Guides
How to Derive Ghost Kitchen Break-Even and Contribution per Order for Owner-Operators
Ghost kitchen formulas for contribution per order and break-even, turned into per-peak-hour targets and commission tier sensitivity, from your own numbers.
What to take away
- Break-even for a delivery kitchen is fixed cost divided by contribution per order, and contribution is measured after the platform commission has come off gross.
- Turn break-even orders into break-even orders per peak hour, because peak hours are the only hours that produce them.
- Sensitivity to the commission rate is the number that surprises operators: a small change in c moves break-even a long way.
- Margin percentage tells you almost nothing here; contribution per order and per constrained minute tell you everything.
- No figure on this page is a margin. The derivation takes your own numbers.
Search results answer "what margin does a ghost kitchen make" with a percentage. A percentage cannot be true across kitchens with different commission tiers, containers, and rents, and this page will not offer one. What it offers is the derivation, so that the margin and the break-even point for your kitchen come out of your own statement in an hour.
Contribution per order
From the pricing and profit guide: net receipt R = P × (1 - c) - f. P is price, c the commission rate under your tier, f any per-order fee.
Contribution per order
- Net receipt R = P × (1 - c) - f
- Subtract food cost F
- Subtract packaging K
- Subtract labor m × L
- Subtract refund allowance a
- Average across order mix: C̄
Contribution per order C = R - F - K - (m × L) - a. F is food cost, K packaging, m labor minutes at loaded cost per minute L, a the refund allowance per order from your statements.
Compute C for your order mix, weighted by how often each dish sells, to get an average contribution per order, C̄.
Break-even orders
Let X be fixed cost per month: occupancy, software, insurance, salaried management, loan payments, and anything else that arrives whether or not orders do.
Break-even orders per month
N = X ÷ C̄
X = fixed cost per month
C̄ = average contribution per order
Everything in N comes from your own agreement, statements, and payroll. The business plan should show this line with the inputs beside it.
Break-even per peak hour
Orders do not arrive evenly. Let H be the number of peak hours per month you can staff, from your schedule. Then:
Is break-even reachable?
Is n above the constraint's maximum orders per peak hour?
No demand reaches break-even; change structure
Demand can reach break-even at this fixed cost
Break-even orders per peak hour: n = N ÷ H.
Compare n with the orders per peak hour the kitchen actually produced in its test weeks, and with the maximum the constraint allows (sixty divided by the average constrained minutes per order). If n is above what the constraint allows, no amount of demand reaches break-even at this fixed cost and this price; something structural has to change.
Sensitivity to the commission
Because c multiplies P, it moves R and therefore C̄ directly. Write C̄ as a function of c. Recompute N for the commission tier one step above and one step below your current tier. The difference is the value of the tier decision, often larger than any single menu change.
Commission tier sensitivity
Tier below
- Commission rate c
- lower
- Net receipt R
- higher
- Average contribution C̄
- higher
- Break-even orders N
- lower
Current tier
- Commission rate c
- current
- Net receipt R
- current
- Average contribution C̄
- current
- Break-even orders N
- current
Tier above
- Commission rate c
- higher
- Net receipt R
- lower
- Average contribution C̄
- lower
- Break-even orders N
- higher
Platform tiers and fees are read from current terms, and they change. Rerun this whenever a change notice arrives.
Scenarios, in variables
What changes
- Move to a lower-visibility, lower-commission tier
- c falls; orders may fall
- Add own-channel orders
- c is zero for those orders; own costs rise
- Add an add-on dish with near-zero constrained minutes
- C̄ rises on orders that take it
- Widen the radius
- Orders rise; refunds and a may rise; transit failures
- Sign a bay instead of hourly
- X rises; capacity rises
- Run a merchant-funded promotion
- R falls on promoted orders
Effect on N
- Move to a lower-visibility, lower-commission tier
- N falls; check whether orders per peak hour still reach it
- Add own-channel orders
- C̄ rises on the mix; X may rise with marketing
- Add an add-on dish with near-zero constrained minutes
- N falls without new trips
- Widen the radius
- C̄ may fall while N appears to be reached faster
- Sign a bay instead of hourly
- N rises; n may fall if H rises more
- Run a merchant-funded promotion
- C̄ falls for the period; N rises for the period
Fill the table with your own numbers before each decision. The point is that most growth moves change both X and C̄, and only the arithmetic says which way N goes.
What margin percentage hides
Two dishes can share the same margin percentage yet deliver different contribution per constrained minute. A kitchen with a healthy margin percentage can sit below break-even if X is high or H is low.
Margin percentage ignores payout lag between platform payment and supplier payment. That lag is where kitchens with good margins still run out of cash.
Use C̄, N, n, and the sensitivity to c. Leave the percentage for conversations with people who have not seen your statement.
Reading the statement
Platform statements show gross, commission, fees, refunds, and adjustments by order. That is the source for c, f, and a, and it is the place where the assumed tier and the actual tier turn out to differ.
The Internal Revenue Service's page on what records a business should keep describes a system that clearly shows income and expenses with supporting documents. The statement is the income document for a delivery kitchen, and the break-even derivation is just reading it with purpose.
The Bureau of Labor Statistics' profile of food service managers lists budgets and payroll records among the role's duties. Assign the monthly rerun of N to that person by name.
Where the inputs come from
- P and the pricing rulesthe how-to article on setting prices in this cluster.
- m and Ltimed orders at peak and the payroll, which the hiring and training guide covers, including why the loaded rate is higher than the wage.
- X: occupancy from the site cluster, software and insurance from their articles.
- Any claim you make to customers about value or price is an advertising claim; the Federal Trade Commission's advertising guidance for small business requires it to be truthful and substantiated.
- Decisions that change X or H, such as a second bay or later hours, go through the gates in the expansion and market guide.
Common questions
What is a typical ghost kitchen profit margin?
There is no typical figure that applies to your commission tier, container, and rent. Compute C̄ and N from your statement; that is your margin, and it is the only one that matters.
How many orders do I need to break even?
N = X ÷ C̄, from your fixed costs and your contribution per order. Then n = N ÷ H tells you whether your peak hours can produce it.
Does a lower commission tier always help?
It lowers c and raises C̄, but it may lower visibility and orders. Compute N under both and compare with orders per peak hour under both.
Why does my margin look fine but cash is short?
Because margin ignores the days between platform payout and supplier payment. That gap is working capital, and the startup cluster's cost article sizes it.
