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What would you do in this situation?


GagesVending

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About 5 weeks ago I placed a Beaver way rack at a Mexican restaurant.  The owner was not in at the time; but I spoke to the manager, who said yes to my 25% commission offer.  Today I went in to service and the owner approached me and asked what the deal is with the rack.  I told him that he receives 25% and he quickly told me that it's not enough.  I asked him what he thought was fair and he said 40%.  I told him that I can't make any money at that rate; so I told him I could pay 30%, but he said the lowest he would accept is 35%.  I explained that I would need to raise the prices from 25 cents to 50 cents; which I felt may decrease the sales.  So, figuring I'd need to spend a small fortune on new mechs, I  asked him if I could instead replace it with a larger rack (7 way) and he said no!  Even though there was more than enough room, he does not want a larger rack.  

 

Bottom line:  The 4 way grossed $40 for 5 weeks at 25 cent vend (3 toys, gumballs).  Should I pull the rack or simply replace the mechs?  Being that it is definitely not a premium location, I don't feel that it is worthy of paying such a steep commission rate...what do you think?  I'd appreciate everyone's input!

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For starters, we couldn't hand-pick a worse time of year to evaluate a location.  I have a location that's routinely $300/month pull $135 the last four weeks.  This could be a $80/month place and you don't know it yet due to holidays.  Improbable?  Yes.  But not crazy.  Especially if the sales don't seem to match the foot traffic you're seeing.  

 

I'd upgrade to 50 cents (less for the location and more for the fact that you need to do it anyway), keep the location until March and pull it if sales remain flat.  

A bigger issue is the fact that the owner doesn't really want you there, so monitor that.  My relationship with the owner can be the swing vote in borderline locations like this.  I don't need marginal sales AND you crawling up my a$$ every month when I come to service.  I don't think you're losing much by walking away either.  Start locating this machine elsewhere ASAP.  Nothing provides better clarity to situations like this than a $70/month location that's happy to have you there.  I don't think there's a wrong decision Gage.  

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I recently placed a charity machine, located by a locating service, and when I showed up the guy working there (not sure if it was the owner, a manager, or just a waiter) demanded 35% comission. He doesn't know it yet, but he'll be paid on net; and if he doesn't like it I'll pull the machine.

 

As for your question about mechs, you've introduced the machine at 25 cent vend price. I wouldn't swap to 50 cent vend price unless you roll out some new products. I once upgraded some machines to 50 cent mechs without changing product and my sales plumetted. Don't do that. People won't buy the same product for twice the price. In the best situation, you would have done the mech swap before the machine was installed, but you have what you have and will have to deal with it as best you can.

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Pay a rate that will still make you money. Honestly you should be at .50 on the bottom and .75 on top anyway. If not even at. 30% it's too tight the cost of business has went up. The volume of the location should have little to do with the rate because if there is no profit in the deal that won't change much with more volume

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I recently placed a charity machine, located by a locating service, and when I showed up the guy working there (not sure if it was the owner, a manager, or just a waiter) demanded 35% comission. He doesn't know it yet, but he'll be paid on net; and if he doesn't like it I'll pull the machine.

 

As for your question about mechs, you've introduced the machine at 25 cent vend price. I wouldn't swap to 50 cent vend price unless you roll out some new products. I once upgraded some machines to 50 cent mechs without changing product and my sales plumetted. Don't do that. People won't buy the same product for twice the price. In the best situation, you would have done the mech swap before the machine was installed, but you have what you have and will have to deal with it as best you can.

 

His sales can't plummet though.  He's averaging 2 bucks a week per head and it's only been there 5 weeks.  The vast majority of vends at a restaurant are external customers so he's fine to move to .50 without changing product.  

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Thanks for all of the replies guys!  I really like Rick's idea about waiting until March to decide to pay or quit.  Some of my sales were half of standard collections; but there were a couple that were almost double.  Too unsteady time of year right now to make a final decision.  I'll go with that idea.  In the meantime, I'm going to find some Beaver 50 cent mechs to replace on my next service.  I almost always change toy products each service.  

 

Something I thought was very odd was, they already gave me a business card with the restaurant phone number on it; but he insisted that I take his cell phone number as well.  He said in case I have any questions for him, to give him a call...only question I had was if I could upgrade; so I'm not sure what he meant by it.  Is this typical or do you have any ideas as to what he what thought I would need to contact him for?

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He probably just wanted to make sure that any and all  communication with his business went through him directly and not his staff. He may be thinking that you may want to revisit the equipment upgrade topic or bring in a different type of machine at some point down the road and he wants to have the final say on that. Pretty apparent that he wasn't happy with the deal his manager set up.  I agree with leaving it there for a while. I have had some locations that were contentious at best in the beginning that have turned into to great locations that are pleasant to service now.

