The Restaurant Profitability Test is an accurate method to determine the profit potential of a foodservice operation. It’s very simple. Take your annual sales divided by your square footage. This represents your annual sales per square foot.
Although all restaurants are not equal, sales volume is the most reliable measure of a restaurant’s ability to generate profit. The best way to evaluate a restaurant’s profit potential utilizing a sales volume measurement is by calculating sales per square foot.
A Full Service restaurant will need to generate between $150 and $250 per square foot to break even. A Limited Service restaurant will need to generate between $200 and $300 per square foot to break even. Restaurants with sales per square foot less than the low end of these averages will be challenged to avoid an operating loss.