The Break-Even Point (BEP) Formula for Restaurant Business

The break-even point (BEP) refers to a situation in economics where total costs and total revenues are equal, resulting in neither profit nor loss. But what is the purpose of BEP for a business? In this article, let’s dive into a complete overview of its benefits and how to calculate BEP for restaurant businesses!

Benefits of BEP

Essentially, BEP is used to assess the performance and success of a company. It helps businesses evaluate the overall efficiency of all parties involved, including whether the company has reached a production level that generates enough profit to cover operational costs.

Additionally, BEP can determine how much production capacity is left to increase production volume or create new products, and it assists entrepreneurs in projecting changes in profit when product prices fluctuate.

Factors Determining BEP for Restaurant Business

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In the context of the restaurant business, BEP can be understood as the number of customers your restaurant needs to serve in order to make a profit. This figure is based on the average amount of money spent by your restaurant's visitors.

To calculate the break-even point or BEP for your restaurant, you first need to gather the following data:

• Total fixed costs and mixed costs (monthly)

• Total variable costs for a specific month

• Average monthly sales

• Average number of visitors per month

Fixed costs are expenses that do not change regardless of how many customers visit your restaurant. Even if no one dines at your restaurant in a month, these costs remain. Examples of fixed costs include rent, insurance, taxes, monthly wages, permits, and accounting and legal fees.

Mixed costs are expenses that always exist but may vary each month. Examples include phone and internet bills, water, electricity, and gas.

In contrast, variable costs change based on the business's fluctuations. For instance, during busy periods, these costs will be higher, whereas they will drop or stabilize when the restaurant is quiet.

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Examples of variable costs include raw materials for food and beverages, hourly wages for workers, disposable items, packaging for takeout orders, and cleaning supplies.

You can obtain the average monthly sales figure and visitor count from the ESB POS cash register application. This cash register app offers comprehensive and accurate real-time transaction reports, making it easier to review your restaurant's daily performance. ESB POS is also linked with an Order Management System (OMS) that can boost your culinary business profits.

How to Calculate BEP for Restaurant Business

Once you have collected the necessary data, you can calculate your restaurant's BEP using the following formula:

Break-Even Point = Fixed Costs ÷ (Revenue per Visitor - Variable Costs per Visitor)

Revenue per visitor can be obtained by dividing the total revenue received over one month (or another specific time period) by the number of visitors during the same period.

And there you have it—a discussion about the Break-Even Point (BEP), the factors that determine the BEP value for a restaurant, and how to calculate BEP for your restaurant business. Once you have calculated the BEP, you can use this figure as a benchmark to enhance your restaurant's performance and maximize profits.