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He probably just wanted to make sure that any and all communication with his business went through him directly and not his staff. He may be thinking that you may want to revisit the equipment upgrade topic or bring in a different type of machine at some point down the road and he wants to have the final say on that. Pretty apparent that he wasn't happy with the deal his manager set up. I agree with leaving it there for a while. I have had some locations that were contentious at best in the beginning that have turned into to great locations that are pleasant to service now.

That makes sense! He seemed like a decent person; but was definitely greedy to say the least. I will keep it there until at least march (unless it gets kicked out) and go from there. Thanks for the input!

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Something I thought was very odd was, they already gave me a business card with the restaurant phone number on it; but he insisted that I take his cell phone number as well.  He said in case I have any questions for him, to give him a call...only question I had was if I could upgrade; so I'm not sure what he meant by it.  Is this typical or do you have any ideas as to what he what thought I would need to contact him for?

 

Look at it from his point of view.

In his opinion, his manager already negotiated a bad deal in accepting 25% commission rather than the 35% the owner was able to get out of you.

So, he may consider his manager a chump...a chump who is great at running a restaurant but not at cutting a deal.

So, by giving you his cell ph#, maybe he hopes to handle all further negotiations with you himself (should any come up) rather than risk having his manager make another "bad deal".

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Look at it from his point of view.

In his opinion, his manager already negotiated a bad deal in accepting 25% commission rather than the 35% the owner was able to get out of you.

So, he may consider his manager a chump...a chump who is great at running a restaurant but not at cutting a deal.

So, by giving you his cell ph#, maybe he hopes to handle all further negotiations with you himself (should any come up) rather than risk having his manager make another "bad deal".

 

 

I suppose you're right.  He owns about four other restaurants so if I were him, a small bulk rack at one location would be the least of my concerns!  (Especially when his changing things up upset me almost enough to leave altogether)  The extra $4 would not be enough for me to worry about but hey, I guess everyone's different.

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I suppose you're right.  He owns about four other restaurants so if I were him, a small bulk rack at one location would be the least of my concerns!  (Especially when his changing things up upset me almost enough to leave altogether)  The extra $4 would not be enough for me to worry about but hey, I guess everyone's different.

 

The restaurant business is no joke.

He didn't get to be the owner of several restaurants by not sweating the little things.

 

An old mentor of mine used to always tell me -- watch your pennies and the dollars will take care of themselves.

 

Had you left, he wouldn't need to wait long before someone else with similar equipment would be offering their services...and giving him the commission he asked for.

Owning a few restaurants, he or his managers probably get pitched bulk vending machines every week by phone or in person.

 

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The restaurant business is no joke.

He didn't get to be the owner of several restaurants by not sweating the little things.

 

An old mentor of mine used to always tell me -- watch your pennies and the dollars will take care of themselves.

 

Had you left, he wouldn't need to wait long before someone else with similar equipment would be offering their services...and giving him the commission he asked for.

Owning a few restaurants, he or his managers probably get pitched bulk vending machines every week by phone or in person.

 

I agree with you 100%.  I stayed in and agreed because I didn't want to lose the spot to the competition.  May even lead to taking over the other locations too; just never know.  The thing that still upsets me is that changing up the agreement is simply bad business; so it leaves a bad taste in my mouth.  I guess I can chew some gum to solve that problem for that now though! B)

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O K here's my thoughts. Call him and schedule an appoint. When you meet with him collect the money in the machine and divide it at 25%, show him how much you take and his take then take out the cost of goods and divide it again and show him the diff.. Explain that there is little profit in vending and you have the expenses of ordering, stocking , fuel and such. If he's the business man he's suspose to be he should understand. Then explain that if he still wants you to go to 30 or 35 then tell him that it would take a contract for all his restaurants and what ever machine you see fit to put in each place. I believe that most other vendors would play those cards to get all 5 of the locations. Good Luck 

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I start out offering the highest comission I can afford to and still make money. I don't want to get booted over some competitor offering a few bucks more its not worth the hassle if I can't make $ at a comm rate they will accept forget it there's always ppl in this biz who will lie and claim they are paying 50% of gross or what ever, next time u pay make an appt to pay the owner direct, tell him this isn't a lot but I hear u own 3 more places, wouldn't u like to make 3x more than this? Let me place equipment there...if he balks explain how much is he making now? Zero...u have to pay rent on every sq ft of space shouldn't u try to maximize income from every sq ft,especially at no cost. Ask him its free $ what's he see as the down side...be prepared to answer his objections!

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  • 1 month later...

Update:

 

Just yesterday I serviced this Mexican restaurant for the second time.  It was consistent in numbers; about $42 this time.  Owner was nice, but I can tell he's going to be annoying.  (He asks too many questions like what other toys I have, etc.)  I upgraded the prices on toys here to 50 cents finally; so we'll see what happens.  Gumballs still at 25 cents and I probably won't change that.  There's no competition still here, so I'm thinking it shouldn't impact the numbers too bad.

 

Does anyone have experience with 1" at 50 cents in a location that has a competitor selling comparable 1" toys at 25 cents?  If so, I'd like to hear your findings.  I'm considering this at a couple shared locations.

