Cost price of a component that I

Quick answer

I'll be honest - external processing nearly killed my first restaurant's margins. You think you're saving money by outsourcing prep work, but forget about all the hidden costs that pile up. Most operators underestimate the true expense of having components processed externally.

I'll be honest - external processing nearly killed my first restaurant's margins. You think you're saving money by outsourcing prep work, but forget about all the hidden costs that pile up. Most operators underestimate the true expense of having components processed externally.

What are the real costs of external processing?

External processing means you're paying for convenience, not just the product. These costs stack up faster than most operators realize.

? Example: Having vegetables cut

You have 10 kg of onions cut by your supplier:

Whole onions: €2.50/kg = €25.00
Processing costs: €1.50/kg = €15.00
Packaging costs: €0.30/kg = €3.00
Transport (extra): €5.00

Total: €48.00 for 10 kg cut onions = €4.80/kg

Cut onions cost nearly double the whole ones. That's what convenience actually costs.

Hidden costs you often forget

External processing comes with sneaky expenses that don't show up on the main invoice:

Processing costs: Labor for cutting, marinating, portioning
Packaging costs: Vacuum bags, containers, labels
Extra transport: More deliveries or special cooling requirements
Minimum order quantities: You're forced to order more than needed
Shorter shelf life: Processed products spoil much faster

⚠️ Note:

Processed products often have 50-70% shorter shelf life. Factor waste into your cost calculations.

The comparison: doing it yourself vs. outsourcing

A fair comparison requires including every single cost - the kind of thing you only learn after closing your first month at a loss:

? Example: Portioning beef steak

Option 1 - Do it yourself (whole côte de boeuf):

Whole côte: €18.00/kg
Labor (30 min): €12.00
Cutting loss: 15% = €2.70/kg

Real cost price: €18.00 / 0.85 + labor = €21.18/kg + €12.00 = €33.18 for 8.5 kg = €3.90/100g portion

Option 2 - Have it cut externally:

Cut beef steak: €28.00/kg
No labor, no loss

Cost price: €2.80/100g portion

External cutting saves €1.10 per portion here, despite the higher per-kilo price. Numbers don't lie.

Including quality and consistency

Cost isn't everything. Other factors matter too:

Consistency: External processing delivers uniform portions every time
Time: Your staff can focus on cooking, not prep work
Quality: Professional equipment often beats kitchen tools
Flexibility: Scale up during rushes, down during slow periods

? Example: Cutting fries

Cutting fries yourself from whole potatoes:

Potatoes: €0.80/kg
Peeling loss: 20%
Labor: €15.00/hour, 20 kg/hour

Real cost price: (€0.80 / 0.80) + (€15.00 / 20) = €1.00 + €0.75 = €1.75/kg

Frozen fries: €1.85/kg

Difference: €0.10/kg - but frozen fries are consistent and faster

External processing makes sense for these situations

Outsourcing works particularly well for:

Labor-intensive operations: Cutting, filleting, deboning
Special equipment needed: Vacuum sealing, freezing, smoking
Small volumes: Too little to justify doing in-house
Peak loads: Extra capacity during busy periods
Expertise: Operations requiring specialized knowledge

Food cost calculators help you compare both options and find the real cost per portion.

How do you calculate the cost price of externally processed components?

Gather all cost items

Note the purchase price of the base product, processing costs, packaging costs, and any extra transport costs. Ask your supplier for a detailed price breakdown.

Factor in waste and shelf life

Processed products often have shorter shelf life. Add 5-15% extra waste to your cost price, depending on the product and your turnover rate.

Compare with doing it yourself

Calculate what it would cost to do it yourself: base product + labor + cutting loss + required equipment. Divide by the number of portions to get the cost price per portion.

Include quality and time in your decision

Don't just look at costs, but also at consistency, time savings, and quality. Sometimes something is more expensive but still the better choice for your concept.

✨ Pro tip

Track your external processing costs weekly for the first 6 months - suppliers often sneak in price increases without proper notice. This gives you use to negotiate or switch providers quickly.

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Frequently asked questions

Do I need to include VAT in external processing calculations?

Yes, external processing falls under 21% VAT. Always calculate food costs excluding VAT. A processing fee of €1.50 including VAT equals €1.24 excluding VAT.

How do I factor minimum order quantities into my cost price?

If you're forced to order more than you'll use, factor in waste. Minimum is 10 kg but you only use 8 kg? Calculate with €10 costs for 8 kg usable product.

What if the quality of external processing falls short?

Make clear agreements about quality standards and factor in a small buffer (2-5%) for waste. Always test small quantities before ordering large volumes.

Can I use external processing seasonally?

Absolutely - that's often the smartest approach. Outsource during busy periods, handle it in-house during slow times. Just mind minimum orders and contract terms.

How often should I check external processing prices?

At least every 3 months. Processing fees rise with labor and energy costs. Update your cost prices immediately when rates change.

Should I account for storage costs with external processing?

Yes, processed items often need more refrigeration space and special storage conditions. Factor in the extra cooler space and energy costs.

How do I handle portion weight variations in externally processed items?

Weigh random samples from each delivery and adjust your cost calculations accordingly. A 10% weight variation can significantly impact your margins.

ℹ️ This article was prepared based on official sources and professional expertise. While we strive for current and accurate information, the content may differ from the most recent regulations. Always consult the official authorities for binding standards.

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

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.

8 years kitchen manager at 1NUL8 Group Rotterdam

Expertise: food cost management HACCP kitchen management restaurant operations food safety compliance

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