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Problems with increasing prices?


joel112
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Has anyone had problems with increasing their prices. I just bought three machines where the previous owner hadn't increased the prices in three years. Before I take over the account, they are supposed to talk to the locations and explain that the it is time to put the prices up. To give you an example, cans are set at 50c and I think they should be around 60c. It is a good account that is doing a lot of volume.

I just wanted to know what kind of resistance we will be up against. What do you guys think?

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Joel112

I have 15 full line machines going in on the 23rd of this month. When negotiating my contracts with all my locations we sat down and talked about pricing. This is how I dealt with the rising prices. I told the account if they wanted a higher commission I would have to raise my prices. If they wanted to stick with a lower one I would keep my prices within reason. So these are the prices we have came up with (below). My answer to your question is this, sit down with them evaluate your comm with them explain with rising wholesale costs and rising fuel you will need to increase prices or if they would like to keep the prices the same they will have to take a lower commission. But if the account is doing good volume you might not want to rock the boat. I'm learning fast that people dont care about your price issues or any issues for that matter they just want the cut and thats it. I have worked it out with all my locations that if a price increase is necessary within the 24 month contract I would give them a 30 day notice. I hope this helps

Soda 12oz .75

Water 20oz & Gatorade 12 oz $1.00

Candy Bars .75

Chips .65

Snack Cakes,Pastry .85

Coffee Black & Hot Chocolate .75 8oz

Spec coffee (Latte,Capp,Mochacino,Es) $1.00 8oz

 

Brian

Summit Vending LLC

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Do you have a contract with all your locations? I have two combo machines at a car dealership and one at a volunteer fire company. The previous owner told me that the locations didn't care about a contract, they just wanted a good service for their customers/fireman.

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Yes, I do have a contract with all my locations. The way I look at it is I dont want some fly by night company coming in and offering the moon and getting me removed. This is an exclusive contract as well meaning they cannot bring any other machines into the locations period. I have all my accounts set up on a 24 month contract that automatically renews. Need to make sure I get my investment money back.

 

Brian 

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Although I use contracts sometimes (like when a commission is involved), contracts do not keep locations. Only one thing keeps locations..........  Service.

I honestly believe that if an account is not being properly serviced, by me or any company, then they deserve to be kicked out contract or not. I don't want to be in a location that doesn't want me, but might be keeping me because of a contract.

Just my thoughts. Ohhhh, and if people aren't complaing to you and giving you a hard time then your prices aren't high enough :)

 

JD

 

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JD,

I think you missed my point. The point is service you are correct. I wouldn't be in this business if I didn't bring service to the table. Since I'm offering a coffee service to my locations I will be at the locations everyday and that translates to superior service. The contract is to protect the account from some company who comes in an offers a false commission(Vendors in this business not all of them but a pretty good amount of them offer a unthinkable commission to get the account then fudge the numbers). This is why the contract is in place. I plan on offering my locations quality service,product, fair prices and an honest commission.

Brian

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Brian,

I was not questioning your service. My point is that I see contracts boken all the time. If you have a contract they can still choose the guy that promises the moon, break your contract and there is not much you can do about. If they want you out to put him in they will get you out.

I think that not having a contract (when not necessary) keeps vendors honest and keeps there service level up.

Do you pay commission on all your locations? What kind of coffee service requires being there everyday?

JD

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Yes, I do pay a commission on all my locations. And my coffee service is an internal tank Saeco 7p Plus machines. All my locations are within 10 minutes of my house and will require service on a daily basis as my locations will have high volume. I believe having a contract with locations shows your commitment to the location that you are serious and that all is spelled out for both parties. My contracts include a section regarding service issues and cancellationt. Service is paramount period I agree with you but better to be safe than sorry by getting bumped out in one day and have nothing to fall back on(contract). On your comment about not having a contract keeps vendors more honest I will respectfully disagree with you. Thanks for the good debate.

 

Brian

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On your comment about not having a contract keeps vendors more honest I will respectfully disagree with you. Thanks for the good debate.

