TKK Posted June 18, 2013 Posted June 18, 2013 hey guys haven't posted in a while. ok, Im having problems with a chain of my locations. its a route I got for a steal. the previous owner was paying $1,100 a month in commission. onky because the owner put him through school and whatever. when I bought the route I told the owner who is out of the states sometimes, that I couldn't pay the same amount as products have gone up, and jacking prices up just drop sales usually. he was like nope, u pay what hes payin and that's that. ive paid him 2 months of that amount. then the previous owner told me I shouldn't pay that much, because everyone here usually pays 10% gross sales. it makes $3,500+ a month. which would be $300-$350+. well I told him I couldnt keep paying him that much, its outrageous. that's $13k a year. I did raise prices and sales dropped a bit. so heres what it is total monthly gross (last month) $3500 product 30% so $1100-$1200 taxes $200 commission $1100 -$2500 or so expenses I keep $1000...? that sucks. I don't think its fair. so last month I sent him only $600. and sure enough I ot the call, I explained that I can only give him that much as its about 40% net. he said someone offered him 65% gross lol. anyways the problem is this, he says I have to keep paying 1100 or he will sue me. that that was his contract with the previous owner, which expired. so he said if u took over u need to carry that same contract and your obliged. the dude keeps using people as middle men and calls the previous owner instead of me all the time. its a pain in the golpher. the previous owner says hed be stupid to have me take them off as no one will pay him even half of that. so what do I do? A) remove the machines and have them keep my other 7 machiness in my garage company. bluff. tell him its either this much or im taking them off therefore that 20 squared empty space will be making him $0. C) Just leave it and keep paying him.having a ton of cashflow and getting a small bite? D) most reasonable id say, keep paying til I find more locations thanx guys, im in a rush so I left stuff out and like usual probably misspelled.
moondog Posted June 18, 2013 Posted June 18, 2013 hey guys haven't posted in a while. ok, Im having problems with a chain of my locations. its a route I got for a steal. the previous owner was paying $1,100 a month in commission. onky because the owner put him through school and whatever. when I bought the route I told the owner who is out of the states sometimes, that I couldn't pay the same amount as products have gone up, and jacking prices up just drop sales usually. he was like nope, u pay what hes payin and that's that. ive paid him 2 months of that amount. then the previous owner told me I shouldn't pay that much, because everyone here usually pays 10% gross sales. it makes $3,500+ a month. which would be $300-$350+. well I told him I couldnt keep paying him that much, its outrageous. that's $13k a year. I did raise prices and sales dropped a bit. so heres what it is total monthly gross (last month) $3500 product 30% so $1100-$1200 taxes $200 commission $1100 -$2500 or so expenses I keep $1000...? that sucks. I don't think its fair. so last month I sent him only $600. and sure enough I ot the call, I explained that I can only give him that much as its about 40% net. he said someone offered him 65% gross lol. anyways the problem is this, he says I have to keep paying 1100 or he will sue me. that that was his contract with the previous owner, which expired. so he said if u took over u need to carry that same contract and your obliged. the dude keeps using people as middle men and calls the previous owner instead of me all the time. its a pain in the golpher. the previous owner says hed be stupid to have me take them off as no one will pay him even half of that. so what do I do? A) remove the machines and have them keep my other 7 machiness in my garage company. bluff. tell him its either this much or im taking them off therefore that 20 squared empty space will be making him $0. C) Just leave it and keep paying him.having a ton of cashflow and getting a small bite? D) most reasonable id say, keep paying til I find more locations thanx guys, im in a rush so I left stuff out and like usual probably misspelled. I hope you didn't pay more than those machines are worth - at 33% commission, that account isn't worth squat. I wouldn't pay that for a spot in Disneyland.
RobertInPhilly Posted June 18, 2013 Posted June 18, 2013 Tell me you had an business attorney review your contracts and business purchase. What does the contract say? As you said the contract is expired, does it have a auto renewable clause built into it? Contracts do but really don't mean squat. Tell the owner you'll be by to pick your equipment up ASAP, since he found someone that is willing to pay 65%, he's bullshitting you. Call him out. He knows you're new and is taking advantage of you.
