Looking to buy a route

[pdxryan]

Hello i am new to the forum and sorta new to the vending business. I have only worked on a route before that is the only experience i have on a vending route. I am looking at buying a fully working vending business. The guy is asking 70k for it, it has 30 machines at 22 locations. He provided a financial statement listing the assets and expenses. On paper it says its bringing in just short of 100k a year with 67% of that going to expenses. A few problems  i see are 12 of the machines are seaga which after spending 10 mins on the forum sounds like they are total junk. i could post the financial statement i was giving but not sure that its allowed or the proper thing to do, im not sure. what im asking is does this sound like a good deal and someone let me know if they need to see the statement to get a better understanding.

[QuikVend]

If it were me, I wouldn't consider it. With nearly half the machines being Seaga, you're going to have to replace them due to lack of replacement parts.

I'd also caution you to maybe start smaller, just to be sure owning your own vending route is something you actually want to do. There's a big difference between running a route for someone else and owning a route with 22 locations. That can be quite a bit to take on at once and could cost you quite a bit of money if you're not truly ready. 

[CajunCandy]

Pass!

To many china made machines! One or two maybe but not twelve!

Keep looking.

cajun

[CapitalCityVendingLLC]

How close are the accounts to one another?  Do you have a vehicle to work the accounts?  When the seaga's break down, are you ready to wrestle with them and eventually replace them?  

 

Just shy of 100k is pretty good for 30 machines.  That's a 3k/machine average which is pretty solid.

 

When I buy an account, or a route, the first thing I look at is the equipment.  If/When the account dies or something happens, the equipment can be picked up and relocated.  Almost half of the machines being Seaga's would worry me.  Second thing I look at is the actual account.  Once again, it looks like these are pretty good accounts for the most part.  Then I look at the other things like the questions I listed to start off.

 

Putting an exact value on the route however is rather difficult....

 

Let us know how it all ends up

[AZVendor]

If he is trying to tell you that a route of 30 machines where 1/2 are Seagas is doing $100K per year then he's making up his numbers and trying to pass this off as a viable route.  I can also say that 67% expenses is kind of high depending on what that includes.  You need to see P&Ls from him and some bank records to prove his receipts.  If he can prove his numbers then you can probably improve the sales when you upgrade the Seagas to real machines, but that costs a lot of money.  In that case you'd need to buy it with virtually no value on the Seagas which he certainly won't go for.

[pdxryan]

Thank you for all the replies i really appreciate it. This is something i really want to do and grow. I am prepared to work really hard. here is a p&l i guess these numbers can be confirmed thru USA Live. i removed the names of the locations and the serial numbers for privacy  

[lacanteen]

It would be worth 50-60K with main stream equipment. As they say on Shark Tank: "I'm Out"

[Magiccity726]

I may have brought this up in a previous thread but isn't the asking price for a route typically 3 years gross plus equipment? In South Florida this is what people say. 70k for a route that grosses just under 100k sounds pretty good unless the equipment needs to be replaced. Something seems a bit off to me. 

[pdxryan]

i am in the process of going to each location and over looking the machines. so far each one seems ok. i also thought it was a to good to be true situation. but its two partners who own it one is moving on in life after a divorce. the other partner really just wants someone to buy out the partner and is ok with being a hands off partner because he does not have time for this business so he is open to selling it all.  

[Magiccity726]

So is it 70k to buy out the partner or 70k to buy the whole route? I started off working for a vending company too. It's a lot more stress but it's better in the long run. You have to transition from being a technician into being an owner. 

[pdxryan]

70k for the whole thing 35k if i wanted to keep the partner 

[Magiccity726]

67% expenses seems really high. 70k for the route seems low to me but they're much more experienced people on this board than me. 

[AZVendor]

There are only 9 machines I would ever own on this list - the USIs, AMS's and whatever the Coke machines are.  It's very obvious that these inexperienced vendors bought their equipment at The Discount Vending Store in Florida where they see all old folks retiring there as potential targets.  This is the only web presence for "Fortune Resources."  This is all crap, poorly built and overpriced imported junk.  The Jofemar machines are from Europe (Spain or Israel as I recall) and they are good but they're not sold outside of the Florida area so there is a small installed base.  The fact that they are making money with these garbage machines is pretty impressive unless they are faking their numbers.  With the details they are showing they probably are reporting real numbers but you need to see it proved by bank deposits mirroring what they are claiming.  

