Hello friends!

I have a Italian restaurant that is interested in buying my products and selling them on their dessert menu. Cakes they would sell by the slice, also interested in specialty cupcakes and pies! Before I have a sit down with them I want to be as prepared as possible. I am operating under Cottage Food Laws (If that helps with advice). I am just wondering what I should price my product at? Do I sell to them as if I were selling to any customer at normal price? Should I offer them a deal of 3 months at cost, just to see if the product does well then increase to normal pricing after that? Also any additional advice or guidance. Do they advertise my name along with the product?

Thanks so much!

Newbie :) 

I'm not 100 percent sure, but I don't think you can sell your home baked goods to a commercial establishment. 

Here it does say that restaurants are allowed. Also checking with my local health department says so as well....

Maybe I am misunderstanding? 

http://forrager.com/law/ohio/

Hi, SweetCharm -

Congrats on your opportunity! I'm in Ohio, too, and operate under CFL.  I have a "FAQ" sheet from the state and this is what they say about where you can sell:

Where may Cottage Food Production Operations Sell Their Food Products?

Cottage Food Products may only be sold in Ohio. Cottage Food Products that are properly identified and labeled may be sold directly to the consumer from the site where the products are produced; sold through grocery stores, farm markets, farmers markets; and sold and/or used in preparing food in a restaurant.

So, I know you can for sure sell pre-packaged and labeled items (like cookies in a coffee shop, for example), or someone who produces honey under CFL could sell that honey to a restaurant to use in their recipes, so I would think you would be fine as long as what you sell to the restaurant is properly labeled per the CFL. But, just to be extra-sure, you could certainly call/email the states food safety folks: Contact ODA Division of Food Safety: 1-800-282-1955 Ext 4366; Email: [email protected]

As far as the pricing goes, I don't think I would offer any special pricing -- you said they are interested in your products, so they are coming to you, right? They know you are a home baker offering specialty items, and I think they are probably prepared to pay for that -- I'm sure there are plenty of commercial dessert distributors that could give them cheap desserts if that's what they want. Not saying to gouge them on the price, and you might be able to work out some type of volume discount later if you choose,  but I think initially I would charge the same as what I would charge any other customer. That being said, I think it's probably smart to do a 3-month trial or so because this can benefit you both. They might decide the products aren't selling well enough, or you might decide not to continue for one reason or another. 

Yep, looks likes like your good there.  Just check with your local town/city health dept as they may have certain regulations for you.  In my town, I have to get a different license to sell wholesale and my products have to have ingredient labels.  Your town/city may or may not have additional regulations.

Also, I would think you'll need liability insurance, so if you don't already have it, double check on that.  

I would definitely NOT sell to them at cost.  It's not worth it to you if you're not making money and they are.  If your product doesn't sell, they'll let you know :) Make sure it's worth it to you.  You don't want to be selling in bulk for little monetary gain.

Say you sell them a cake for $50 and they are getting 20 slices and selling them at $5 bucks a pop.  They are making $50 on your cake.  What are you making?

Make sure you know exactly what everything costs you to make before you go into the meeting and do not give them an answer right then and there.  Go home with all the info and crunch the numbers.

Good luck!!

Thank you all so much for the replies! Yess they have approached me, so I agree, keeping my prices the same as a normal customer is probably the best choice. I will contact my local health department to insure I am going into this with a full understanding of the laws that I am required to abide. 

Again, thank you thank you!! :) 

I am in Canada so that makes a difference, but I was approached by two franchisees who wanted to sell my baked goods and desserts. One was a restaurant that sells breakfast all day and they were looking to offer a dessert and coffee menu to draw a different crowd mid afternoon and evening. The other was a Mexican style restaurant. They both approached me and both knew I was operating legally as a small business from my home. In my little area I can legally bake and sell on a small scale without being a legally licensed and registered business.

I cannot however, buy my ingredients wholesale. Both restaurants were willing to allow me to purchase my ingredients under their business name which is legal. One wanted me to bake from their kitchen and the other didn't care where I baked. For liability purposes I preferred the idea of baking from their kitchens.

