Newbie with question on purchase of route and machines

[ASVG]

I AM A NEWBIE IN THIS BUSINESS AND WAS RECENTLY LOOKING FOR AN INVESTMENT OPPORTUNITY THAT I COULD FIND. I FOUND A GUY THAT IS SELLING A VENDING BUSINESS IN THE CHICAGOLAND AREA AT WHAT SEEMS A FAIR PRICE FOR A GOOD PROFIT. JUST NEED SOME ADVICE ON IF THIS SEEMS LIKE A GOOD DEAL FROM PEOPLE WHO HAVE BEEN IN THE BUSINESS FOR A WHILE. BASICALLY THERE ARE 6 MACHINES. THE ANTARES "OFFICE DELI" MACHINES (2 YEARS OLD). ALL WORK GREAT AND HAVE NEVER HAD ISSUES BESIDES THE OWNER NEEDING TO REPLACE A COMPRESSOR FROM WHAT I KNOW. ALL 6 MACHINES ARE ON LOCATIONS THAT BRING IN A TOTAL OF AROUND $2600 A MONTH. I HAVE A SPREADSHEET FROM PAST 2 AND HALF YEARS FROM WHEN HE BOUGHT THE MACHINES. THE LAST 2 YEARS GROSS SALES FROM THE ACCOUNTS HAVE BEEN $26,000 SALES AND ABOUT $16,600 PROFIT AND WHEN YOU CONSIDER GAS AND TIME A TOTAL PROFIT OF AROUND $15,000 ANUALLY. ALSO HES INCLUDING ALL INVENTORY AND MONEY IN MACHINES AND EQUIPMENT TO MOVE THE MACHINES AND ALL REMAINING INVENTORY AND SHELVING HE HAS AS WELL AS MARKETING MATERIALS (BOXES FULL). I HAVE THE BUSINESS IN CONTRACT FOR $12,000 BECAUSE I LOOKED AT ALL NUMBERS AND MACHINES AND IT LOOKS GOOD IN MY MIND. I KNOW I HAVE SEEN ON THIS SIGHT THAT THE MACHINES ARN'T THE BEST OBVIOUSLY BUT FOR ME TO GET IN THE BUSINESS SEEMS LIKE A GOOD DEAL. I DO PLAN ON BUYING MORE (BETTER) MACHINES AND ADDING ACCOUNTS ONCE I GET THE HANG OF EVERYTHING. I AM CLOSING IN A COUPLE DAYS AND ANY INSIGHT OR FEEDBACK WOULD BE GREAT. PART OF ME IS A BIT NERVOUS BUT MY GUT FEELING SEEMS THIS IS A GOOD ENDEVOUR. THANKS ALL AND I'M GLAD I GOT AHOLD OF THIS FORUM AS IT WILL HELP ME IN MY JOURNEY.

[RJT]

How about adjusting your text to a normal text and stop yelling at us, take the caps lock off....

Machines have known issues, parts are hard to get and pricy, and are also known for very low resale value. NO professional vending company uses these machines. The machines alone would make me steer people away from this deal. Hard to say with the numbers beacuse numbers can be altered to say whatever the seller says. One easy way to prove numbers is cost of good recipts from suppliers. Show me recipts of product purchases that back up sales numbers quoted. Either way the numbers are ok but nothing great.

Does he have contracts for the locations that can be transfered to the new buyer? If not that makes it tough to add much value to the account itself. Being new to the business makes the transfer a tough one. Even seasoned vendors have a tough time when buy out accounts to retain them. People get ticked off at both the seller and buyer when it happens a lot of times. Is he willing to train you and offer any type of recourse if the accounts dont do what he says they do or you loose the accounts?

I know of a deal where the largest vending company in the world bought 10 large accounts from a vendor and then lost 7 of them within 90 days. I know because I took 2 of them and I know the companies that took the other five. If it can happen to them it is a good chance it can happen to you.

IMO you are much better off starting from scratch or trying to buy one account at a time at the most.

