How much do I sell a sauce recipe for?

PrimeTime

PrimeTime

Hi Folks!  I have a question for anybody out there including any commercial saucers.
 
I will keep it short and sweet... Some friends of mine run a section of a commercial farm where they grow many things including a few hot peppers. They currently sell a hot sauce under their own name made with produce they grow. They have it made at a commercial kitchen and DO NOT have a recipe. I am told they "use" a recipe that the kitchen owns and I guess they pay more for that.
 
They have approached me to develop a sauce recipe for them based on their produce. Thats no problem.
 
When we get down to it they asked what sort of $ I would want. 
 
My question is pretty much do you think I should just sell the recipe at a flat rate or ask for $1 per case equivalent sold, a combo of both?
 
Any opinion is appreciated.
 
Thanks in advance!!!
 
 
 
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If you are going to develop a recipe for them, you should make it worth you time. (In the kitchen, running test batches, taste testing to the public, and all the ingredients there within). It would be great if you had a contract that would allow you a percentage from each case/bottle sold for a certain period of time, but it comes down to this:
 
Whatever you and the other party can agree on.
 
And, as the smartest man in the world once told me, anything is only ever worth what someone is willing to pay.
 
Good luck.
 
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Thanks Scovie.
 
I will get the peppers free from them and will find out what else they grow that I can work with in small test batches. That stuff should all be free in my opinion.
 
Anything I need to buy I will keep records of and should be covered, in my opinion. The time spent I need to put a price on. They are friends so Im not trying to get over on them but also not trying to give anything away. I will deliver a solid sauce that they are very pleased with.
 
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They are commissioning you just like any professional. So figure out the costs and what you want to make. Pretty simple.
 
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Thanks Boss.
 
We have only talked for a second about it so the pay is up in the air. Its a matter of if I take a lump sum or a c/e payment in my mind. I don't know how well they will sell it so Im up in the air. Of course I don't want a small payment then hear its selling like crazy..
 
Just looking for others thoughts on it.
 
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It also matters how much you believe in the proposed recipe.

If you're making them a great recipe, maybe you get a couple hundred dollars. Then they go on to be the next Tabasco & make millions from it.

What happens if they go out of business? Does the recipe revert back to you? Or can you never use that recipe again?

All considerations - your price should reflect your confidence in the recipe you've made. Maybe ask for $X cash and X% of sales?

I dunno....
 
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I guess a simple contract could state that it goes back to me in the event they go out.
 
Im wondering if there should an initial payment then something like .08 a bottle. Just throwing that number out there, no idea..
 
Ill say again. I will work with them on what they want and produce the absolute best sauce I can. I could offer a "lesser" or "simpler" sauce for a lower price i guess. Hard to say as simple sometimes is best!
 
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what happens if they don't like any sauce you make?  
 
Not that that is likely to happen, but it's a scenario~~~

I'd take an hourly rate for your development time and a small % of sales.  But that will tie you to them forever and how are you to know if they are paying you what they are selling?  Then you have to do an audit of the books....:rolleyes:..........  Lump sum upon acceptance of your recipe makes it quick and easy. 
 
 
Interesting situation.  Hope you share what the agreement is.  Not specific numbers, of course....that's up to you and how good your negotiating skills are.  :)
 
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Great points SL, thanks. I didn't think about the first scenario.
 
Im leaning towards a lump sum as I fear they won't get behind it as needed. They aren't really the hustlers that it would take for a percentage to work for me I'm thinking.
 
I have no idea what a fair asking price would be!
 
I knew I would get some great feedback here!
 
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If I do any work of any type I charge 2x-3x my hourly rate at my day job, I consider my personal time very important and compensation is needed. Any materials required for that work will be supplied or reimbursed for. Making sauces and in my case rubs for people works the same way.
 
A lump sum is a possibility but you'll have to figure a time-frame that you will complete your job/task with in certain range, think cost overruns. It's difficult to make deals with friends and family (my sister knows to have home bread ready for me when I do work...hahaha) but it's really important to keep it strictly business.
 
Some of the options by others are viable but personally I'm a cash up front sort of person....but that's me. Friendship before $$$ (people get weird when you delve into this type of venture)
 
Ok...not that much help but.... :confused:
 
OhioHeat
 
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PrimeTime said:
3x my day job hourly to make a hot sauce huh?
 
I don't even know what to say.
 
Something to think about..
 
Thanks Ohio!
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depends on your level of expertise, how quickly you can dial in the sauce, how well the sauce will work/scale up for production, how easily it will pass Process Authority reviews to get approved, how easily it will be approved by the local AJH's, how well you can work the product through all those hoops to get it to market....... 
 
OhioHeat doesn't say whether his Off-Time work is in his daytime trade or a sideline business.  Someone could be a computer programmer during the day and make hand-crafted ukuleles in their off-time. 
 
3x daily hourly rate for off-time work....I can see that.  You may not see that if you don't have the expertise to back it up for this particular project.  For our electrical business, if someone wants us to come out on the weekend....it'll cost 'em.  If I'm working on a side project that is sauce/food-related and it's interesting and I just want to do it because it piques my interest.....minimum compensation to whatever I feel like at the moment.  If I'm hired as a co-packer by someone who has an idea for a product but not a clue or resources to bring said product to market,  it'll cost, because I will be doing everything  needed to get that product to market. 
 
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I guess I can see that. As far as I know all Im doing is developing the recipe. None of the legal. Im good at sauces but there is no way I would ask a friend to pay me three times what I make in my day job per hour.
 
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3x the money is the upper end and my day job, Product Improvement Specialist(inspection) for Navistar, isn't anywhere near my love of the spicy goodness we all enjoy. I suppose I was simply implying how important my free time is and what value I bring to whatever I'm working on. I use to do photography, web design, fence building, car/semi-truck work among other things and by giving out that rate it also weeds out cheapskates and those not serious about their project(s).
 
