Question 1

What are fixed vs. variable costs?

Accepted Answer

Fixed Costs are expenses that don't change regardless of how many orders you sell, like rent, salaries, and insurance. Variable Costs are expenses that change in direct proportion to your sales volume, such as food ingredients, packaging, and delivery commissions.

Question 2

How do I calculate my 'Average Variable Cost Per Order'?

Accepted Answer

For each order, you need to sum up all the costs that are directly tied to it. This includes the cost of the food (COGS), the cost of all packaging materials, and any per-order fees like delivery commissions and payment processing fees.

Question 3

Why is break-even analysis important for a virtual restaurant?

Accepted Answer

It tells you the minimum sales you need to achieve to avoid losing money. It's a critical first target for any new business and helps you set realistic sales goals, make informed pricing decisions, and manage your costs effectively.

Question 4

How can I lower my break-even point?

Accepted Answer

You can lower your break-even point in three main ways: 1) Reduce your fixed costs (e.g., find a cheaper kitchen space), 2) Reduce your variable costs per order (e.g., find cheaper suppliers), or 3) Increase your average order value without increasing variable costs proportionally (e.g., through upselling drinks).

Question 5

What is a 'Contribution Margin'?

Accepted Answer

The Contribution Margin is the revenue left over from an order after subtracting the variable costs. It's the amount of money that 'contributes' to covering your fixed costs. A higher contribution margin means you reach your break-even point faster with each sale.

Virtual Restaurant Break-Even Analysis

Results

Understanding Break-Even Analysis

Frequently Asked Questions

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