The equipment is probably working well but it won't be long before the repairs and lack of parts availability for these machines becomes very expensive.  The partnership thing is a disaster waiting to happen so don't even consider it (look at what it's doing to these two guys).  In their expenses the labor is meaningless as their time isn't worth anything, as the saying goes.  If they are paying themselves only $325 per week then that proves it's not making money.  Their product cost at 44% is way too high so their prices are too low.  They are likely doing this as healthy vending and those product costs are ridiculously high requiring higher than average prices.

Now to the nitty gritty.  They are valuing the machines at a startlingly realistic price of $1600 per machine which is lower than I would have expected, but these are probably a year old or so.  The problem is they are also attaching a value to each machine placed ($450 and 700 per) which is bogus though there is no rule of how to value a business.  That's just them trying to get their investment of $70K back, in case you missed that number on the page.  I wouldn't give more than 50% of annual gross sales and then only if the numbers are proved.  As I've said, you're getting subpar machines that WILL crap out on you sooner than American made machines (don't buy into the claim that Seaga is American made - all the parts are imported).  

[Southeast Treats]

Lots of red flags here, I do see that it looks like most machines are online... do they all have credit card readers?  That is a 6 month sales summary, if they did a full 6 months it means that any machine showing sales less than 1,300 for the period is selling less than 50 per week.  I see several that are not even getting close to that.  Where is the monthly expense for online service listed?  They are including a vehicle (be prepared to pay tax, tag, impact fees and insurance over the cost of the purchase for the vehicle).  Are the machines listed as "coke" owned by them or loaned from the bottler?  No value to you for loaned machines, but a built in bottler relationship has good and not so good points if it exists.  Need to look at the sales tax they are reporting and see if it jives with the local sales tax rate.  I think their overhead is too low overall, I would be digging.  Are they working out of home or do they have a warehouse/ storage unit? (and where will you work out of???)  I agree the per location charge is bogus, they may have paid a locator but that is done, you are buying the business including those locations.  Be careful about inventory valuation, much of what they leave you may be short dated or out of date.  How often do they service these accounts?  Small machines with big sales = too much service time and cost.  And all of those off brand machines are very troubling... bottom line here is MAYBE pitch them a lower offer and sit back.  When no one else buys it for what they want they will be calling, you just have to decide if it's worth any offer at all. 

[Southeast Treats]

By the way, sales tax in Florida is 6% minimum, higher with local options taxes in most counties, they are showing tax AND expenses at only 4% of revenue.... do your due diligence, if you are serious about wanting to buy ask as many questions as you can.  There should be at least 2,000 in credit card swipe fees and monthly fees if the credit number is correct, where is that shown?  Do they own or lease the readers? Owned readers would have value, if leased where is the monthly payment for that and how much is it?  How long until you would own the readers?

[Southeast Treats]

I just keep thinking of more stuff.... they have a van, where is the insurance cost?  How much is that, and how much will insurance cost you?  Repairs and maintenance for the van?  Business liability insurance, they may not have it, will you? (That is not as expensive as you might think, shop around).  Business licenses?  Telephone?  Do they pay commissions to any of their accounts?  How do machines get moved when needed? 

[AngryChris]

I completely agree with Southeast Treats.  The first thing I said when I saw that report was... "They have a credit card reader on ALL 30 machines? Where are the credit card fee expenses? The wireless connection expenses?"  I looked more and they simply rounded up saying they get 25 mpg in a LOADED van (to do $2,000/week, that's a lot of product in a minivan).  250 miles per week means the accounts are pretty spread out.  The 30 hour time might be right, but why wouldn't someone show ACTUAL fuel expenses rather than just calculating it all out?  How come there is NO expense for parts and repairs? Even new machines have problems.  I would find it hard to believe that, with 30 machines, there has never been a repair expense.

All in all, a few things seem really shady about this.  Are the numbers REALLY backed up by USA Technology's report?  Or did they make up their own report?

I could be wrong but it seems to me like they are fudging the numbers.   Let me ask you this: When you checked out the machines, were they stocked with product with good dates? Did they ALL have credit card readers? Did the locations seem to have enough employees/customers to support such sales figures?  Did you guys restock the machines when you looked at them? How stocked was the van?