It was simply another suggestion thrown into the hat....that's all. Honestly I'd go with a flat fee....develop 4 to 8 types of sauces. Run samples out to people get their opinions and tweek (not twerk  :shocked:  ) as needed and submit to your prospective buyers. If not having to deal with the legal aspect of all this so much the better.

hope this works out for you.
 
OhioHeat, Ed
 
(sadly I can't play a instrument to save my life and making a ukuleles does sound cool ;) )
 
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All great points Ed. I never questioned the numbers just didn't see myself asking them for that.
 
I told one part of the party we need to have a quick meeting if they are serious. We would discuss the sauce they are looking for, the ingredients, and forms of payment which include development hours. I would type up a simple contract and have them fill out a short form for what the sauce needs to be. I would do several sauces and give them to them for whatever tastings they want to do. I can then sell them any or all of the recipes for x dollars.
 
Its great to get all of the great advice from the members here and Ive decided the next step has to be a meeting.
 
I will post when all is said and done and let folks know what happened if anything at all. It remains to be seen if we are on the same page at all in my opinion.
 
Thanks y'all!
 
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Give the first few 'paid' recipes hefty price discounts - especially for friends - like maybe a couple hundred bucks.  These first paid gigs are important milestones and help establish credibility for you going forward.  Protect yourself with a simple contract that states something along the lines of:
 
"I, PrimeTime hereby release said recipe for perpetual use by X and Y people, owners of Z company, to make hot sauce till they can't or won't anymore, for the sum of $xxx.xx.  If, along the way, said recipe becomes a huge mongo smash hit with the public, selling X amount of bottles per year within the next ten years, at that time I will then be guaranteed to receive 25% of the company or $250,000.00, which ever is greater worth. X and Y people, owners of Z company, agree to manufacture this recipe to exact standards and hereby agree to indemnify me from any error in the production of said recipe.  Forsooth and witnesseth notarized here on this day, fourscore hot peppers are great"
 
My last advice is for you to advise them as to get on obtaining quotes for their own costs in the process; they're buying a recipe from you, then they're going to produce it themselves?  Or are they then going to their current hot sauce maker to have the sauce made?  Either option is likely to cost significantly more, not less.  Final product will likely be incredibly better (your recipe skills with their homegrown excellent produce) but it will also be more expensive to make/obtain.  Depending on the volume of hot sauce they currently sell per month a co-packer might not be correct - but that also might mean they need access to food safe kitchens, etc.  It's a commercial farm, do they have a commercial kitchen on premises?  So many variables.
 
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SmokenFire said:
Give the first few 'paid' recipes hefty price discounts - especially for friends - like maybe a couple hundred bucks.  These first paid gigs are important milestones and help establish credibility for you going forward.  Protect yourself with a simple contract that states something along the lines of:
 
"I, PrimeTime hereby release said recipe for perpetual use by X and Y people, owners of Z company, to make hot sauce till they can't or won't anymore, for the sum of $xxx.xx.  If, along the way, said recipe becomes a huge mongo smash hit with the public, selling X amount of bottles per year within the next ten years, at that time I will then be guaranteed to receive 25% of the company or $250,000.00, which ever is greater worth. X and Y people, owners of Z company, agree to manufacture this recipe to exact standards and hereby agree to indemnify me from any error in the production of said recipe.  Forsooth and witnesseth notarized here on this day, fourscore hot peppers are great"
 
My last advice is for you to advise them as to get on obtaining quotes for their own costs in the process; they're buying a recipe from you, then they're going to produce it themselves?  Or are they then going to their current hot sauce maker to have the sauce made?  Either option is likely to cost significantly more, not less.  Final product will likely be incredibly better (your recipe skills with their homegrown excellent produce) but it will also be more expensive to make/obtain.  Depending on the volume of hot sauce they currently sell per month a co-packer might not be correct - but that also might mean they need access to food safe kitchens, etc.  It's a commercial farm, do they have a commercial kitchen on premises?  So many variables.
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All great stuff here. Thank you SmokenFire. I like where your going with this.
 
I can report at the moment that they haven't gotten me one test pepper yet after a very very casual meeting. It seems they want me to make a recipe to use up stuff at the end of the season that they can't sell. It has started to sound like a poor idea on their end in my mind but I will still entertain a deal if they come to me with something real.
 
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PrimeTime said:
 
It seems they want me to make a recipe to use up stuff at the end of the season that they can't sell. .
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Nice idea to use up end of the season produce, but it can never be replicated.  Every season will be different, which is OK if the sauce is sold as Limited Edition 2014 etc. 
 
Without knowing exactly what produce they are growing, what about doing something picked?  That will allow for a variety of vegetables to be used, can be different every year, easy enough to process without a lot of licensing (usually).  I've used this Colorado Mix recipe several times and people really like it.  If they have refrigerator/cooler space to store the finished product, the recipe can be cold packed, which keeps the veggies crisp.
 
I'm not getting how all this would work for you if you don't know what produce you'll have to work with.  Given the short shelf life of veggies, how will you have time to do test batches?  By the time the test batch gets tested and approved for processing and selling, the produce will be gone.  If they do want to go with a hot sauce, just make it a one shot deal.  Couple hundred dollars, one batch, maybe there's a community/commercial kitchen you can rent for the day, get them to help you with produce prep and bottling.
 
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Thanks SL and trust me Im with you on every single thing you stated. I never said that they had good ideas, I was just going to offer them a solid sauce that fit the bill.
 
We shall see but Im sure it was a not so well thought out concept by them.
 
Stay tuned
 
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