I'll admit something that might shock you: most restaurant owners are terrible at make-or-buy decisions. They rely on gut instinct instead of hard numbers, and it's costing them thousands. Here's how to calculate the exact tipping point where making becomes more expensive than buying.
Why this calculation matters for your bottom line
Every make-or-buy choice directly hits your food cost percentage. Make too much in-house and you're bleeding labor dollars. Buy everything pre-made and your ingredient costs skyrocket. The break-even calculation reveals that sweet spot where profits live.
💡 Example:
Making mayonnaise vs. buying:
- Making it: €2.80 ingredients + 15 min labor (€6.25) = €9.05
- Buying: €4.20 per liter
Result: Buying saves €4.85 per liter
The break-even formula that actually works
For every make-or-buy decision, you'll calculate two total costs and compare them:
Making it = Ingredient costs + Labor costs + Overhead costs
Buying = Purchase price + Processing costs (if applicable)
The cheaper option wins. Period.
⚠️ Watch out:
Don't ignore labor costs. A chef costs €25-30 per hour including employer contributions. That time isn't free, even if it feels like it.
Calculate labor costs without fooling yourself
Labor costs are the hidden killer that flips most calculations:
- Gross hourly wage: €15-18 for kitchen staff
- Employer contributions: Add 30-35% (pension, holiday pay, social taxes)
- Real labor costs: €20-25 per hour
- Prep time: Time it exactly, don't guess
💡 Example labor cost calculation:
Making soup (5 liter portion):
- Chopping vegetables: 20 minutes
- Cooking and finishing: 45 minutes
- Total time: 65 minutes
- Labor costs: (65/60) × €22 = €23.83
Quality and shelf life change everything
Break-even isn't just about price. These factors can flip your decision:
- Quality: Homemade often wins, but not always
- Shelf life: Homemade spoils faster
- Consistency: Purchased products stay uniform
- Flexibility: Homemade adapts easier
- Inventory risk: Making requires more ingredients in stock
Real examples from restaurant P&L data
Sauces and dressings:
💡 Hollandaise sauce (1 liter):
- Making it: €8.50 ingredients + 30 min (€11) = €19.50
- Buying: €12.80 per liter
- Difference: Making costs €6.70 extra
Based on real restaurant P&L data, buying wins unless quality justifies the premium
Bread and pastries:
- Usually cheaper to buy (specialized equipment needed)
- Labor-intensive with early morning hours
- Short shelf life increases waste risk
Appetizers and garnishes:
- Small quantities: often cheaper homemade
- Large quantities: buying wins
- Seasonal products: depends on availability
Your break-even point isn't permanent
External factors constantly shift your calculations:
- Supplier price increases: Check every 6 months
- Wage increases: Labor gets more expensive
- Volume changes: Higher volume creates economies of scale
- New suppliers: Better prices or quality become available
⚠️ Watch out:
Last year's smart decision might be this year's profit killer. Recalculate your main make-or-buy choices at least twice yearly.
Tools that speed up these calculations
Manual calculations eat time and create errors. A food cost calculator like KitchenNmbrs helps by:
- Automatically tracking ingredient costs
- Calculating labor costs per recipe
- Comparing different scenarios quickly
- Instantly updating break-evens when prices change
How do you calculate the break-even between making and buying?
Calculate the costs of making it yourself
Add up all ingredient costs for the desired quantity. Measure how much time the preparation takes and multiply by your labor costs per hour (€20-25). Add ingredients and labor costs together.
Calculate the costs of buying
Look up the purchase price from your supplier for the same quantity and quality. Add any processing costs (for example, a purchased sauce that you still need to dilute or heat up).
Compare and decide
Subtract the costs from each other to see the difference. Also factor in quality, shelf life and consistency in your decision. The cheapest is not always the best choice for your concept.
✨ Pro tip
Calculate break-evens for your top 3 most labor-intensive prep items within the next 48 hours. These often show the biggest cost savings potential and can shift your food cost percentage by 2-3 points.
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
How do I calculate labor costs per hour correctly?
Take the gross hourly wage and add 30-35% employer contributions. For a chef at €16 gross this becomes €16 × 1.33 = €21.28 per hour including all costs.
Should I include overhead costs like gas and electricity?
For small quantities you can ignore this. For large volumes or energy-intensive preparations (frying, long cooking times) add €0.15-0.25 per kWh or m³ of gas.
How often should I redo this calculation?
Check your main make-or-buy decisions every 6 months. Supplier prices and labor costs change regularly, which can shift your break-even point.
What if the quality of purchased goods is much worse?
Calculate how much extra revenue better quality generates. If customers pay more for homemade or return more often, the expensive alternative can still boost profits.
Does volume play a role in the calculation?
Yes, with larger volumes you often get better purchase prices and labor costs per unit drop. Calculate for your actual volumes, not small test portions.
How do I handle seasonal price fluctuations in my calculations?
Track ingredient costs monthly and calculate break-evens for peak and off-season periods. Switch between making and buying based on seasonal availability and pricing.
What about food safety costs for homemade items?
Factor in additional storage containers, labeling, and HACCP compliance time. Add roughly 5-10% to your labor costs for items requiring strict temperature control or short shelf lives.
📚 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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