![]() ![]() Variable costs are your expenses that vary in proportion to the amount of menu items you sell. These costs don’t fluctuate from month to month. Your total fixed costs are your expenses that have to be paid, no matter what your sales. To perform a break-even analysis, the first numbers you need to collect are your fixed and variable costs. What is the difference between fixed and variable costs? Your break-even point calculation relies on accurate accounting of your expenses and information from your POS system about guest check averages. The amount of revenue needed depends on the sum of your total fixed and variable expenses over a certain period of time. Your break-even point demonstrates how many people you need to serve in order for your restaurant to make money, based on how much money the average guest spends. What is the break-even point for a restaurant? Understanding your break-even point, you may make the decision to close temporarily to avoid losing more money on your variable costs. As discussed below, your restaurant business has some costs that are fixed, to be paid no matter what, and some costs that are variable. If you are currently unable to hit your break-even point with your restaurant sales, this means your restaurant is losing money by staying in business. When You Should Consider Closing Temporarily Consider offering a takeout menu that simultaneously allows you to slim down your inventory and minimize your prime costs. If you are doing delivery only, you will likely need to adjust your menu offerings anyway, to pivot toward foods that keep well during delivery transit. Consider reducing your food costs by limiting the number of menu items in a way that allows you to streamline your inventory. ![]() If you are able to still reach your break-even point or make a profit, you may want to adapt to the decrease in demand by adjusting your menu offerings. If your state or municipality is allowing restaurants to be open, whether that’s for delivery only or full service, you still are probably experiencing a slow-down in business. How to Determine If You Should Trim Menu Offerings When you know this metric, you are better able to determine at which point it makes sense to cut costs, or at which point you need to reconsider your options. Calculating your restaurant break-even point will give you an idea of what revenue is needed for your business to be profitable. Information about your key restaurant operations can help you navigate your business through these uncertain times, while still providing for your staff and customers. Understanding your break-even analysis at this critical juncture can help you assess risk and make the most well-informed decisions you can. However, there will undoubtedly be an impact on all businesses, including all owners, managers, servers, chefs, delivery drivers, and more in the food business. With a constantly-changing understanding of the public health ramifications of COVID-19, no one can say for sure how restaurants are going to be affected. apart), modifying your menu to serve takeout, or closing temporarily. If your state allows dine-in, or perhaps delivery only, you are working to make critical decisions about staying open, changing your dining options (for instance, only seating customers 6 ft. Regulations and public advisories for restaurants during the coronavirus pandemic range widely throughout the country. ![]() Deciding on making restaurant operation changes during the coronavirus pandemic Essentially, your break-even point is what sales you need for a certain period of time to not lose money, or “break even.” This is a financial calculation that can help you make critical staffing decisions as well as devise operational plans for your business.īreak-even point formulas may seem complicated guesswork, but if you know a few key metrics about your expenses and average guest spend, calculating your restaurant break-even point can be a simple and powerful tool. Especially in uncertain times, an important factor in decisions about how to operate your restaurant is your break-even point. ![]()
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