Here's what I've learned after watching countless restaurants fail: most owners pick locations based on emotion, not math. They fall in love with a space but never calculate if they can actually generate enough revenue to cover the rent. Your fixed costs don't care about your dreams - they demand payment every month.
Calculate your maximum revenue potential
Before assessing rent, figure out your absolute revenue ceiling. This depends on capacity and realistic pricing - not wishful thinking.
💡 Example capacity calculation:
Restaurant with 40 seats, open 6 days per week:
- Lunch: 40 covers × €18 average = €720
- Dinner: 60 covers × €32 average = €1.920
- Per day: €2.640
- Per week: €15.840
Maximum per month: €63.360
Calculate conservatively. You won't hit capacity daily. Most successful places reach 60-80% of maximum potential.
The 30% rent rule
Here's a hospitality golden rule: rent shouldn't exceed 30% of revenue. Above this threshold, profit becomes nearly impossible.
💡 Example rent calculation:
With expected revenue of €40.000 per month:
- Maximum rent: €40.000 × 0.30 = €12.000
- Including service charges and taxes
- Also add gas, water, electricity to this
Total housing costs: max €12.000
Add up all fixed costs
Rent's just the beginning. Calculate every monthly expense that hits regardless of sales volume:
- Rent and service charges
- Gas, water, electricity (fixed portion)
- Insurance (liability, inventory, business damage)
- Subscriptions (POS system, music, software)
- Minimum staff costs (yourself + permanent staff)
- Depreciation (kitchen equipment, furniture)
⚠️ Watch out:
Don't overlook 'hidden' costs like insurance, accountant fees, repairs and equipment replacement. These can easily add €1.000-2.000 monthly.
Calculate your break-even revenue
Your break-even point shows exactly where you stop losing money. Use this formula:
Break-even revenue = Fixed costs / (1 - Variable costs %)
Variable costs typically run 55-65% of revenue (food, beverages, additional staff during peak periods). Most kitchen managers discover too late that underestimating variable costs by just 5% can push break-even up by thousands.
💡 Example break-even calculation:
Fixed costs: €18.000 per month, variable costs: 60%
- Break-even: €18.000 / (1 - 0.60) = €45.000
- You need to generate at least €45.000 in revenue to break even
- Everything above that is profit (before tax)
For €5.000 profit you need €57.500 in revenue
Check the reality of your location
Examine your premises and surroundings with brutal honesty:
- Foot traffic: How many potential customers pass daily?
- Parking: Can guests park without hassle?
- Competition: How many similar concepts operate nearby?
- Target audience: Does your concept match the neighborhood demographics?
A gorgeous space in the wrong area becomes an expensive mistake.
Create a worst-case scenario
Don't plan only for success. What happens if revenue drops 30% below projections?
⚠️ Watch out:
First-year operations often achieve only 60-70% of planned revenue. Ensure you can cover fixed costs during this ramp-up period, or you'll fail before gaining momentum.
How do you check if rent and fixed costs add up? (step by step)
Calculate your maximum capacity
Count your seats, multiply by realistic turnover (lunch 1×, dinner 1.5×), calculate with average bill value. This is your theoretical maximum per day.
Calculate 70% of your maximum as realistic
You won't be full every day. Take 70% of your maximum capacity as realistic monthly revenue. This is what you'll probably achieve in your first year.
Add up all fixed costs
Rent, energy, insurance, subscriptions, minimum staff, depreciation. Everything you must pay regardless of your revenue. These are your true fixed costs.
Check the 30% rule
Divide your total fixed costs by your realistic monthly revenue. If this comes out above 30%, your fixed costs are too high for this location.
Calculate your break-even point
Fixed costs divided by (1 minus variable costs percentage). If this is higher than your realistic revenue, it becomes very difficult to make a profit.
✨ Pro tip
Drive by your potential location during 3 different time periods over 2 weeks and count actual foot traffic. If you see fewer than 200 people per hour during peak times, your revenue projections are probably too optimistic.
Calculate this yourself?
In the KitchenNmbrs app you can do this in just a few clicks. 7 days free, no credit card.
Was this article helpful?
Frequently asked questions
What if my rent exceeds 30% of revenue?
Profitability becomes extremely challenging. You can attempt price increases, boost customer volume, or negotiate rent reductions. Often, relocating proves the most viable solution.
Should service charges and utilities count toward rent costs?
Absolutely. Calculate total occupancy expenses: rent, service charges, utilities, municipal taxes. These combined figures represent your true housing costs.
How can I verify my revenue projections are realistic?
Study comparable nearby businesses, monitor foot traffic patterns, and analyze competitor reviews. Always calculate conservatively - it's better to exceed modest expectations than fail meeting ambitious ones.
Can I start with higher fixed costs and reduce them later?
That's extremely risky. Fixed costs resist reduction due to lease agreements and staffing commitments. Start conservatively and upgrade locations after establishing profitability.
What are typical fixed costs for a small restaurant?
Rent €8.000, utilities €800, insurance €400, software subscriptions €300, core staffing €6.000, equipment depreciation €500. Total approximately €16.000 for 30-40 seat establishments.
How do I factor in seasonal revenue fluctuations?
Calculate monthly averages using your slowest quarter as the baseline. If winter revenue drops 40%, ensure you can still cover fixed costs during those lean months without depleting cash reserves.
📚 Sources consulted
- EU Verordening 852/2004 — Levensmiddelenhygiëne (2004) — Official source
- EU Verordening 853/2004 — Hygiënevoorschriften voor levensmiddelen van dierlijke oorsprong (2004) — Official source
- EU Verordening 1169/2011 — Voedselinformatie aan consumenten (2011) — Official source
- NVWA — Hygiënecode voor de horeca (2024) — Official source
- NVWA — Allergenen in voedsel (2024) — Official source
- Codex Alimentarius — International Food Standards (2024) — Official source
- FSA — Safer food, better business (HACCP) (2024) — Official source
- BVL — Lebensmittelhygiene (HACCP) (2024) — Official source
- Warenwetbesluit Bereiding en behandeling van levensmiddelen (2024) — Official source
- WHO — Foodborne diseases estimates (2024) — Official source
Food Standards Agency (FSA) — https://www.food.gov.uk
The HACCP standards shown in this application are for informational purposes only. KitchenNmbrs does not guarantee that displayed values are current or complete. Always consult the FSA or your local authority for the latest regulations.
Written by
Jeffrey Smit
Founder & CEO of KitchenNmbrs
Jeffrey Smit built KitchenNmbrs from 8 years of hands-on experience as kitchen manager at 1NUL8 Group in Rotterdam. His mission: give every restaurant owner control over food cost.
Selling food? Then you need KitchenNmbrs
Whether you run a restaurant, food truck, catering company, or meal kit business — you need to know what each dish costs. KitchenNmbrs gives you that insight. Start your free trial.
Start free trial →