns into a loss.

That calls for structural changes rather than harder work on the floor: higher contribution per cover, lower fixed costs or more capacity, such as an extra sitting or more covers in the busiest hours. Knowing the number is what makes the problem visible in time.

Break even falls when contribution per cover rises. That can come from higher spend per cover, through prices, the menu mix or drinks; from lower variable costs, through better buying, less waste or lower card fees; or from steering guests towards dishes with a higher margin.

Small changes matter. Raising contribution from 24 to 26 pounds a cover lowers break even in the example from 333 covers to about 308. That is 25 fewer covers needed every week, from a two-pound change. Our guide to gross profit per dish beats food cost percentage covers how dish margins drive contribution.

It also falls when fixed costs fall. Renegotiating a lease, switching energy suppliers, cancelling unused subscriptions or reducing a loan's repayments all lower the covers needed each week.

Fixed costs are often set once and forgotten. Reviewing them each year, line by line, can find savings that lower it permanently, without asking anything more of the team or the guests.

Build the break even point into the restaurant budget. A budget that shows weekly break even alongside the forecast covers makes it clear which weeks will be profitable and which will not, and how much the busy weeks need to make up for the quiet ones.

Planning this way, a quiet January is not a surprise loss but a known gap, covered by the profit from December. Our guide to a restaurant profit and loss you can read covers reading the results afterwards.

Most venues have weeks well below break even, usually in their quiet season. That is normal, as long as the year as a whole is above it. Look at break even week by week through the year, against your seasonal trade, to see how many weeks fall short and by how much.

If the quiet weeks fall far short, plan for them: lower fixed costs in those weeks where possible, fewer services or promotions that raise covers. Our guide to seasonality: planning for the quiet eight weeks covers what to do with them.

Prime cost, the total of food, drink and labour costs, is closely linked to break even, because it includes the largest variable costs and much of the fixed labour. A venue that keeps prime cost under control keeps its contribution per cover healthy, and its break even low.

Watch both. Prime cost, weekly, shows whether the biggest costs are in line; break even shows what that means in covers. Our guide to prime cost: the one number to watch weekly covers the weekly view.

For a new venue, the break even point is one of the most important numbers in the plan. Work it out before opening, from the expected fixed costs, prices and food costs. It shows how many covers the venue will need each week, and whether the room, the menu and the location can realistically deliver them.

A new venue whose break even is near its capacity is taking a big risk. One whose break even point is comfortably below what similar venues nearby achieve has a much better chance.

Update the break even point whenever costs or prices change: a rent review, a new wage rate, a menu price change, a supplier price rise. Each one moves the number, and a figure that is a year out of date can be badly wrong.

A quarterly review is usually enough, with an extra update after any major change. Keep the workings simple, so anyone can see where the number comes from.

A few traps catch many venues. Forgetting irregular costs, such as annual insurance or quarterly bills, which makes fixed costs look lower than they are. Using menu prices instead of actual spend per cover, which overstates contribution. Treating all labour as variable, which makes break even look lower. And forgetting that discounts, comps and waste reduce contribution.

Each trap makes break even look more comfortable than it is. Be conservative: a break even that turns out slightly too high is a pleasant surprise; one that turns out too low is a shock.

Sharing the weekly break even covers with the team can be powerful. A team that knows the venue needs about 330 covers a week, and can see how many are booked, understands why a quiet Tuesday matters and why the busy weekend counts.

Share it in simple terms, as a target rather than a threat, and celebrate the weeks that pass it comfortably. A team that sees the numbers often finds its own ways to help, from suggesting a dessert to filling a late table.

A new menu changes break even, because it changes spend per cover and the cost of each dish. Work out the new contribution per cover before the menu launches, and check what it does to the covers needed each week.

A menu that raises spend but raises food costs even more can increase the covers needed, which is worth knowing before the menu is printed rather than after the first month's figures arrive.

An invented bistro adds up its weekly fixed costs: rent, rates, insurance, salaries, the minimum hourly team for each service, a loan repayment and software, about 8,000 pounds. Guests spend about forty pounds each, and the variable cost per cover, food and drink at cost plus card fees, is about sixteen. Each cover contributes about twenty-four pounds, so the bistro needs about 333 covers a week to break even.

On Tuesday, it has served 70 covers and has 220 booked for the rest of the week; with its usual walk-ins and late bookings, it expects about 350, just above break even. The owner also works out that the Tuesday lunch service costs about 300 pounds to open and averages only 9 covers, well below the 13 it needs. She moves the Tuesday lunch team to a busier Friday lunch, and the week's profit rises.

servearound does not hold your costs: there is no cost or accounts module and no field for a dish's cost, so the fixed and variable costs in this guide come from your own accounts. What it gives the sum is the trade side: the dashboard shows revenue, covers and spend per cover against the previous period, for all venues or one, and reservation analytics show covers by day, by meal period and by day and hour.

Table analytics show utilisation, seatings, revenue per seated hour and when the room fills, by day and hour, which is the capacity side of the sum, and bookings already made for the days ahead show on the reservations screen, so you can see early in the week how far the booked covers are from break even. See Analytics.

The level of trade at which income equals costs, with neither profit nor loss.

Because the team thinks in covers, and covers connect directly to bookings.

Divide weekly fixed costs by contribution per cover, which is spend per cover minus variable cost per cover.

Treat the minimum team as fixed and the extra hours on busy services as variable, consistently.

Checking early in the week whether covers served plus covers booked will pass the break even point, while there is still time to act.

Yes. A service that never reaches its own break even covers loses money each time it opens.

Raise contribution per cover or lower fixed costs.

Quarterly, and after any change to costs or prices.

The break even point tells a restaurant how many covers it needs each week before it starts making money. Add up the weekly fixed costs, work out the contribution per cover, spend per cover minus variable cost per cover, and divide the first by the second. Below that number, the week loses money; above it, every cover adds its contribution as profit.

Split it by day, check it against covers served and booked by Tuesday, and work out the break even covers for each service to judge your opening hours. Set it against capacity utilisation to see how fragile the business is, lower it by raising contribution or cutting fixed costs, build it into the restaurant budget and update it whenever costs or prices change.