Starting with existing route

[tobiusnc]

I recently became interested starting a part-time bulk vending business.  I've spent several hours reading the forums, and I've learned a ton in a short time.  (Thank-you everyone for actively participating, it's a wonderful resource for a newbie like me.)  Based on my initial reading, I was planning to buy and place a single machine, and take it from there.  However, I checked my local craigslist and discovered someone selling an existing route that looked like it could be a good fit.  I've been in contact with the seller and here's the details of the route.

• Being sold because a new job will have him out of the area for months at a time; some locations need to be serviced at 2 1/2 week intevals.
• 20 Beaver machines placed at 7 downtown locations in a 2 block radius. (Burlington, VT; lots of college kids)
• Parts for ~10 additional machines and 5 spare stands.
• Primarily bar locations.
• Currently vending only nuts and m&ms
• vending business has been in these locations for about 10 or more years with different owners
• $10K annual gross
• 20% commision paid to owner
• Asking $4K

I've done the research in these forums, and it seems 70% of gross sales is a reasonable price.  It seems to me that assuming he can validate the sales number, this is a steal.  One of my primary concerns is the time to service the machines.  The current owner made the following statement about service time:

"every 2 1/2 weeks stop at all locations and look at machines, total 15-20 minutes to go to all of them. Drive to costco and back, 10 or 15 minutes in each filling and servicing. Not all locations need supplies every time so basically you could say max 2 hours every 2 1/2 weeks. Really easy!"

Some specific questions I have for the experienced community here:

• Is this service time reasonable? 
• Is this as good a deal as I think it is? 
• Is this a good way for a newbie like me to get started, or am I likely to be over my head? 
• What else should I be asking/worrying about?

Please help.  Thanks!

[The Master Key]

Most importanty, I would want some verification of sales.  Ask to see his last year's W-2. 

$10,000 annually / 12 months = $833.33 per month

$833.33 per month / 20 machines = $41.67 average gross per machine per month

$833.33 per month / 7 locations = $119.05 average gross per location

That income might be possible, but these would all have to be GREAT locations.  Which could be why he services every 2 1/2 weeks, assuming that's true.

The fact that they are all in a 2 block radius is great.

The profit margin isn't very good on nuts, and you would be paying 20% commission on top of that.  But, I don't see why you couldn't switch them out to try something else.

Just a few thoughts.  Good Luck!

Brian

[kcinnick]

I would look into sourcing your own machines before you pay 4k for 7 locations.  You could easily get new machines in 25 locations for that price.

Also, if these have been on location for 10 years, the secret might be the twice monthly service.

[West Coast Vend LLC]

Tobiusnc,

I don't think those numbers are impossible to believe. You could check out a few more things before making your decision to buy for 4K. (Bars in a college town with the right vending products in them could do great.)

Here are a few questions you may want to ask if you haven't already.

• If the customers have been on this route for 10 years, how old is the equipment? 
• Can you ride/work with him for 2 months collection days.
• If the customers are getting 20%, ask them how much they get per month. (With that number you can back in to the numbers for total collected.)
• Ask the customers if the product is selling out every month. How often does he fill them?

 

Gary

[CraigMc]

All good questions !  Another way to look at is:  What would it cost me to duplicate this route ?  Yes, one could get 20 locations for less than 4k. However, would you be able to get locations that produce the same revenue ?

Ask to see this persons Schedule C for the past three years. That will tell you the true story of revenue. Atleast the one he tells the IRS.

Craig