[mission vending]

To quote another well respected member around here...... "run Forrest run"

My comment, for that kind of money you can get good full size equipment for 4-5 locations, probably a better gross and have equipment that 5 years down the road will have far better resale value.

[RJT]

To quote another well respected member around here...... "run Forrest run"

My comment, for that kind of money you can get good full size equipment for 4-5 locations, probably a better gross and have equipment that 5 years down the road will have far better resale value.

LOL, I refrained from saying that this time.... LMAO...

[AngryChris]

I have some insight.. although it sounds like your deal is already going through, I REALLY doubt that those machines do 85/week per machine. Although it is definitely possible to do so, I have never heard of 6 antares machines, even deli office combos, doing 85/week per machine... have you verified the locations? If the locations have like 10 office workers, those locations would do $20/week MAX!!! These sellers may have a spreadsheet over the last 2 years... but how do you know that those numbers are real? You are paying $2,000/machine.

Ofcourse the money in the machine, inventory, and blah blah blah are all included in the deal... the seller is trying to recoup what he invested... however, it's your call if you REALLY think that those numbers are possible. Keep this in mind though, you pretty much can't get parts/repair those machines... you can't upgrade them... you probably can't resell them unless you find some loser and give him a bunch of false numbers to make the machines sound much better than they really are.. $2,000/machine is OUTRAGEOUS for those... you could buy a real location off of a real vendor that may be doing $200/week out of a bottle machine and can machine and it may only cost you $2,500 for pretty nice used equipment from a distributor.. that's $2,500 investment for $200/week vs. $2,000 for $85/week out of a machine that almost certainly will not do it.

You can do what you want but that's just not the way to start... I bought some antares machines early on and paid significantly less than you and I KNEW they wouldn't make much (they averaged $25/week) but it was enough to keep my inventory rolling so that my snacks wouldn't expire and I was managing to turn around cash. Once my antares machines have paid for themselves, I am going to sell them cheap or scrap them. They have gotten me much larger accounts like I anticipated they would but I would never pay $2,000 for those.... to do $85/week would require a blue collar location with approx. 20 employees or an office with about 60+ employees.

If you want more info, that's great, I can do that too, but I don't want you to get ripped off... but if these locations really do have a ton of employees or something then you might have something... but it's still not a deal... not $2,000 per machine.

[ASVG]

Sorry about the caps and bold. Was testing it out because I've never seen on a forum where you can change font and style. So you guys really think I should run. Wow. Ok couple questions things to ad, 1. All the accounts are in large warehouses and probably the smallest account has 20 or over employees. 2. The owner is willing to train and help out for support as well as start by telling the businesses that I am a worker for a couple weeks then stating I decided to buy the business. 3. I mean I can match sales numbers to the computer system on the machines right? Theres no way he can change total sales on the machine? Or can he? 4. There are contracts which are basic and I dont think there is any length of time on them. But most of these places have been loyal to him and have never had vending so they don't know whats out there and are already happy with the accounts.

Lets say if I was going to drop this deal (and loose my $500 deposit), what type of machines would be a good investment to buy and how do most of you get your accounts? (cold calling, visits, fliers, ) I still feel these deal isn't horrible, and the machines look like new and everything has been working good. I know numbers arn't amazing but for servicing the machine once a week (with one larger account twice a week) and still being able to hold onto my full time job, this seems like a fairly reasonable deal. Right? I would make my money back in less than a year.

At this point I am unsure on what to do. Feel like I made a mistake putting the deposit now without looking into furthur, but the guy is completely honest (or him, his wife, and people at the accounts are putting on a great show and falsifing a lot of documentation they put together.

Also how would I go about buying an account and getting a machine from a distributer? How does that work? Do you pay on the machine or split costs with the distributer? Any insight on that would be great. Sorry for all the newbie questions but your answers are really helping me out.

[Poplady1]

I am not a Antares fan by any means. And my comments here only pertain to the Office Deli. I do know a vendor in LA that has purchased several of these Office Deli machines. She says they do work. I am not sure how long they will work but she has known me for 5 years. She had to find her own locations because the original locations were not producing any money. She then placed them herself which included a 55 person mfg in which she placed two machines, to date they are happy. She has one in a warehouse with 39 employees. Again, they are happy. The others are in office settings with numbers from 30 to 60. One in a "Y".

