Making your own basic ingredients can save you a lot of money, but only if you calculate the real costs correctly. Many restaurants make their own bread, sauces or pasta without knowing whether this is really cheaper than buying it. In this article, you'll learn step-by-step how to calculate the financial value of in-house production.
Why calculating in-house production is important
In-house production always seems cheaper. You only see the ingredients, not the hidden costs. But labor costs, energy and waste also count. Without proper calculation, you don't know if you're saving money or losing it.
- Labor costs: time of your chef or kitchen staff
- Energy costs: oven, mixer, refrigeration equipment
- Waste: failed batches, leftover product
- Opportunity costs: what else could you do instead?
The full cost price of in-house production
A fair comparison means including all costs, not just the ingredients.
💡 Example: Baking your own bread
You bake 20 loaves daily for your restaurant:
- Ingredients (flour, yeast, salt): €0.80 per loaf
- Labor costs (2 hours at €18/hour): €1.80 per loaf
- Energy costs (oven 3 hours): €0.15 per loaf
- Waste (5% failed): €0.05 per loaf
Total cost price: €2.80 per loaf
Compare this to buying from your baker: €2.20 per loaf. Then in-house production is €0.60 more expensive per loaf!
Calculate labor costs correctly
This is often the biggest cost item that gets forgotten. Don't just calculate the hourly wage, but the real cost of staff.
- Gross hourly wage: what you pay out
- Employer contributions: +30% for social charges
- Indirect costs: vacation pay, sick leave
⚠️ Note:
Calculate with the real cost of staff, not just the net hourly wage. At €15 net, you often pay €22-25 per hour in total costs as an employer.
Include opportunity costs
If your chef spends 2 hours baking bread, he can't do other things. These missed opportunities also cost money.
- Mise-en-place for the evening
- Developing new recipes
- Checking inventory and reordering
- Training the team
Ask yourself: what generates more profit? Baking bread or spending this time on profitable activities?
Calculate the break-even point
At what volume does in-house production become interesting? This depends on fixed and variable costs.
💡 Example: In-house pasta sauce
Comparison per liter:
- Ready-made purchase: €3.50 per liter
- In-house production ingredients: €1.20 per liter
- Labor costs (15 min at €25/hour): €6.25 per liter
- Energy costs: €0.30 per liter
In-house production costs €7.75 per liter - more than 2× as expensive!
In this case, buying is much smarter, unless the quality of your own sauce justifies a higher menu price.
Include quality premium
In-house production can justify a higher menu price. Calculate whether this premium covers the extra costs.
- Can you charge €2 more for 'homemade'?
- Do more guests come because of the quality?
- Does it save on other ingredients (less garnish needed)?
Only if the total added value covers the extra costs is in-house production financially interesting.
Practical decision-making guide
Make a simple comparison for each product:
- Step 1: Calculate full cost price of in-house production
- Step 2: Compare with ready-made purchase price
- Step 3: Check if quality difference justifies higher menu price
- Step 4: Decide based on the complete picture
⚠️ Note:
Don't forget the time it takes to develop recipes, train staff and maintain consistent quality. Spread these one-time investments over the expected production period.
How do you calculate the financial value of in-house production?
Gather all costs of in-house production
Note ingredient costs, labor costs (including employer contributions), energy costs and expected waste. Calculate with real hourly costs of staff, not just the net wage.
Determine the purchase price of the alternative
Check what it costs to buy the same ready-made product from suppliers. Compare quality and shelf life fairly.
Calculate the difference in total costs
Subtract the purchase price from your in-house production costs. A positive number means in-house production is more expensive. Also calculate whether a quality difference justifies a higher menu price.
✨ Pro tip
First check your 3 most-used in-house production items. If those aren't profitable, stop doing them and focus on what really makes a difference for your guests.
Calculate this yourself?
In the KitchenNmbrs app you can do this in just a few clicks. 7 days free, no credit card.
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Frequently asked questions
Should I include depreciation of equipment?
Yes, if you've purchased specific equipment for in-house production. Divide the purchase costs over the expected lifespan and production volume.
How do I calculate labor costs if my chef is there anyway?
Calculate with opportunity costs: what else can your chef do in that time? Mise-en-place, recipe development or team training often generate more profit than in-house production.
When is in-house production always worth it?
When it's a distinguishing element that attracts guests and you can charge significantly more. Think of signature sauces or specialties that define your concept.
How often should I update this calculation?
Check at least quarterly or when there are major changes in labor costs or ingredient prices. Energy prices can also fluctuate significantly.
Should I include waste if I have experienced staff?
Yes, even experienced chefs make mistakes. Calculate 2-5% waste for routine products and 10-15% for new recipes or seasonal staff.
⚠️ EU Regulation 1169/2011 — Allergen Information — https://eur-lex.europa.eu/eli/reg/2011/1169/oj
The allergen information on this page is based on EU Regulation 1169/2011. Recipes and ingredients may vary by supplier. Always verify current allergen information with your supplier and communicate this correctly to your guests. KitchenNmbrs is not liable for allergic reactions.
In the UK, the FSA enforces allergen regulations under the Food Information Regulations 2014.
📚 Sources consulted
- EU Verordening 852/2004 — Levensmiddelenhygiëne (2004) — Official source
- EU Verordening 853/2004 — Hygiënevoorschriften voor levensmiddelen van dierlijke oorsprong (2004) — Official source
- EU Verordening 1169/2011 — Voedselinformatie aan consumenten (2011) — Official source
- NVWA — Hygiënecode voor de horeca (2024) — Official source
- NVWA — Allergenen in voedsel (2024) — Official source
- Codex Alimentarius — International Food Standards (2024) — Official source
- FSA — Safer food, better business (HACCP) (2024) — Official source
- BVL — Lebensmittelhygiene (HACCP) (2024) — Official source
- Warenwetbesluit Bereiding en behandeling van levensmiddelen (2024) — Official source
- WHO — Foodborne diseases estimates (2024) — Official source
Food Standards Agency (FSA) — https://www.food.gov.uk
The HACCP standards shown in this application are for informational purposes only. KitchenNmbrs does not guarantee that displayed values are current or complete. Always consult the FSA or your local authority for the latest regulations.
Written by
Jeffrey Smit
Founder & CEO of KitchenNmbrs
Jeffrey Smit built KitchenNmbrs from 8 years of hands-on experience as kitchen manager at 1NUL8 Group in Rotterdam. His mission: give every restaurant owner control over food cost.
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