[pdxryan]

6 hours ago, Southeast Treats said:

Lots of red flags here, I do see that it looks like most machines are online... do they all have credit card readers?  That is a 6 month sales summary, if they did a full 6 months it means that any machine showing sales less than 1,300 for the period is selling less than 50 per week.  I see several that are not even getting close to that.  Where is the monthly expense for online service listed?  They are including a vehicle (be prepared to pay tax, tag, impact fees and insurance over the cost of the purchase for the vehicle).  Are the machines listed as "coke" owned by them or loaned from the bottler?  No value to you for loaned machines, but a built in bottler relationship has good and not so good points if it exists.  Need to look at the sales tax they are reporting and see if it jives with the local sales tax rate.  I think their overhead is too low overall, I would be digging.  Are they working out of home or do they have a warehouse/ storage unit? (and where will you work out of???)  I agree the per location charge is bogus, they may have paid a locator but that is done, you are buying the business including those locations.  Be careful about inventory valuation, much of what they leave you may be short dated or out of date.  How often do they service these accounts?  Small machines with big sales = too much service time and cost.  And all of those off brand machines are very troubling... bottom line here is MAYBE pitch them a lower offer and sit back.  When no one else buys it for what they want they will be calling, you just have to decide if it's worth any offer at all. 

Im pretty sure he only showed the last 6 month on this report because about 9 months ago they bought out a smaller route for dirt cheap ( i guess the guy was a drunk and not servicing the machines and a business location called them to service their business.  there is a lot more detail to the story but way to much to explain). They all do have card readers except one and they do own all the readers. i was also curious about the credit card fees and such i have that as a question i need to ask them when i meet with them. the coke machines they own but do have agreement where they have to buy the soda from coke for those two machines. He also did say he will show the sales tax they have been paying. they are working out of 2 storage units right now and i would be moving to my home i have the room for all product and spare machines. i think they do have a problem with small machines with big sales because they have a few accounts they have to service twice a week and ive all ready looked at replacing those machines with bigger ones. the have a employee they are paying the 325 a week and i talked with him he said they never throw out expired product it gets used before it expires.  I think the real value in this business they have are the locations they have some good locations like a college and a few trade schools, dealer ships and tire places and such. 

[AZVendor]

Just a warning here, if they are required to purchase a specific amount of Coke products direct from Coke then they DO NOT own the Coke machines, regardless of what they have been told.  Look on the side of the door on those machines and you'll find Coke asset tags.  Call the local Coke bottler with those asset numbers and they will tell you who owns the machines.  If the vendors do own them outright then they can purchase their product anywhere they wish - and put any product in the machines they wish. The guy they are paying $325 a week to is a waste of money and you need to can him immediately.  This just goes to prove my idea that these partners are probably retired guys who don't want to work.  It's no wonder this is up for sale.

[pdxryan]

thank you i will look into that for sure.. and yeah day one i would fire him and i would do the work my self 

[rebelwithoutaclue]

d to servI tried 6 saega machines at 7 grand which had approx. 1 grand f product in it. irst month I took in almost 2 grand  but it took me timewise instead of 2 hours I thought it took me over 3 hours. Instead of beign able to service it once every 10 daysi had to service it  one every 6 days. traffic instead f figuring it would take a hour ; was about 12 miles away but construction; took 3 hours roundtrip/ I don't hae a garage and didn't figure going to cosco which added onn another one hour. I own a strore and was neer able to do it on a wed afternoon.always had to be on my one day off or llare at night.  was a time monster. was a lot of lugging.  constant amount of supers  wanting free product. in a year andnd a half  2 compressors broke down 800 bucks later. 3 plexiiglsses broken, a few electrical problems. one costing severall hundred dolllars. the management company who was getting 10 percent wanting 15 percent and auccusing me of cheating hen the winter months I ould take in about a grand a month.. the summer months having to ervice every 5 daysbecause they ddint hold that much in a laundry room which was 100  degrees. a fire where 2 machines were  kept them out of commission for 6 weeks.  It made 5 grand in sa year but  that came oout to about 100 nucks for 6 hours of time. Thhe management woud call me if one machine was out of pepei but had coke. Insurance cost approx. 1500 grand also.   I ended up selling the machines without the route because they insisted I get my golpher down there twice a week and wanted me to service twice a week. I  Owna retail store with grueling hours. don't do this part time.   Ended up selling the machines for 1700. done and have 6 -8 morehours more a week sparetime

[Southeast Treats]

Don't be too quick to fire the only guy who actually knows the route!  And if you do buy this, plan on the expense of changing all the locks as soon as the driver is gone (so he never has your new key!).   No telling how many people have access to the machines right now....

[pdxryan]

any recommendations  where i can buy new locks. 

 

[AZVendor]

I can send you new locks if you'll email me at rbepic4gatgmaildotcom.

[pdxryan]

thank you i will email you for sure after the new year. if i can hash out a deal on this route ill be buying it in january