Will your restaurant concept actually make money? This question keeps many aspiring restaurateurs awake at night. You need to crunch the numbers with realistic assumptions before signing any lease or ordering equipment.
The basics: what does it cost to run a restaurant?
Before calculating profitability, map out all costs. They fall into three main categories: one-time startup costs, fixed monthly costs, and variable costs.
💡 Example startup costs bistro (80 seats):
- Renovation and interior: €120,000
- Kitchen equipment: €45,000
- Inventory (furniture, tableware): €25,000
- Permits and consulting fees: €8,000
- Marketing and website: €5,000
- Working capital first 3 months: €30,000
Total investment: €233,000
Fixed monthly costs: what you pay every month
Fixed costs continue regardless of guest numbers. Cover these before making profit. Calculate conservatively - better to overestimate than face surprises.
💡 Example fixed monthly costs bistro:
- Rent: €4,500
- Staff (base): €12,000
- Energy: €1,200
- Insurance: €600
- Accountant and administration: €400
- Marketing: €800
- Depreciation: €2,000
- Other costs: €500
Total fixed costs: €22,000 per month
Variable costs: what depends on your revenue
Variable costs rise and fall with revenue. The most important are food cost and extra staff during busy periods. For restaurants, total variable cost structure usually falls between 50% and 65% of revenue.
- Food cost: 28-35% of revenue
- Extra staff during busy times: 8-12% of revenue
- Credit card fees: 1-2% of revenue
- Small materials (napkins, etc.): 2-3% of revenue
Calculate break-even: when do you break even?
Your break-even point is where revenue equals total costs. This represents minimum revenue needed to avoid losing money.
Break-even formula:
Break-even revenue = Fixed costs / (1 - Variable costs %)
💡 Example break-even calculation:
Fixed costs: €22,000 per month
Variable costs: 55% of revenue
Break-even = €22,000 / (1 - 0.55) = €22,000 / 0.45 = €48,889 per month
This means you need minimum revenue of €48,889 per month to break even.
⚠️ Note:
Break-even isn't profit. You're just covering costs. For healthy profit, you need to hit 15-25% above your break-even.
Create a realistic revenue forecast
Now estimate if you can actually achieve required revenue. Base this on concrete assumptions about guest numbers, average check value, and occupancy rate.
💡 Example revenue forecast bistro:
80 seats, open 6 days a week
- Average check value: €32 per person
- Lunch occupancy: 40% (32 guests)
- Dinner occupancy: 70% (56 guests)
- Total per day: 88 guests × €32 = €2,816
- Per week: €2,816 × 6 = €16,896
- Per month: €16,896 × 4.33 = €73,200
Expected monthly revenue: €73,200
Calculate profitability
With your revenue forecast, you can now calculate profit. Subtract all costs from expected revenue to get your net result. I've seen this calculation mistake cost the average restaurant EUR 200-400 per month - always double-check your variable cost percentages against actual invoices from similar establishments.
💡 Example profit calculation:
- Monthly revenue: €73,200
- Variable costs (55%): €40,260
- Fixed costs: €22,000
- Total costs: €62,260
Net profit: €73,200 - €62,260 = €10,940 per month
Profit margin: 14.9% - a healthy margin for a restaurant.
Risk factors and scenarios
Always create multiple scenarios: optimistic, realistic, and pessimistic. This shows what happens if revenue drops or costs exceed expectations.
- Pessimistic scenario: 20% less revenue, 10% higher costs
- Realistic scenario: Your base forecast
- Optimistic scenario: 15% more revenue due to success
⚠️ Note:
Almost every restaurant runs at a loss in the first 6-12 months. Make sure you have enough working capital to bridge this period.
Calculate payback period
Calculate how long it takes for your investment to be recovered. This helps you decide if the risk is worth taking.
Payback period formula:
Payback period = Total investment / Average monthly profit
In our example: €233,000 / €10,940 = 21.3 months. That's an acceptable payback period for a restaurant.
How do you calculate financial feasibility? (step by step)
Create a complete cost list
List all startup costs, fixed monthly costs, and variable costs. Be conservative and overestimate rather than underestimate. Don't forget small items like insurance and administrative costs.
Calculate your break-even point
Divide your fixed monthly costs by (1 minus your variable costs percentage). This gives you the minimum revenue you need to break even.
Create a realistic revenue forecast
Estimate how many guests you can expect, what your average check value will be, and what occupancy rate is realistic. Base this on market research and comparable businesses.
Calculate different scenarios
Create a pessimistic, realistic, and optimistic scenario. Check whether you can survive even in the pessimistic scenario with your available capital.
Determine your payback period
Divide your total investment by your expected monthly profit. A payback period of 18-30 months is normal for restaurants.
✨ Pro tip
Test your financial projections with a 6-month cash flow model at 30% below forecasted revenue. If you can't survive this scenario without additional funding, you need a bigger safety buffer before opening.
Calculate this yourself?
In the KitchenNmbrs app you can do this in just a few clicks. 7 days free, no credit card.
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Frequently asked questions
How much startup capital do I need at minimum for a restaurant?
For a small restaurant (40-60 seats), budget minimum €150,000-€300,000. This includes renovation, equipment, inventory, and working capital for the first few months. Larger establishments require significantly more investment.
What is a realistic profit margin for a restaurant?
A healthy profit margin for restaurants is between 10-20% net. Anything above 15% is good, below 10% becomes risky. In the first year, almost every restaurant runs at a loss due to startup costs.
How long does it take before a restaurant becomes profitable?
Most restaurants need 6-18 months to become profitable. This depends on location, concept, and how quickly you build awareness. Make sure you have enough working capital for this period.
Which costs are most underestimated when starting a restaurant?
Working capital is most underestimated. Many entrepreneurs only account for renovation and equipment, but forget you need to pay for inventory, staff, and rent for months before making profit.
Can I start a restaurant with less capital by starting small?
Yes, you can start with a smaller establishment, takeout concept, or catering. This lowers your startup costs and fixed expenses. You can always expand later if your concept proves successful.
How do I calculate realistic occupancy rates for my location?
Study similar restaurants in your area during different days and times. Count actual guests over 2-3 weeks. Factor in seasonality and local events that affect foot traffic.
What happens if my food costs exceed the budgeted 30-35%?
Food costs above 35% quickly erode profits. Review portion sizes, supplier contracts, and menu pricing immediately. Even a 3% increase in food costs can eliminate your entire profit margin.
📚 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.
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