Guide contents
Break-even is the sales level where a restaurant’s contribution margin exactly covers its fixed costs. Below it, the model reports an operating loss. Above it, each additional dirham contributes to operating profit at the contribution margin ratio.
Keep these three formulas
- Contribution margin ratio = (sales − variable costs) ÷ sales.
- Break-even sales in MAD = fixed costs ÷ contribution margin ratio.
- Daily break-even covers = break-even sales ÷ average check ÷ operating days.
01 · The questionAt what sales level does operating profit equal zero?
Cost-volume-profit analysis groups costs by what happens when sales rise or fall. Each sale first pays its variable costs. What remains, the contribution margin, absorbs fixed costs. Break-even arrives when accumulated contribution equals the period’s fixed costs.
Always fix the period. Monthly costs produce a monthly threshold. If you plan by week, convert rent, subscriptions and fixed payroll to that basis too. Combining an annual expense, a monthly ratio and daily sales gives a number with no usable unit.
For a new project, compare this threshold with premises capacity and opening capital. The Morocco restaurant opening guide connects those assumptions to the lease, fit-out, cash reserve and service rehearsal.
02 · ClassificationA cost is fixed or variable relative to a period and volume.
Rent, software subscriptions, insurance and guaranteed monthly salaries are generally fixed in the short run. Ingredients, packaging, platform commissions and payment fees move with sales. Utilities and hourly labour can be mixed: a base exists with no guests, while another part rises with activity.
| Family | Documented example | Treatment |
|---|---|---|
| Fixed | Rent 30,000 · base payroll 55,000 · admin and subscriptions 15,000 MAD | 100,000 MAD/month |
| Variable | Ingredients 30% · variable labour 8% · payment, packaging and delivery 4% | 42% of sales |
| Mixed | Energy, overtime and maintenance that respond in steps | Split base and variable parts |
This classification is the model’s most important assumption. A wage is not automatically fixed or variable; the answer depends on contract, schedule and horizon. Record the rule and keep the evidence behind it.
03 · FormulaDivide fixed costs by what every sales dirham leaves behind.
At a 42% variable-cost rate, the contribution margin ratio is 58%: 1 − 0.42 = 0.58. In this model, each sales dirham leaves 0.58 MAD to pay fixed costs and then operating profit.
The calculation is 100,000 ÷ 0.58 = 172,413.79 MAD. Check it backwards: 172,413.79 × 58% = 100,000 MAD of contribution, exactly equal to fixed costs. Operating profit is zero.
Break-even is not fixed costs divided by net margin. It uses the contribution margin ratio.Calculation control · Kiwi Guides
04 · Operating translationFrom 172,414 MAD per month to 78 covers per day.
At an 85 MAD average check, the restaurant needs 172,413.79 ÷ 85 = 2,028.4 equivalent covers in the month. Across 26 operating days, that is 78.0 covers per day. Round a volume target up.
At 210,000 MAD of actual sales, margin of safety is 210,000 − 172,413.79 = 37,586.21 MAD, or 17.9% of sales. Modelled operating profit is 210,000 × 58% − 100,000 = 21,800 MAD.
A 30,000 MAD target profit requires more than break-even: (100,000 + 30,000) ÷ 0.58 = 224,137.93 MAD. Break-even answers “how do we avoid a loss?” Target income answers “how much do we want to earn?”
Test your assumptions.
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Without JavaScript: fixed costs ÷ (1 − variable-cost rate), then divide by average check and operating days.
05 · LeversTest one assumption at a time before acting.
A higher average check reduces required covers only if demand and sales mix survive. Lower food cost improves contribution only if it does not shift cost into waste, labour or quality. Another operating day spreads the target but can add variable and step-fixed costs.
- Recalculate after lasting rent, payroll or subscription changes.
- Update the variable rate from a full period, not the best weekend.
- Test price, menu mix, supplier cost, schedule and operating days separately.
- Compare break-even with actual sales and available cash.
- Keep an expected and actual version every month.
06 · LimitsThe model assumes a reasonably stable mix and cost behaviour.
A restaurant sells many products. If guests shift from high-contribution dishes to lower ones, the overall ratio changes and break-even moves. The relationship is not perfectly linear: suppliers use price tiers, a second service needs a team, and seat capacity sets a ceiling.
Operating break-even does not replace a cash-flow plan. Loan principal, equipment purchases, VAT, tax, collection timing and owner drawings need separate treatment. Use this guide to understand the mechanism, then reconcile it with the actual accounts.
07 · Common questionsWhat to settle before sharing the target.
Is the manager’s salary a fixed cost?
If it is paid regardless of sales, it is generally fixed in a monthly model. If part varies with revenue, split the components and confirm treatment with your accountant.
Is food cost the only variable cost?
No. Include packaging, commissions, payment fees and labour that genuinely scales with activity. Omitting them inflates contribution and understates break-even.
Why can accounting profit stay negative above the threshold?
The mix or costs may have changed, or the model may omit an expense, depreciation, financing item or tax. Reconcile every assumption against the income statement.
Sources and methodSources and method
The formulas come from the references below. The MAD figures are worked Kiwi examples, not market averages.