Calculating margins on homemade products you sell to other restaurants is like being both the farmer and the distributor - you need to profit at each stage. Unlike regular dishes served in your own establishment, these products require accounting for production costs, labor time, and B2B profit margins. You're essentially running two businesses: making the product and selling it wholesale.
What makes homemade products different?
Regular dishes get calculated for your own restaurant's food cost. But homemade products you resell? You've become a mini-supplier. You must account for:
- All ingredients and raw materials
- Labor time for production
- Packaging and transport
- A healthy profit margin for B2B sales
💡 Example:
You make pasta sauce yourself and sell it to other restaurants. Per liter it costs you:
- Ingredients: €3.20
- Labor time (30 min at €18/hour): €9.00
- Packaging: €0.50
- Gas/energy: €0.30
Total cost price: €13.00 per liter
The correct formula for B2B margins
Reselling to other food service businesses demands a different formula than your own dishes:
Selling price = Total cost price / (1 - Desired margin %)
⚠️ Note:
Always include your labor time. Many entrepreneurs forget this and sell below cost price without realizing it.
Standard margins for homemade products
B2B sales to other restaurants demand different margins than consumer sales:
- Fresh products (sauces, dressings): 40-60% margin
- Shelf-stable products (chutneys, jams): 50-70% margin
- Complex preparation (ragù, broth): 50-65% margin
- Simple products (spice mix): 60-80% margin
💡 Example calculation:
Your pasta sauce costs €13.00 to make. You want 50% margin:
- Selling price = €13.00 / (1 - 0.50) = €26.00
- Check: (€26.00 - €13.00) / €26.00 = 50% margin ✓
So you sell for €26.00 per liter to other restaurants.
Calculating cost price: every component
A complete cost price calculation includes these elements:
1. Ingredient costs
All raw materials that go into the product, including spices, oil, vinegar.
2. Labor time
Calculate your hourly wage (including employer taxes) × production time. Don't forget prep and cleaning time.
3. Packaging
Jars, labels, boxes for transport.
4. Energy
Gas, electricity for cooking/baking. Based on real restaurant P&L data, estimate 2-5% of ingredient costs.
💡 Example complete calculation:
Homemade pesto, batch of 10 jars at 200ml:
- Basil, pine nuts, cheese, oil: €18.00
- Labor time 1 hour at €20: €20.00
- 10 jars + labels: €5.00
- Energy (mixer, cleaning): €1.00
Total €44.00 for 10 jars = €4.40 per jar cost price
At 60% margin: €4.40 / 0.40 = €11.00 selling price per jar
Pricing strategy for different buyers
Not all food service businesses pay identical prices. Adjust your pricing based on:
- Volume: Larger buyers get a discount
- Payment terms: Cash payment = lower price
- Relationship: Regular customers get better terms
- Location: Delivery within 5km vs. further away
⚠️ Note:
Never go below your cost price, even for good customers. You're then losing money instead of making it.
How do you calculate the margin on homemade products? (step by step)
Calculate all production costs
Add up: ingredients, labor time (including your hourly wage), packaging and energy costs. Don't forget any element, or you'll lose money without realizing it.
Determine your desired profit margin
Choose a margin between 40-70% depending on your product and market. Fresh products usually lower, complex preparation higher.
Calculate your selling price
Use the formula: Cost price / (1 - Margin %). For example €10 cost price at 50% margin = €10 / 0.50 = €20 selling price.
✨ Pro tip
Track your actual production time for 3 batches and use the average - most entrepreneurs underestimate by 30-40%. Include cleanup, packaging, and quality checks in your time calculations.
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 charge VAT on my selling price to other restaurants?
Yes, if your turnover exceeds €20,000 per year, you must charge VAT. For food products that's 9% VAT which you pass on to your buyers.
How do I calculate my hourly wage for labor time?
Take your desired net hourly wage × 1.4 (for employer taxes and income tax). So €15 net becomes €21 gross that you include in the cost price.
What if my competitor is cheaper?
Never go below your cost price. Focus on quality, service or unique flavor. If you're really too expensive, look at where you can cut costs without losing quality.
How often should I adjust my prices?
Check every 3 months if your ingredient prices still match. With major supplier price increases adjust immediately, or you'll lose margin.
Can I charge different prices to different customers?
Yes, that's allowed. Many producers use tiered pricing: more volume = lower price per unit. Just make sure you always stay above your cost price.
Should I include equipment depreciation in my cost calculations?
For specialized equipment used exclusively for production, yes. Divide annual depreciation by expected production volume to get cost per unit.
📚 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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