She purchased these used (2 years old). The previous owner had the contract of sale to show her. The amount that person paid was just awful. The original owner was selling them at 2500.00,she offered 1000.00 they took it.

In this case, if you offered $1000 each you might have a good deal. Print out some of the stuff on line about these machines, such as the BBB report on Antares. Reference the fines they have been paying because of over stating possible income, high pressure sales and failure to perform promises in their contract. In my search I did not see complaints about the office deli machine not working. If you can get this at the right price it might work out for you.

Poplady

[dogcow]

THIS SOUNDS LIKE A BAD DEAL YOU MIGHT WANT TO STAY AWAY.

[dogcow]

1. All the accounts are in large warehouses and probably the smallest account has 20 or over employees.

do they have other vending,read some reports on antares they are aparently notorious for putting machines in the front office of a big warehouse of mfg facility and telling you they "got you a big account" when really the account already has full size machines they just put their combo unit in the office. u need some idea of the average or highest # of employees because thats gonna dictate how often u need to service the machine and therefore how much money u will make ( search for mission vending's "cost to service" thread to understand this).

2. The owner is willing to train and help out for support as well as start by telling the businesses that I am a worker for a couple weeks then stating I decided to buy the business.

is he willing to finance? if not then i would be skeptical of what the accounts make based on the equipment hes got there. who knows tho. maybe you can run the route for a while before you purchase to verify numbers.

3. I mean I can match sales numbers to the computer system on the machines right? Theres no way he can change total sales on the machine? Or can he?

most equipment has non resettable counters but i can set the validator to accept big bills and just put $10s in there all day long to run up the counter.

Lets say if I was going to drop this deal (and loose my $500 deposit), what type of machines would be a good investment to buy

dixie-narco, vendo, USI (drinks)...AP, USI, Crane (snacks)

and how do most of you get your accounts? (cold calling, visits, fliers, )

generally or purchase from another vendor.

I still feel these deal isn't horrible, and the machines look like new and everything has been working good. I know numbers arn't amazing but for servicing the machine once a week (with one larger account twice a week) and still being able to hold onto my full time job, this seems like a fairly reasonable deal. Right? I would make my money back in less than a year.

see cost-to-service thread 2x a week is a lot to service an acct, mine are lower volume i do them once every 2 weeks.

At this point I am unsure on what to do. Feel like I made a mistake putting the deposit now without looking into furthur, but the guy is completely honest (or him, his wife, and people at the accounts are putting on a great show and falsifing a lot of documentation they put together.

i cant speak to this...he may have put together a nice business , oen of my family members sold biz-ops and the fact is despite overpaying some people are able to succeed and build a good business from these machines, but on the average most people do not. no one here can tell you if he is lying its up to you to determine that....be creative, dig deeper, 12k is a lot of money you worked very hard to get that money...dont be so fast to give it away.

Also how would I go about buying an account and getting a machine from a distributer? How does that work? Do you pay on the machine or split costs with the distributer? Any insight on that would be great. Sorry for all the newbie questions but your answers are really helping me out.

distributors often sell refurbished used machines for a good price, higher than u can get a machine off craigs list but cheaper than new and usually its got some kind of warantee plus they deliver and service....oh yeah ...did you think about how ur gonna move the machines? you might want to consider that

[RJT]

Ok, let me give this info to you since I am not sure my original info was good enough to keep you away.

Combo machines are not where you need to be with vending. Combo machines have been talked about many, many times on this and other forums. If you have a combo machine in a decent account you are at high risk of another vendor moving in and taking it from you. Combo machines simply dont hold enought product and variety to be used in a decent account.