 

Good then we agree then :)

Why do you have fifteen machines going in on one day? Is it one big location or multiple? Also what size chips are you selling at .65?

 

Thanks

 

JD

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Just starting out, I have 2 locations, one I got from a friend, the other I got because someone saw my machine and liked the prices I had. Being very small, I can out bid most bigger companies as far as price of my products, the 2nd location kicked out there vendor and placed me there because the last vendor raised his prices to high the employees couldn't afford there product, I understand why the bigger companies had to do this, but should I feel bad for taking there location, beacuse I can afford to make lees profit and not have all the expences. The new Location does around $150 a week in sales(with no commision)The owner is happy there employees can have a vending machine they can afford to use and I am happy to get a good account. What would any of you tell your locations If i came along with better prices and same great service??

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Brian,

That’s a good margin for chips. Do you have help putting in 15 machines in one day? I have never tried that many at once.

Grvending,

You are correct that you can sell for cheaper and still have good service when you are small with minimal overhead. If you intend to stay small that’s not a big problem. If you intend to grow it will come back to bite you.

If you sell "price" to your customers you will limit your growth. The customers that buy based on "price" will be less tolerable of your wholesale cost increases, rising gas prices, and increased overhead cost that come with growth. In an economy like we have right now that moves quick, you have to pass these cost on quickly or you will be left behind making less and less and paying more and more.

I am not saying to rip people off with your prices. I'm saying set your profit margin and keep it! Don't let anyone negotiate that away. That is your paycheck. If your paycheck shrinks so does your service. Nobody can provide good service with a shrinking paycheck. This senario ensures that they will be stuck with the same equipment forever as it will never make sense to reinvest in the location.

I am passionate about this because I just spent the last year correcting situations like this that I created in my first couple years of startup. I just dropped a location with 230 employees because they could not mentally get passed paying more than .60 for candy (they still complained at .60). They were sold on "price" and that’s what they have paid for years. I don't want locations like this.

 

So to answer your question "what would I say if you came along and took a location"?

I would explain to them just like I did above. If the location is does not see it my way then they are not the customers that I am targeting. Vending companies come and go all the time. You either need to grow or shrink; you can't just stay the same. Eventually when there equipment gets too old, or when the service level drops due to reduced profitability, it might take years, but they will call me or another "service" based vendor.

 

Just my thoughts

 

Jeremiah

 

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I will add that (since the forum won't let me edit more than an hour after my post):

 

This is not directed at you. It is a rant in general:)

 

Tedk, another member in this forum got on to me about this almost 2 years ago in another forum. He bluntly told me that I was under selling my service which was an amateur mistake. I didn't see the harm in competing on price so I did. I later realized that it was hurting me and my business and now agree with Ted 100%.

 

JD

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I agree with alot of what you said, but being a small company now I need to get locations on "price" as I don't really have any other things to offer yet. I can say service, but until I prove it over time or have references from other locations to show new locations, why then would they change to my company except that they get a better price. You are 100% correct that my profit margin will be lower with cheap prices, but what sence does it make to raise your prices right out of a good location, like the last vender did, for a 25 employee location I think $150 a week in sales is darn good.

 

P.S. I dont take any posts personal ever, just each person opinion

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GR

When talking with these locations I explained to them with rising gas and wholesale prices that the prices and commission would have to work hand and hand. They all seem to understand that I as the vendor would need to make money as well. Once you set the bar at a location you will be hard pressed to increase prices unless otherwise discussed prior to placing your machines. This is why it is important to have the above conversation prior to placement so they cant say you didnt tell them. I gave my locations a 30 day advance price increase notice and they appreciated it. The previous vendor that was removed from these locations was raising prices on the movers and doing it on a weekly basis. What ever was selling the most price increase. That opened the door for me.

Coininvestor,

It will be a task ,but I moved all these machines myself when picking up and unloading them. We will have to see how it goes.

 

Brian

Summit Vending LLC

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