Discount Break-Even
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What this tool does
How much extra volume a price cut needs before it protects your profit — from margin and discount.
Other tools for this stage
- Ops CopilotDescribe what's going wrong in the unit; get causes, this week's actions, and metrics.
- Multi-Unit BenchmarkPut your units side by side — find the drag, and what closing the gap is worth.
- FDD Builder AIFor franchisors: your disclosure outline, the data to gather, and the earnings-claim call.
- Break-Even CalculatorThe revenue — and customer count — a unit needs each month before it makes a cent.
- Working Capital & RunwayModel the ramp-up: the working capital a unit burns before break-even, and whether your reserve survives it.
- Occupancy Cost RatioCheck rent + occupancy as a share of revenue against healthy benchmarks, and your max sustainable rent.
What this calculates
A discount is funded entirely out of margin, so the volume needed to stand still is far higher than intuition suggests. Given your gross margin and the discount you are considering, this returns the additional unit volume required simply to hold the same gross profit — before any judgement about whether the promotion was worth running.
What you will need
Gross margin before the discount. The lower your margin, the more brutal the arithmetic. A discount on a thin-margin item can require volume increases that are not physically achievable.
Discount depth. The actual reduction customers receive, including anything stacked on top such as a loyalty offer or an aggregator promotion running at the same time.
How to read the result
Compare the required uplift with what your unit can physically serve. If holding profit needs forty per cent more covers at your busiest hour, the promotion cannot work regardless of demand — you will queue, service will slip, and you will lose the margin without gaining the volume. Then ask who is buying: a discount taken mostly by customers who would have paid full price is a pure margin transfer, and volume never appears at all.
Questions about this tool
Why does a small discount need such a large volume rise?
Because the discount comes off gross profit, not off revenue. If your margin is thirty per cent, a ten per cent discount removes a third of the profit on every sale, and volume has to make up all of it.
Does this account for a royalty?
Use a margin figure that is already net of the percentage royalty, since the royalty is charged on gross revenue — you pay it on the discounted sale too.
When is a discount worth running anyway?
When the goal is not this month's profit — trialling a new item, filling a genuinely dead day part, or acquiring customers you can measure returning. Decide the objective first, then use this to see what it costs.
For reference only; not legal, tax, or investment advice. Results depend entirely on the figures you enter — check them against your own quotes and your franchise agreement before acting on them.