Professional vending companies only use combo style machines as a sattelite machine in larger locations. They hardly ever would use one in a stand alone location. They are usually attached to another large account in some way. Maybe in a large plant and the office request a machine becauzse of the long walk to the break room. Then a combo machine would be justified to use in that situation. I had a three plant contract one time and one of the locations across town only had 15/20 people in it so we did a combo machine. At the time they had no vending at all at the location. These are the type situations where a professional vending company will use a combo machine. Even with thay we are not using Antares, Sega, or any similar machines. We are using Crane National, USI, or something like that.

Start out on the right foot and stay away from combo machines all together. If a person in vending started with combo machines they will usually not keep them long term and would tell you if they had to do it all over again they would have started with full size machines.

[ASVG]

ok. He is willing to finance but i offered him a low price and we agreed on 12k. So i guess that is good. He is also willing to stay on the route and help out and maybe act as an employee for a bit. I have a question though. Do those numbers sounds right. $26k in sales and about $16k profit. After gas and expenses about $15k profit? What is typical return (or profit) on your sales numbers? I found another duy with some dixie machines I may invest in as well but maybe the office deli will help get a grasp on things, if I decide it really is worth it because after what everyone is saying seems like I am possibly not making a good decision. Thanks for all the replies and help guys. This forum is great.

[dogcow]

ok. He is willing to finance but i offered him a low price and we agreed on 12k. So i guess that is good. He is also willing to stay on the route and help out and maybe act as an employee for a bit. I have a question though. Do those numbers sounds right. $26k in sales and about $16k profit. After gas and expenses about $15k profit? What is typical return (or profit) on your sales numbers? I found another duy with some dixie machines I may invest in as well but maybe the office deli will help get a grasp on things, if I decide it really is worth it because after what everyone is saying seems like I am possibly not making a good decision. Thanks for all the replies and help guys. This forum is great.

those numbers sound a bit optimistic ...its sort of in the ballpark. it all depends on

product and pricing without that info i cant say. could he be taking cheap wise

chips and marking them way up and get to those numbers...maybe. possibly he isnt

selling any short date items like pastry or expensive items like candy i have no idea.

what you seem to not be hearing or understanding is the deal isn't bad cause of the revenue ($80/wk is not terrible but not really great either) but the equipment is way over priced and likely to give u problems down the road. also it will cost you more than it should to service these accounts.

for less than the price you might be able to equip these locations with full size snack machines and 3rd party or full svc drink machines. you could then reduce the service cycle down to once a week or once every 2 wks and make a decent income then be ready to pounce on a better acct when they come around.

[AngryChris]

The antares deal aside.... 16k profit for $26k in sales does NOT sound legit. As I stated early, $85/week is possible if the locations are legitimately that good ( have you seen the locations? You need to see people WORKING in the location rather than the seller claiming they have x amount of employees ). That aside, $16k for $26k equates to 61% profit margins... you are talking about cans for about 75-85 cents each, pastries at $1.00+, candy at $1.00+, premiums at .85+, etc... yeah it's possible with those numbers but most of the vendors that I know, including myself, run anywhere between 40-50% profit margins after cost of goods (COG). Fuel cutting an extra $1,000/year? That seems somewhat reasonable... if they aren't terribly far apart. However, if you are a legit business, you also have to pay sales tax.

If I had NO experience with vending MACHINES but understand the prices/profits, I would say your deal sounds possible... I just don't believe that it's real.

Here's what you do, find out the PRICES for things (ie. chips, candy bars, pastries, cookies/zoo crackers/etc..., canned soda, 16oz bottles, etc....).

Once you have those prices, get back here and post and the numbers will magically be crunched (utilizing an amazing technology known as brain-function w/ accounting knowledge). At that point, we can decide if the margins seem realistic...

If these locations all had single-price can machines (cheap) with some decent snack machines (such as used nationals/APs) then I doubt any of us would even be saying too much against it because the equipment would be SO much better... and single-price can machines with old nationals/APs are by no means top-end equipment!

[AngryChris]

Somehow I believe that I am the first guy to answer his questions and dogcow keeps getting to it before I do. Dogcow, you are clearly cheating by replying faster than me. Don't ask why, you just are.

Anyway, ASVG, just notice that we are all dissing on the EQUIPMENT and that is ASSUMING the sales/profit numbers are legit!

