Do you think this will work?

[Zigzag Vending]

I am looking to purchase part of a route from a vendor that is retiring for health and age, but every time we start to talk about the route, he gets defensive. It's hard to tell if he wants to sell, or if he just HAS to sell. And he mentions again and again that he has had "interested: people in the past look over his route and then place competition racks in his locations. That may be why he's acting so skiddish, too. I'm really interested, but I need to know things, like (1) what is he asking for down payment (he's mentioned being willing to take a down and then receiving the rest as I earn it from the machines since I'm fairly new and don't have much working capital) (2) What town, how many machines, what types of machines, because hes already stipulated that I will have to bring my own locks so I dont have access to his other machines. (3) Total asking price.

Do you think I could write up (type) a non-compete for the stores I'm specifically looking at? That way we both have a copy and he knows I wont cause trouble, even if I decide not to buy. Would something like that work for one of you seasoned veterans if you were in his shoes? 

[zjtaylor]

If I were really crazy about it I would be willing to sign the non-compete. I would also appreciate the fact that the other vendor would want to do that and that he was serious about buying. I would also do the down payment thing but make sure you have some kind of document unless you guys really trust each other.

[gumball guy]

         I have been down this road with aging operators and frankly it is tough for many of them to let go of their business hence the cat and mouse games. Any operator who has been in business any length of time knows that he has to let a potential buyer look over things such as locations and equipment in order to make a reasonable offer on the business. I would never sign a non-compete or even suggest it in a situation like this. I would stay in touch with him and be friendly. Don't pressure him and just make it clear that when he is ready to sell you are really interested in buying it even if it is small portions. Finally, be prepared for him to come at you with a ridiculous price and don't be afraid to walk away if you can't get a reasonable price from him. If you walk away be nice and do it on good terms because there is a good chance he will come back to you down the road with a more reasonable price. Good luck and be patient.

[musser]

Anyone selling a route that does not require a non compete mon disclosure would be an idiot. Serious buyers and sellers also would sign a purchase agreement. I'm not talking about someone with just a couple of machines and locations. There are way to many dishonest people not to be vigilant. Another big issue is that most " buyers" don't actually have any money, selling a business that is as hands on as bulk vending not something you want to extend credit in.

Remember too that the value of a route is not in the equipment but the locations. a route can have the best machines in the world but if they are all at crappy locations what you really looking at is a bunch of machines in far flung storage units.

[gumball guy]

     Everyone here has their own preferences when it comes to buying bulk vending routes and I say do what works for you. I base my offer primarily on the equipment plus what it would cost me to hire a locator (or myself) to place it. There are other factors that can come into play such as what commissions he is paying if any, if the machines have been serviced regularly or are they in distress etc... . At the end of the day your only tangible asset is the machine so if it is junk or really tired that should definitely influence the price.  Example: You wouldn’t pay as much for a Vendstar as you would a Northwestern Triple Play would you? Of course not and that’s my point. If a route for sale has excellent equipment (Oak, NW, Eagle, Beaver) I know that I will be able to use that equipment for decades whether it be in that location or somewhere else and i would be compelled to pay more for it than i would for a Vendstar route. I agree that the location is important but when you are buying a big route you usually take the bad with the good. And many of these routes have their fair share of bad! Again that is why I go heavy on machine valuation when buying a route because I know that down the road I will be redeploying slow location machines elsewhere. In the bulk vending business nothing lasts forever,especially good locations and you ride the wave as long as it lasts so I am rarely going to pay a huge premium for a location. Remember that the location can kick you out 5 minutes after you buy the route and you are especially vulnerable to this happening if the route has been neglected before you bought it.

     I have bought lots of routes over the years (several large routes included) and have never signed a non-compete. The truth is if you have the cash it puts you in the drivers seat and most people will sell without a lot of fuss. Like Musser alluded to most people don't have the cash to buy a large route out right so once a route owner is exhausted by endless tire kickers they will often jump at an all cash offer. I have signed a non-disclosure when negotiating because people are sharing proprietary financial information and there is no down side for me in doing that. I, as a buyer, would never suggest a non-compete to a seller because there is no upside for me. If you do sign a non-compete you better make sure your attorney reads it thoroughly so you are aware what all the stipulations are especially if the deal goes south. You don’t want to inadvertently impede your ability to be competitive in any geographic area in the future if you can avoid it. Again, be nice to the guy. Ask him for advice as it will benefit you and it may compel him to work with you on a deal for the route.  Just be smart and do your due diligence before signing anything.

      One of the biggest reasons people fail at bulk vending is because they don’t understand that losing locations is an integral  part of the business. Successful full time bulk operators are constantly locating either because they lost a location or have an under performing one.  Many people are under the delusion that they will place a machine and it will be there for 30 years spitting out money to them like a cash machine. Next thing you know one place has a new manager....get it out! Next place says they no longer have room....get it out!  My personal favorite "nobody uses it anymore" as your pulling out $20 bucks in quarters....Get it out! Then the depression hits and you have machines half full of candy filling up the garage. That's bulk vending folks and that's when you need to hit the bricks and get those machines back out. Moral of the story......If you are filling up your shop, garage or a storage unit with idle machines the only one you have to blame is yourself.  

[musser]

Gum guy I agree pretty much with you. I guess I simplified too much. Yea equipment makes a difference. I guess my perspective is this: there is a guy that I have been dickering with for about four years. He had at one time one of the largest routes in the state. Ok so I have over time figured out mist of his business. Now, knowing a lot about his equipment I wouldn't buy the route at any price. The equipment all needs replaced. Sounds odd I know but the income he is getting would never pay for the replacement of the equipment. He makes money because he doesn't spend any and is milking what is left of the business. I tend to emphasize income because if the income is high enough you can up grade, if not you are better off locating your own machines.

charity is different than commercial. Commercial locations often have benefit of contracts. Charity is ok too if it is maintained because it is so spread out, there is safety in numbers.

[gumball guy]

I had a very similar situation last year. Great old guy but couldn't come to terms initially. I realized that he was the owner of alot of unmarked derelict equipment in some of my areas. He called me a month later wanting to make a deal and i respectfully declined for the same reason you stated. He will end up riding that route down to nothing. I agree completely that commercial is a different story than charity, especially if you have chain locations.