Find the Annual Sales Number Where Your Store Stops Covering Itself

You are looking at a lease, a food truck, or a small shop, and you need to know whether the sales level can cover the bills. Find the annual sales number where your store stops covering itself by dividing fixed costs by contribution per sale, then multiplying by average sale price. That gives you a break-even revenue level you can compare to actual sales.

Papa John's disclosed a plan to shut down 300 low-performing U.S. restaurants before the end of 2027. Roughly 200 of the planned closures would take place in 2026. The targeted stores are mostly franchise-owned, more than a decade old, and have average annual sales below $600,000. A location can look busy and still fail to cover its fixed costs.

• List fixed costs for one period.
• Calculate contribution per sale.
• Divide fixed costs by contribution per sale to get break-even units.
• Multiply break-even units by average sale price to get break-even revenue.
• Compare break-even revenue to actual annual sales.

Fixed costs set the floor

List your fixed costs for one month. The total should not move when you sell one more item. Include rent, regular payroll, insurance, software, loan payments, property taxes, and regular maintenance. Leave out costs that rise with sales, such as supplies, credit card fees, hourly overtime, and commissions.

Pull one month of bank statements and mark every recurring charge that would still appear if you sold nothing. When unsure, ask whether the invoice would arrive if the store closed for a week. If yes, treat it as fixed for the worksheet.

The common mistake is to call every expense fixed. If the cost rises when you sell more, it is variable. A clean fixed-cost list is the only starting point that will not make your break-even number too low.

A fixed-cost total is only useful when it is monthly or annual, not a mixed set of bills. Write the period next to the number.

Contribution margin pays the fixed costs

Calculate contribution per sale. You need one dollar amount that shows how much each sale adds after paying the costs tied to that sale. Subtract average variable cost from average sale price. If a kiosk sells a drink and its variable costs are lower, the difference is contribution.

Average sale price comes from total sales divided by total transactions. Average variable cost comes from the costs that attach to each sale. Without data, start with one week of receipts and average them. The result should be a number you can defend.

Repeat the calculation for your real menu, service, or product mix. For several items, use an average that reflects how often each item sells. That amount is what one average sale contributes toward fixed costs.

A break-even point exists only when contribution is positive. Each sale must add money before fixed costs can be covered.

Break-even units turn costs into a sales target

Divide fixed costs by contribution per sale to get break-even units. That is the number of sales you need in the chosen period to cover fixed costs.

Round the result up if you need whole sales. A store cannot sell a fraction of a drink, so use the next whole number.

Use the same period for both numbers. Monthly fixed costs go with monthly contribution. Annual fixed costs go with annual contribution. Keep the period label visible on the worksheet.

The annual test is the real decision

Multiply break-even units by average sale price to get break-even revenue. For monthly numbers, multiply monthly break-even revenue by 12 to get the annual test.

Compare that number to actual annual sales. Actual sales above break-even revenue mean the location covers its fixed costs and contributes to profit. Actual sales below it mean the location is not covering itself, even if it feels busy.

Without a full year, use the last 12 months or a typical month times 12. The comparison should be actual sales against break-even revenue, not against rent or profit.

Update the number when rent, wages, prices, or product mix change. Recalculate before you make the next decision, especially before a landlord or investor asks for a number.