[mission vending]

Ok, let me give this info to you since I am not sure my original info was good enough to keep you away.

Combo machines are not where you need to be with vending. Combo machines have been talked about many, many times on this and other forums. If you have a combo machine in a decent account you are at high risk of another vendor moving in and taking it from you. Combo machines simply dont hold enought product and variety to be used in a decent account.

Professional vending companies only use combo style machines as a sattelite machine in larger locations. They hardly ever would use one in a stand alone location. They are usually attached to another large account in some way. Maybe in a large plant and the office request a machine becauzse of the long walk to the break room. Then a combo machine would be justified to use in that situation. I had a three plant contract one time and one of the locations across town only had 15/20 people in it so we did a combo machine. At the time they had no vending at all at the location. These are the type situations where a professional vending company will use a combo machine. Even with thay we are not using Antares, Sega, or any similar machines. We are using Crane National, USI, or something like that.

Start out on the right foot and stay away from combo machines all together. If a person in vending started with combo machines they will usually not keep them long term and would tell you if they had to do it all over again they would have started with full size machines.

This is one place where RJT and I have a significant difference in opinion. Having been there, done that, IMO, combos have a place for small start up vendors, for several reasons.

1. They will help you get enough volume going to make expiration dates less of a problem.

2. Helps to learn various aspect of the business, OJT so to speak. Learning how to manage product selection, service schedules, R&M of equipment are all important to the long term success of your business.

3. Building equity, machines bought properly will generate cash flow to help fund growth while learning the many different aspects of the business. When you outgrow the need for the machines then you can sell them and the location to another newbie and you should be able to get about what you paid for the machines back. This DOES NOT include Antares machine, the likelihood of your finding someone to buy this stuff for what you are about to pay is very small.

Finally, I agree with the other guys that the stated profit margin is highly suspect. He is showing you a spreadsheet, right? How about a tax return? A tax return with this info is 1000X more credible than a spreadsheet that may or may not have all the pertinent info in it.

[vendman0729]

ASVG, I was just going through a very similar situation as yours literally like 3 weeks ago but on a smaller scale. The concept however is basically the same. I asked these guys the same thing as you about a route purchase with mechanical machines. My post is titled something like 3 route purchase? It would be a good read for you. I was really tempted to buy it and I wanted it badly but I listened to these guys and I am glad I did. Eventually we have to get our mindsets of these antares machines and such.

I think this will also help convince you as well. When the guy was showing me his route with his antares machine, I swear half the products he vended for me barely even came out right from the machine haha. Like the chips getting stuck for example. It was a funny and awkward situation and I am sure the owner felt a little embarased.

Anyways I purchased for the same amount of money of around $1700 a single nursing home with awsome modern USI machines (CB 300 and 23 select Snack) which produces over 300 a month. Yeah I could have purchased the 3 locations route of mechanical machines and made even more, but the time and gas e.t.c to service all these little locations just wasn't worth it. Not to mention if you buy this route, you wont have the peace of mind knowing that you have good quality machines that work because they wont.

In this industry, having a good peace of mind goes a long way. I have found this myself the hard way.

[ASVG]

Ok. I understand we are talking about equipment now. Well now heres some more information. I basically want to verify that the sales spreadsheet he gave me could be verified or even be possible. I am going to renegotiate the deal I believe to where I will basically be paying minimum for the machines and mainly paying for the routes. Which brings me to another question. What would a route bringing about $200-$400 a month and sometimes up to say $900 a month be worth. Which is what his past 3 years of spreadsheet states. Here are some pricing he has on the machines: cans 12oz (selection of product) - $.85. Monster - $2.25. Apple Juice I think its a 11oz - $1.00. Snickers, butterfingers, etc candy bars- $1.00 chips - $75 then there are entres like stew at 3.00 or honey buns at .85 or ramen soup for .75. Sorry I am giving short version. Just to get a general idea. Drink selection has 161 drinks (20 of which are monster and apple juice). Candy bars are 14 in a row and chips 8 in a row as well as huney buns.

