How café break-even works
Your break-even point is the weekly sales figure where what's left after variable costs exactly pays the fixed costs. Every dollar below it comes out of your pocket. Every dollar above it is profit, less only the costs that move with sales.
For a café, the useful version of the answer isn't dollars. It's customers. Divide weekly break-even by the days you trade and by your average transaction value, and you get the number of people who need to come through the door each day before you earn anything.
A worked example
The calculator opens with a suburban café on $3,500 a week of fixed costs: $1,100 rent, $900 for a salaried manager, $900 for the owner, $350 for power, insurance and software, $150 of equipment lease, and $100 of everything else. Coffee, food and drink run 30% of sales, hourly wages 30% and packaging and card fees 5%, so variable costs are 65% and every dollar of sales leaves 35 cents.
$3,500 ÷ 0.35 = $10,000 a week. Over six days at a $14 average transaction, that's 120 customers a day. On current sales of $11,500, the café makes $525 a week before tax and has a 13% margin of safety. A wet July that knocks a seventh off trade puts it straight into loss.
What counts as fixed and variable in a café
- Fixed: rent and outgoings, a salaried manager, your own wage, insurance, POS and software subscriptions, equipment leases and loan repayments, accountant's fees.
- Variable: beans, milk, food and drink stock, hourly baristas and kitchen staff rostered to trade, takeaway cups and packaging, card and delivery-app fees.
- The grey area: the minimum roster. If you need two people on the floor however quiet it is, those hours behave like a fixed cost. Moving them into fixed costs gives a more honest break-even.
Using break-even before you sign a lease
This is where the number earns its keep. Before committing to a site, put the proposed rent and a realistic roster into the calculator and look at the customers-a-day figure. Then stand outside the site at 8am on a Tuesday and count the foot traffic. If you'd need a third of everyone walking past to buy a coffee, the rent is too high, however good the site looks. Our guide to café lease negotiation covers what to push for.
Loyalty cards and discounts
A buy-nine-get-one-free card is a 10% discount on your most loyal customers. At a 35% contribution margin, those customers need to visit about 40% more often just for the card to break even. It often does work for a café near offices, where it shifts habit from the place next door. It rarely works when most customers are already regulars. The discount box in the calculator shows the exact figure for your numbers.
Mistakes that make break-even look better than it is
- Leaving out your own wage. If you work 50 hours a week in the café and pay yourself nothing, the business isn't breaking even. You're subsidising it.
- Using GST-inclusive sales. Use sales excluding tax. In New Zealand, GST-inclusive takings overstate your real sales by 15%, so you look further above break-even than you are.
- Ignoring seasonality. Work it out for your quietest month, not your average one. That's the month that tests your cash.
- Forgetting the lease repayments on the coffee machine. They're easy to miss and they're fixed.
For the full method, see café break-even analysis. For managing the quiet months, see café cash flow. To lift your average transaction instead of chasing more customers, see how to increase average transaction value.
Frequently asked questions
How do I calculate my café's break-even point?
Break-even sales = fixed costs ÷ (100% − variable cost %). With $3,500 of weekly fixed costs and variable costs of 65% of sales, a café needs $10,000 a week to break even.
How many customers does my café need a day to break even?
Divide weekly break-even sales by your trading days, then by your average transaction value. $10,000 a week over six days at a $14 average transaction is about 120 customers a day.
Are barista wages a fixed or variable cost?
Hourly staff rostered up and down with trade are variable. A salaried manager, and your own wage, are fixed. Most cafés have both; split them rather than putting all wages in one column.
Is a loyalty card worth it for a café?
Only if it brings in extra visits. A buy-nine-get-the-tenth-free card is roughly a 10% discount on those customers. At a 35% contribution margin that needs about 40% more visits from them just to stand still.