Home Processor Restaurant Question

Decorating By lusciouslayers Updated 5 Oct 2011 , 1:52am by MimiFix

lusciouslayers Posted 3 Oct 2011 , 4:20am
post #1 of 8

Hi;

I'm new to this forum. I wish I had found it a long time ago but better late than never.

My question(s) is I'm in NYC and I see that we have the home processor exemption. If I were to sell my cakes to a restaurant as is allowed how much do you get as payment. I don't do the elaborate beautiful cakes I see here. I do cakes, layer or not, with frosting, plus cookies, candy etc. All from scratch. I've been baking for years but for friends/family/and co-workers at Christmas with excellent feedback. Cakes vary from 4.00 to 6.00 a slice in my area. If a restaurant charges 4.00 a slice would I get half? If they could get 16 slices from a cake that would be $64.00. Should I expect $32.00? Less? I don't have much choice in this city and I'm surrounded by bakeries etc so it's hard to do business with limited options.

Also, do I need insurance? License? I sent an email over a week ago to the NYS dept. of agric. and never heard from them.

Thanks for any help you can give me.

7 replies
jason_kraft Posted 3 Oct 2011 , 4:43am
post #2 of 8

When looking at selling wholesale you will need to know how much the product is costing you and the minimum profit margin you are willing to accept, this is your minimum selling price to the retailer. You'll also need a good idea of how much said product sells for at retail, so if the retailer is planning on marking up your product past what the market will bear it's probably not worth selling to that retailer. Markup for bakery items in upscale grocery stores is in the 40-50% range, not sure what the markup is in NYC restaurants (that's something you'll want to find out before you proceed).

When pitching to a retailer you'll want to lead with your competitive advantage: why the retailer should buy your product instead of buying from a competitor (or making something in-house) and why their customers will want it. Backing up your statements with market research is a big plus.

I'm not sure about a license (try calling the DOA instead of emailing) but at a minimum you will need liability insurance.

lusciouslayers Posted 4 Oct 2011 , 1:39am
post #3 of 8

Thanks so much Jason. Some good ideas. I will call the DOA this week. I do have a restaurant that is interested but their offer is too low in my opinion. It's one thing when you sell to an individual you get the price you set. When selling to a restaurant it's a percentage of what they sell their pieces of cake etc for. Obviously I factor in cost of ingredients but then do I add say 10.00 or 15.00 for the hour it takes to make a cake? I was hoping for a 50/50 deal. Is that to much to ask for? In other words if one cakes sells for say 60.00 ( 5.00 a slice x 12 slices) I think $30.00 is fair for one cake.

jason_kraft Posted 4 Oct 2011 , 2:47am
post #4 of 8

50/50 would mean a 100% retail markup, which seems high to me, but that might be the norm for restaurants in your area (I haven't dealt directly with restaurants for wholesale). But if you look at the cost structure of the cake on your end (ingredients, labor, delivery, and overhead) vs. the restaurant's (storage, minimal labor, and a small overhead contribution) it doesn't seem fair to split the revenue.

There's the issue of waste if your products have a short shelf life, but if they can be frozen that's usually not an issue. Personally I would start with an offer of $45 as a wholesale price for a cake that sold at retail for $60, that would give the restaurant a 35% markup. Only you can decide how low you are willing to go, but if you can make a good 20% profit by selling cakes at $30 each then that might be worth it.

lusciouslayers Posted 4 Oct 2011 , 3:31am
post #5 of 8

Thanks again Jason for all your help, I'm learning a lot. Have to say though my math is not that good and it's certainly not the fun part of this process for me. I made a couple of cakes for them and one cake would sell for $48.00 in their restaurant and their offer to me was $17.00 (not even a split).
I'm waiting to find out about the insurance before I give them my answer and counter offer as that is too low.

MimiFix Posted 4 Oct 2011 , 9:49pm
post #6 of 8

lusciouslayers, you need to speak with the inspector for your borough. Some of the allowed home processor products are going through a change so before you start talking about cake pricing it's best if you find out what is and isn't allowed. Call the NYC office (71icon_cool.gif 722-2876. The Albany office can also help answer questions (51icon_cool.gif 457-5459. Someone will eventually get back to you.

About pricing: In the baking industry, the suggested pricing strategy is to find the cost of your product then multiply 3x for wholesale and 4x for retail. There are variables, of course, but this is the basic idea.

Good luck, Mimi

lusciouslayers Posted 5 Oct 2011 , 1:39am
post #7 of 8

Thank you for you help Mimi. I called the first no. today. The guy told me insurance was not needed and after I told him the restaurant was inquiring about it he said that was between myself and the restaurant. Not sure exactly what that means. We then spent close to 20 minutes discussing the home inspection. icon_sad.gif He asked what I was making, what kind of cake, what was in the cake and then told me I would have to fax, some woman in charge in my area, every ingredient in the cake in order by quantity and also the ingredients ingredients. He said for example if I'm using cream cheese what exactly is in the cream cheese. That's just for one cake. He said no commercial equipment in my kitchen. Scrub everything and label all my ingredients and keep in one place, he suggested a large tupperware bin.

He said if I failed that inspection then that was it. I could not apply again.
The website also noted there could be surprise inspections along with fines if you don't pass the surprise inspections.

MimiFix Posted 5 Oct 2011 , 1:52am
post #8 of 8
Quote:
Originally Posted by lusciouslayers


The website also noted there could be surprise inspections along with fines if you don't pass the surprise inspections.




Can you send me the link to that page?

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