I know it is a lot to ask but any help would be great. I am going to definitely ask for his tax returns because that would be a big help. I know he has filed but seems like he didnt pay a whole lot (at least from what I think is a lot but I may be wrong). I really want to buy the route at least. I really want to get my foot in the door in this business and learn and buying a route seems the best way.

Oh yeah, I went around to all the locations and I had seen everyone working on locations. A lot of large warehouses and mills. These machines were not placed by Antares. The guy selling the route found the routes and set everything up himself. So I think that is a plus compared to something set up by an outside vendor.

Once again thanks everyone for the help and hopefully I will be in the business soon with a good investment.

[vendman0729]

Without talking about the kind of machines that are on location, I try my best to pay of a route with 6 months gross or 12 months profit. These deals are not easy to come by but they do come up. Sometimes 7 or ever 8 months gross might be ok but then this is where all the little factors really come into play. Routes closer to home have a lot more value, and of course the machines themselves carry value if their good machines.

The nursing home I bought was a really good deal for 1700. If it makes 300 a month then thats even less then 6 months gross. However, I wouldn't have mind paying even upto 2400 for this location. The reason is because the machines themselves IMO are worth almost that and its also only 10 minutes from where I work at.

By the way the prices you stated on the products are really good. If you look at the industrys standard prices, you will see you have an advantage. Just makesure the chips are the 1oz bag for .75 otherwise for the 2oz bag you will want to increase the price.

o and I just realized this is my 100th post YAY

[AngryChris]

Ok. I understand we are talking about equipment now. Well now heres some more information. I basically want to verify that the sales spreadsheet he gave me could be verified or even be possible. I am going to renegotiate the deal I believe to where I will basically be paying minimum for the machines and mainly paying for the routes. Which brings me to another question. What would a route bringing about $200-$400 a month and sometimes up to say $900 a month be worth. Which is what his past 3 years of spreadsheet states. Here are some pricing he has on the machines: cans 12oz (selection of product) - $.85. Monster - $2.25. Apple Juice I think its a 11oz - $1.00. Snickers, butterfingers, etc candy bars- $1.00 chips - $75 then there are entres like stew at 3.00 or honey buns at .85 or ramen soup for .75. Sorry I am giving short version. Just to get a general idea. Drink selection has 161 drinks (20 of which are monster and apple juice). Candy bars are 14 in a row and chips 8 in a row as well as huney buns.

I know it is a lot to ask but any help would be great. I am going to definitely ask for his tax returns because that would be a big help. I know he has filed but seems like he didnt pay a whole lot (at least from what I think is a lot but I may be wrong). I really want to buy the route at least. I really want to get my foot in the door in this business and learn and buying a route seems the best way.

Oh yeah, I went around to all the locations and I had seen everyone working on locations. A lot of large warehouses and mills. These machines were not placed by Antares. The guy selling the route found the routes and set everything up himself. So I think that is a plus compared to something set up by an outside vendor.

Once again thanks everyone for the help and hopefully I will be in the business soon with a good investment.

The size of the building means nothing, it's the amount of people and the type of people working there. Anyway.... with those numbers, it is possible to get 55% profit margins.... however... I don't like what I am reading...

Unless your post was wrong, you first said that this route did $24,000/year... now it's doing $200-400.. sometimes $900/month? That equates to $2400-$4800/year and *occasionally* $10,800/year.

I am really confused as if you wrote that wrong or something is up... if what you are saying is true, and you are saying that the entire BUSINESS brings in $200-$400/month, that is NOTHING... but it makes sense with those machines. Now if they are each bringing in that much, then yeah the $26,000/year figure *might* be legit.

Back to your question.... if a location by itself was doing $200-$400/month or about $2400-$4800/year, I would probably make a reasonable offer offer of around $1,000 w/o equipment and with a contract... but that's if I really wanted the account... I have a rule of not buying accounts off of people.

Again, the profit margins on those prices makes it possible to achieve 55% margins but I am really curious on this "$200-400/month" deal. You need to find out if that is for the entire business or just each account doing that.