The Bottom Line
Make In-House vs. Sourcing Elsewhere
‘Homemade’ is a big industry buzzword, motivating eateries across the country to shift a lot more work to in-house production. On the surface, this should boost the brand. Homemade items garner trust, showing that your restaurant dedicates time and attention to every aspect of its menu. Outsourcing, on the other hand, might give people the impression that you cut corners.
But while it’s a nice touch, ‘homemade’ isn’t for everyone. Oftentimes it falls back to your core customer, your price point, and the direction you want to take your establishment.
Whether you’re opening up a brand new place or looking to tweak your menu to fit the trend, consider a few points before directing your chefs on one particular trail.
What is the in-house production cost?
On the surface, producing in-house is cheaper than sourcing elsewhere in the same way that guests save money by cooking in instead of going out to your restaurant. Think beyond the basic food costs, though, to assess whether producing a certain item is worthwhile. Let’s say that you’re revamping your dessert program and want to add cheesecake to the menu:
• What additional ingredients do you now need to buy in order to make cheesecake? What are the operational costs associated with this expansion?
• Do you have the necessary storage capacity for cream cheese, graham cracker crumbles and extra butter? How will this affect your utility bills?
• How many hours will your staff spend making cheesecake? Will you have to hire an additional chef?
Compare these types of line items to your current liabilities. Food costs, labor for loading/unloading, logistics behind deliveries and storage are all factors to consider. From the very beginning you should know how any operational changes will affect the bottom line. You consider outside measures to evaluate ROI from there.
Does the outside source have brand appeal?
Sourcing from a renowned brand can be a big advantage, drawing in customers that might not otherwise have walked in through your doors. If you want to serve cheesecake, The Cheesecake Factory is the obvious brand partner of choice. Tread carefully, however, as these types of contracts often come at a price. Consider the following points to determine your ROI:
• Compare the cost of a brand partnership with that of other third-party vendors. How many more cheesecake orders will you have to sell on a weekly basis in order to break even?
• Consider your restaurant’s previous dessert category sales. Do you see potential from a brand-name partner to significantly lift the category as a whole?
Sometimes a brand-name partnership can be all a restaurant needs to differentiate itself from its counterparts. And even if you have the budget, these partnerships should be kept to a minimum. You want your restaurant to retain its own identity.
What would your guests think?
If your restaurant aims to serve self-righteous millennials, then homemade is a surefire way to win over customers. Conversely, if you’re a roadside diner and attract a largely price-sensitive visitor base, you’re not going to turn too many heads by promoting yourself as a ‘from scratch’ restaurant.
Think critically and truthfully about your core customer, and whether you want to keep them or change your brand to attract a new profile. A roadside diner could recognize major money coming in the surrounding area, and may want to transform into a premium brand as part of the transition. In this case, homemade cheesecake from natural ingredients would be a nice touch, if promoted correctly. All else equal, however, outsourcing cheesecake from a typical food vendor will reduce overhead without as much as a second glance from your loyalists.
Whatever decision you do make, it should drive sales over the long term. If you are deciding whether to make an item in-house or outsource it, track sales data for that item a few months prior to the transition, then monitor sales over the next year to account for seasonality. From there you can evaluate if the change was worthwhile.
If you’re looking for a complete rebrand, be sure to pace yourself in a way that you and your team can handle. A bustling kitchen may not adjust easily to making all of its sauces in-house at once. Taking things step by step and measuring results will allow you to properly move in the right direction.