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I think that that would really hurt your sales.

 

Update:

 

Just yesterday I serviced this Mexican restaurant for the second time.  It was consistent in numbers; about $42 this time.  Owner was nice, but I can tell he's going to be annoying.  (He asks too many questions like what other toys I have, etc.)  I upgraded the prices on toys here to 50 cents finally; so we'll see what happens.  Gumballs still at 25 cents and I probably won't change that.  There's no competition still here, so I'm thinking it shouldn't impact the numbers too bad.

 

Does anyone have experience with 1" at 50 cents in a location that has a competitor selling comparable 1" toys at 25 cents?  If so, I'd like to hear your findings.  I'm considering this at a couple shared locations.

I think that would really hurt your sales.

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I have one location where I have 4 1" heads and a competitor has 2 (at 25 cents) plus a 2" (at 50 cents). I run 2 25 cent heads (bouncy balls, etc) and 2 50 cent heads containing much better toys than hers. She runs junk that I don't even know where she buys it. I do fine there, but not spectacular. I usually do almost everything at 50 cents but because of the competition I put in a few 25 cent heads with my cheapest toys to grab some of those quarters.

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Update:

 

Just yesterday I serviced this Mexican restaurant for the second time.  It was consistent in numbers; about $42 this time.  Owner was nice, but I can tell he's going to be annoying.  (He asks too many questions like what other toys I have, etc.)  I upgraded the prices on toys here to 50 cents finally; so we'll see what happens.  Gumballs still at 25 cents and I probably won't change that.  There's no competition still here, so I'm thinking it shouldn't impact the numbers too bad.

 

Does anyone have experience with 1" at 50 cents in a location that has a competitor selling comparable 1" toys at 25 cents?  If so, I'd like to hear your findings.  I'm considering this at a couple shared locations.

Yes, we have .50 near .25 and from what we can determine, we are the only ones making any money.

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I have one location where I have 4 1" heads and a competitor has 2 (at 25 cents) plus a 2" (at 50 cents). I run 2 25 cent heads (bouncy balls, etc) and 2 50 cent heads containing much better toys than hers. She runs junk that I don't even know where she buys it. I do fine there, but not spectacular. I usually do almost everything at 50 cents but because of the competition I put in a few 25 cent heads with my cheapest toys to grab some of those quarters.

 

What are you running at .25?

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What are you running at .25?

 

Bouncy balls (I loaded up at 4 cents a ball from a local vendor getting out of the business - when I have to pay regular prices plus shipping I'm not sure if I'll keep them at 25 cents), various junky rings, spongebob tattoos (don't sell for me at 50 cents, barely sell at 25 cents), and I just started creating a 25 cent mix with some of that same stuff.  That's it - everything else is 50 cents.

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Bouncy balls (I loaded up at 4 cents a ball from a local vendor getting out of the business - when I have to pay regular prices plus shipping I'm not sure if I'll keep them at 25 cents), various junky rings, spongebob tattoos (don't sell for me at 50 cents, barely sell at 25 cents), and I just started creating a 25 cent mix with some of that same stuff.  That's it - everything else is 50 cents.

 

Thanks

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I have moved several 2 inch capsule machines from .50 cents to .75. You have to be prepared for it. Costs are relatively the same you are just ordering less and moving less product for about the same revenue in most places. I will be moving them all back to .50 cents. I just feel better moving more product. Easier for me to do everything that way.

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About 5 weeks ago I placed a Beaver way rack at a Mexican restaurant.  The owner was not in at the time; but I spoke to the manager, who said yes to my 25% commission offer.  Today I went in to service and the owner approached me and asked what the deal is with the rack.  I told him that he receives 25% and he quickly told me that it's not enough.  I asked him what he thought was fair and he said 40%.  I told him that I can't make any money at that rate; so I told him I could pay 30%, but he said the lowest he would accept is 35%.  I explained that I would need to raise the prices from 25 cents to 50 cents; which I felt may decrease the sales.  So, figuring I'd need to spend a small fortune on new mechs, I  asked him if I could instead replace it with a larger rack (7 way) and he said no!  Even though there was more than enough room, he does not want a larger rack.  

 

Bottom line:  The 4 way grossed $40 for 5 weeks at 25 cent vend (3 toys, gumballs).  Should I pull the rack or simply replace the mechs?  Being that it is definitely not a premium location, I don't feel that it is worthy of paying such a steep commission rate...what do you think?  I'd appreciate everyone's input!

Get out of there, now, fast!

80 USD for 4 machines is not very much. 35% comission is just plain too much, That means that you will be spending 20-30% in candy/gumball + 35% comission= 50%. This means that you are pocketting only 40 USD, now substract gas to that one. So you will be getting 10 USD per machine!!Which is very little.

Besides the restaurant owner doesnt seem to be a nice guy to make business with. So you will have to deal with him and his questions and everything that annoys him bc of your machines, etc, etc. The list is endless. Get out and fast!

One important thing is which kind of people are you dealing with!

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