Profitability cases come back to one equation: profit = revenue - costs. Break it down one more level and most questions answer themselves.
- Revenue = price × volume.
- Costs = fixed costs + variable cost per unit × volume. Rent and salaried staff are fixed; ingredients and card fees grow with each sale.
- Contribution margin = price - variable cost per unit. It’s what each sale adds toward the fixed costs.
- Breakeven volume = fixed costs / contribution margin.
- Payback = upfront investment / yearly profit.
When a price changes, work out the new margin per unit and the new volume, then multiply. Don't apply the price change to profit directly: when margins are thin, a 10% price rise can double profit.