External processing can make cost price calculation complex. Many entrepreneurs forget to include the real costs of outsourcing, making them think they're getting a better deal than they actually are. In this article, you'll learn step-by-step how to calculate the total cost price of components that are processed externally.
What are the real costs of external processing?
With external processing, you don't just pay for the product itself, but also for the service. These costs are often higher than you think.
💡 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
In this example, cut onions cost almost double the price of whole onions. That's the price for convenience and time savings.
Hidden costs you often forget
External processing has more cost items than you see at first glance:
- Processing costs: The labor for cutting, marinating, portioning
- Packaging costs: Vacuum bags, containers, labels
- Extra transport: More deliveries or special cooling
- Minimum order quantities: You often have to order more than you need
- Shorter shelf life: Processed products spoil faster
⚠️ Note:
Processed products often have 50-70% shorter shelf life. Factor in waste in your cost price.
The comparison: doing it yourself vs. outsourcing
To make a fair comparison, you need to include all costs:
💡 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
In this case, having it cut externally is €1.10 per portion cheaper, despite the higher per-kilo price.
Including quality and consistency
Besides costs, other factors play a role:
- Consistency: External processing often delivers more uniform portions
- Time: Your staff can focus on other tasks
- Quality: Professional equipment can deliver better results
- Flexibility: During busy times you can order more, during quiet times less
💡 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 more consistent and faster
When external processing makes sense
Outsourcing is especially worthwhile in these situations:
- Labor-intensive operations: Cutting, filleting, deboning
- Special equipment needed: Vacuum sealing, freezing, smoking
- Small volumes: Too little to do efficiently yourself
- Peak loads: Extra capacity during busy periods
- Expertise: Operations that require specific knowledge
A system like KitchenNmbrs helps you calculate both options and compare the real cost price 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
Create an Excel with all cost items for both doing it yourself and outsourcing. Update it monthly - this way you'll immediately see when the balance shifts and can switch between options.
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
Do I need to include VAT in external processing?
Yes, external processing falls under 21% VAT. Always calculate your food cost excluding VAT. A processing fee of €1.50 including VAT is €1.24 excluding VAT.
How do I factor minimum order quantities into my cost price?
If you're forced to order more than you use, factor in waste. If the minimum is 10 kg while you use 8 kg: calculate with €10 costs for 8 kg usable product.
What if the quality of external processing falls short?
Make agreements about quality standards and factor in a small buffer (2-5%) for waste. Always test small quantities first before ordering large volumes.
Can I use external processing seasonally?
Yes, that's often smart. Have it done externally during busy periods, do it yourself during quiet times. Just keep in mind minimum orders and fixed contracts.
How often should I check external processing prices?
At least every 3 months. Processing fees often rise with labor costs and energy prices. Update your cost prices immediately if rates change.
📚 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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