TKK Posted June 18, 2013 Author Posted June 18, 2013 I only paid $8,000 for 7 machines. all ap/usi etc, and 4 triples. it was a good deal as its already grossed $12k+ in the last 3 months, left w inventory, all coins, completely full, and prepaid 1 month commission.
mission vending Posted June 18, 2013 Posted June 18, 2013 1. Nobody can force you to honor a contract you did not sign. As long as you did not agree to assume the previous owners agreements there is nothing he can do but kick you out. 2. Pretty much whatever you do will either get you kicked out or make you want to leave anyway. Not going to tell you what to do but if it was me I'd send a nice letter with your next commission pymt explaining that you are not party to the previous agreement. Further you understand he wants a commission and here is your offer. If he finds it unacceptable then please provide a 30 day notice when he wants the machines out.
AZVendor Posted June 18, 2013 Posted June 18, 2013 I agree with what Mission says. You have to realize that you are in a no win situation unless you call his bluff and win. I would do as Mission says and see if he will back off a little bit to allow you to make some money. I will say though, if you're dealing with a foreign owner, he will think the world owes him everything and he owes nothing. I'm not trying to be racist, but I've dealt with this before. If the owner is foreign, he was raised in a different society that works differently than in the US. Now, assuming that is not the story, you just have a greedy, hard golpher guy that wants what he used to get that was provided by someone not too smart or maybe not too honest, and it will be a hard sell now to convince him that isn't how the business works. You could work out a pro-forma or P and L for the account that lays out the income, expenses, and net to you for each scenario and maybe work to his common sense as a business owner. This will show him how 33% (usually a lie unless offered by Coke or Pepsi) and especially 65% (definitely a lie) will not allow a business to succeed. This will probably be a hard sell and you might still have to call his bluff and risk walking away. You should also look closely at the contract and see if there are any protections for you such as renegotiation of terms after the expiration, or the ability to raise prices or adjust commissions. Does the contract favor the vendor or the location? If it favors the location then the last owner really didn't know what he was doing. How about a lower commission at the old prices? As I recall you raised some prices to slow the sales down so you didn't have to service the machines so often.
TKK Posted June 18, 2013 Author Posted June 18, 2013 thanx for the great advice guys! yeah hes a complete golpher. he just says it is what it is. but he says to deal with the guy who sold me the route. he says u guys have to pay me the $1100 or ill sue both of u and take u to court. I told him sir I have not signed anything all I signed is between me and the PO saying the machines were fully his and paid off and now mine. in location but doesn't specify anything. he says he ran those machines 6 years ago so I guess he bases it on that which I told him product costs is not comparable. I did raise prices. the contract he had w the PO was like a rent thing. saying either party can get off whenever theyd like. and it was like one combo machine located $225 , two single machines in one location $350 for both. $20 per triple. it sucks because thers a 5th location that was only making $350 a month w a combo so the PO pulled out.
AZVendor Posted June 18, 2013 Posted June 18, 2013 If this is a "rent" disagreement, then this deal went sideways 6 years ago and the greedy owner is living in the past. I doubt his business is any better now than it was 6 years ago. The guy you bought it from was not smart when he negotiated this deal and it's understandable why he wanted out - he couldn't make any money. I would be tempted to let him sue me and see how far he gets (I think it's hot air), but in the meantime he can do whatever he wants in his buildings. He can turn your machines to the wall or bring in an entirely new vendor. Anyone else who agrees to give this guy anything close to what he wants from you will not make any money either and will either cheat what he pays or get into an argument with the owner like you have and be out on his ear, too. The writing is on the wall, if he doesn't get what he wants, you're out. This is how bad vending can get, because even if you reach an agreement with him, you will be wondering what will come next, do you trust each other, do you still want the account. Sometimes it's best to walk away.
