Your prep cook just tossed perfectly good chicken bones while you're buying expensive stock base for tomorrow's soup. This scenario plays out daily in kitchens where by-products like bones, vegetable scraps, and bread ends could slash food costs instead of hitting the trash. But here's the catch: how do you price these 'free' ingredients without skewing your actual dish costs?
Why by-products mess with your cost calculations
Many kitchens toss valuable by-products that could work perfectly in other dishes. Chicken bones from your fillet special make excellent stock. Vegetable trimmings from mise-en-place become rich broth. But if you use these 'free' ingredients without proper accounting, you'll get a warped view of your real food costs.
💡 Example:
You buy chicken at €18/kg and use bones for soup stock. If you count that stock as 'free', your soup profit margins look artificially high.
- Whole chicken: €18/kg
- Fillet: 60% of weight = €30/kg actual cost
- Bones: 40% of weight = needs proper accounting
Three approaches for by-product pricing
You've got three ways to handle by-products in your cost calculations. Your choice depends on accuracy needs and available time.
Method 1: Deduct residual value (most precise)
Assign a specific value to your by-product and subtract it from the original cost. This creates fair pricing for both dishes involved.
💡 Example residual value:
Whole salmon €20/kg, fillet 55%, scraps 45%:
- Salmon head for stock: valued at €3/kg
- Salmon fillet cost: €20 - (€3 × 0.45) = €18.65/kg
- Stock cost: €3/kg salmon head
Method 2: Proportional split
Divide total purchase costs across all resulting products, based on their relative value or weight. From analyzing actual purchasing data across different restaurant types, this method works well for high-volume operations with consistent by-product usage.
Method 3: Symbolic pricing
Set a small fixed amount for the by-product so you don't forget it has value. For instance, €0.50 per liter of house-made stock keeps things simple.
⚠️ Watch out:
Never treat by-products as completely free. You'll get distorted profit pictures and won't know which dishes actually make money versus those that just look good because they use 'free' ingredients.
Real kitchen examples by operation type
Restaurant: Vegetable stock creation
Daily vegetable prep leaves you with peels, stems, and outer leaves. These transform into stock for soups and sauces.
- Method: Symbolic cost of €1.50 per liter
- Logic: Scraps represent small portion of vegetable purchases
- Advantage: Simple tracking, eliminates 'free' misconception
Pizzeria: Breadcrumbs from returns
Returned pizzas or kitchen mistakes become breadcrumbs for meatballs and other preparations.
💡 Example breadcrumbs:
Pizza dough costs €1.20 each. If 5% become breadcrumbs:
- Breadcrumb cost: €0.60 per 100g (half fresh pizza value)
- Meatball portion: 50g crumbs = €0.30 ingredient cost
Bistro: Wine reductions from opened bottles
Wine past serving quality still works perfectly in sauces and reductions.
- Pricing: Original wine cost divided by 5 (since it's written off)
- Example: €15 bottle → €3 per bottle for cooking use
Tracking systems for by-products
Proper by-product tracking requires a flexible system that handles multiple cost points for the same ingredient.
Excel setup
Create separate entries for identical ingredients at different price points:
- Salmon fillet fresh: €36/kg
- Salmon head for stock: €3/kg
- Vegetable stock (house-made): €1.50/liter
Using specialized software
Tools like KitchenNmbrs let you create the same ingredient with different costs. 'Beef bones (fresh)' at €8/kg and 'Beef bones (scrap)' at €2/kg keeps everything organized without complex math.
⚠️ Watch out:
Update by-product prices regularly. If your main ingredient costs rise, by-products should too. Salmon heads from €25/kg fish cost more than those from €18/kg fish.
Situations where 'free' actually works
Some scenarios genuinely allow zero-cost by-products:
- Garden herbs: Parsley you grow specifically for garnish
- Staff meals: Food the team eats instead of discarding
- One-off tests: Single experiments to test feasibility
But once a by-product becomes a regular recipe component, it needs a proper cost assignment.
How do you calculate food cost with by-products? (step by step)
Determine the value of your by-product
Choose a method: deduct residual value (most accurate), proportional allocation, or symbolic cost price. For most kitchens, symbolic cost price works best: give the by-product 25-50% of the value of the fresh product.
Register both ingredients separately
Create separate ingredients in your cost price system. For example, 'Chicken leg fresh' (€12/kg) and 'Chicken bones stock' (€3/kg). This prevents confusion and lets you use both correctly in recipes.
Calculate food cost per dish normally
Add up all ingredients, including by-products at their assigned cost price. Then calculate your food cost percentage: (total ingredient costs / selling price excl. VAT) × 100. Now you have a fair picture of your actual margin.
✨ Pro tip
Track your 3 highest-volume by-products over the next 2 weeks and assign each a fixed cost. You'll capture most of your hidden ingredient value without drowning in paperwork.
Calculate this yourself?
In the KitchenNmbrs app you can do this in just a few clicks. 7 days free, no credit card.
Was this article helpful?
Frequently asked questions
Can't I just count by-products as free?
That seems logical, but creates distorted profit pictures. Dishes using lots of by-products appear more profitable than they actually are. You'll make better decisions with realistic ingredient values.
How do I determine the right price for a by-product?
A solid rule: assign 25-50% of the fresh product's value. Salmon head from €20/kg salmon becomes €5-10/kg. Consistency matters more than the exact amount.
What if I use very few by-products?
Then you can skip them in cost calculations. But once a by-product appears regularly across multiple dishes, proper accounting gives you a clearer profit picture.
Do I need to include by-products in inventory counts?
Only if they represent significant value. A few liters of house stock don't need inventory tracking, but 20kg of frozen bones definitely do.
How do I prevent by-product accounting from getting too complex?
Keep it simple: use symbolic prices and focus on your most-used by-products. Not every vegetable peel needs pricing, but your house-made stock does.
Should I price by-products the same across all dishes?
Yes, consistency is key. If you price vegetable stock at €1.50/liter, use that rate whether it goes in soup, sauce, or risotto. This prevents confusion and maintains accurate costing.
What happens if my by-product costs exceed the main ingredient's value?
You've likely overvalued the by-product. Recalculate using a lower percentage of the original cost, or switch to symbolic pricing to keep things realistic.
📚 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.
All your recipes in one place, forever
Recipes in heads, on notes, in folders — that doesn't work. KitchenNmbrs centralizes all your recipes with costs, allergens, and portions. Try it free for 14 days.
Start free trial →