I can tell you restaurants will expect your products to be priced far lower than what you charge your customers. They have greater overhead costs and have many people to pay in the process of selling, serving and cleaning up after the fact.  They are going to expect dollar store pricing I guarantee. 

I provided samples of a few different desserts. The breakfast restaurant owner wanted specific desserts and wanted me to prepare them alongside one of her chefs. The more she spoke, the more I got a  distinct impression that her chef already baked but she didn't like his recipes. I think she was really after my showing her chef my recipes and then claiming them for her restaurant. I didn't take her offer.

The Mexican restaurant owner wanted items that would suit his menu offerings.  He was good to deal with and we did a trial offering to his customers and the desserts were well received. But on the whole, his restaurant was suffering and the prices he was offering me  for my desserts were not worthwhile for me to consider.

That’s great if you can sell to restaurant, it could really bring in some nice revenue for you. About a month ago someone posted a price matrix, hopefully that will help also I have heard nothing but good thing about the cakeboss software. If the health department says no, you still maybe able to get a commercial kitchen.  Some churches and religious organizations  have commercial kitchens. Good luck

That’s great if you can sell to restaurant, it could really bring in some nice revenue for you. About a month ago someone posted a price matrix, hopefully that will help also I have heard nothing but good thing about the cakeboss software. If the health department says no, you still maybe able to get a commercial kitchen.  Some churches and religious organizations  have commercial kitchens. Good luck

That’s great if you can sell to restaurant, it could really bring in some nice revenue for you. About a month ago someone posted a price matrix, hopefully that will help also I have heard nothing but good thing about the cakeboss software. If the health department says no, you still maybe able to get a commercial kitchen.  Some churches and religious organizations  have commercial kitchens. Good luck

We sell wholesale to cafes restaurants and retail through our own kitchen.  I know things are different in different parts of the world, but we have worked out a tiered pricing system that is properly priced out and covers everything including a profit margin and a percentage for future growth of our business.

Wholesale is our base price and our Cost of Goods is under 30% which leaves 70% gross profit to cover the rest of the overheads. Retail is 15% higher than wholesale.  Wholesale price would be offered to this new restaurant customer, Retail to your normal customers.

The benefits of working out a proper pricing system is that you know you are making a profit and not just covering your costs.  It also means when opportunities like this arise you know whether they are financially worth your while or not.

Having that 15% between wholesale and retail to play with means that you have a little wiggle room when it comes to offering discounts at your discretion.  We do a lot of corporate work which is priced at the retail price, but for corporate customers who use us regularly we give them 5% off retail.  The benefit of this is we have already made our profit at wholesale and it makes them feel good - everybody loves a bargain.   The local hospital, police, and several government departments whose offices are based nearby use us regularly and we give them 5% off retail.

Don't ever do anything at cost, you are dealing with other business people who will have worked out their profit margins based on the price you quote them.  If you raise it so quickly after setting up the deal they will lose their profit margin and I suspect won't be happy about that. If you and they can't make a profit based on your prices, this is a situation that is not going to work for either of you and you both just walk away.

Selling at cost is a road to nowhere, not a path to grow your business.

Absolutely get public liability insurance if you haven't already.  We have to have $20,000,000.00 coverage, check what is necessary where you are.

No they do not have to advertise your name, once they buy your products that's it, you are out of the picture.  Not sure about where you are, but here if a customer asks, the seller has to be able to provide an ingredient list, nutritional guide, name of manufacturer etc, but they don't have to put this information on the cake displayed in the cake cabinet. We don't have Cottage Law here, so I'm sorry I can't tell you if that is necessary where you are.

As Squirellycakes says - protect your recipes, be careful if they say they want you to cook in their kitchen - there is always a catch there somewhere.

If they're fine with you baking from their premises just have them get the ingredients you need and hire yourself out for an hourly wage as a part time employee or independent contractor.  The cottage food laws no longer constrain you nor do you have the overhead and you will probably end up making more assuming you do better than minimum wage (for some you would even do better at minimum wage), but definitely keep your recipes to yourself!

WOW! Thank you al so much for all your knowledge! It definitely helps with what direction to go.