Action Vending Posted June 18, 2013 Posted June 18, 2013 Not trying to be racist (because I am not) but it sounds like a first generation Indian hotel owner? Had one that had a problem with our commissions. went down there got up in his face real close and showed him how we gave him 10% and how it was calculated. Ever since then he has been cool about everything. This guy you are dealing with is just like a bully. you have to stand up for your self and after that everything will be fine.
mission vending Posted June 19, 2013 Posted June 19, 2013 This guy you are dealing with is just like a bully. you have to stand up for your self and after that everything will be fine. Either that or you will be outta there but some sort of clarity and resolution is needed here.
SeaTurtle Vending Posted June 19, 2013 Posted June 19, 2013 sometimes it is better to walk away. Relocate the machines to non commission or a 10% commission place.
TKK Posted June 20, 2013 Author Posted June 20, 2013 I wanna relocate but I've been getting some crappy locations. One made me $11 in a month! That's got to be a record! Plus I already have another 8 ready to place don't wanna have 14. The po said he thinks I should try to sell it back to the owner for $9000 and make a g and not deal with it. The owner had to sell to this guy because the IRS nailed him he wasn't reporting it.
Sparta_Automation Posted June 21, 2013 Posted June 21, 2013 I wanna relocate but I've been getting some crappy locations. One made me $11 in a month! That's got to be a record! Plus I already have another 8 ready to place don't wanna have 14. The po said he thinks I should try to sell it back to the owner for $9000 and make a g and not deal with it. The owner had to sell to this guy because the IRS nailed him he wasn't reporting it. So you already know that you are dealing with a dishonest, no morals person. Offer to sell, but get everything in writing. If he doesn't want buy, then you can always send him a check for what you want believe is an honest commission and put a disclaimer on the check. Something like, "By cashing or depositing this check, you agree that this is payment in full for all commissions owed for the machines located at.....for the month of......" If all else fails, I would believe that you would have less head-ache and worries by just pulling the machines and storing until you get a new location!
moondog Posted June 21, 2013 Posted June 21, 2013 If you decide to keep this nightmare, 1099 the guy at the end of the year for commissions paid. With the IRS already watching him, you'll need to keep your act spotless on this one.
Sparta_Automation Posted June 21, 2013 Posted June 21, 2013 That is true.....by IRS regulations, operators are required to 1099 any person or entity that is not a corporation. That would be AWESOME! And I bet he would be pissed to receive that in the mail!
moondog Posted June 21, 2013 Posted June 21, 2013 It is a corp tho You should still send out that 1099 - I used to own a corp. and we got 1099'd dozens of times each year.
kiwi Posted June 21, 2013 Posted June 21, 2013 Hey TKK, Seems like you are "stuck between a rock & a hard place" as the saying goes.. I don't think the owner will be prepared to come down much on his commission (site fee). You may be able to negotiate it down slightly but definitely not half of what you were paying him previously. This is the problem with paying predetermined site fee's as sometime the turnover doesn't work in your favor. I am sure you knew this when you took over from the previous owner so there is not much you can do about it now. You could remove your machines as others have suggested but unless you have somewhere else to put them they are probably better to leave them where they are especially when you already have machines in storage. It also seems like the turnover is dropping significantly compared to what the previous owner had stated it was doing before. $52K in 2011 $49K in 2012 & by the way things are looking $42K in 2013.. Not good when your site fee still remains the same.
TKK Posted June 22, 2013 Author Posted June 22, 2013 It is dropping, however he was selling things at way lower prices. His cogs were like 47% and mine are now 23%. So its ok in that sence. Plus I'm not including a location that is seperate from the laundromats that one makes $300 a month. And I'm not including the $300 the bulk machines there r making. So the full route is making $4100 a month or so. So that's like 49k So 52k. Minus his 50% cogs. Is 26k. Minus the 13k he was paying him. 13k. Minus 2-3k for taxes and gas. 9-10k. Well take away 3600 for the other location The route is doing better with me handleing it for sure. More profit not as much cash flow
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