Healthy snack and drink route

[happycamper30]

Hi, I am interested in food and beverage vending and have been following this forum for a while.

I am thinking about buying this route,

15 Wittern dual zone machines (oldest is 6 yrs old and most of them are 3-4 yrs old, mostly 41 items)

Gross is about $130K. All machines are in schools and need service 2-3 times a week. Asking $110K.

Do you think it is a good deal? What is a reasonable offer?

Thanks in advance.

Happycamper

[AZVendor]

Those machines are good models to use though they are probably combo machines with snacks in the top and drinks in the bottom.  If so then you will not be able to gross too much from each machine before they need to be serviced, if in a good location.  Hence them needing service 2-3 times per week.  You say these are all in schools so if the students have access to them and all are in Jr. High or High Schools then your sales should be pretty good, as long as you are the sole supplier and you don't have another vendor as competition. 

 

I would demand proof of the sales by month and for the past year or two.  You also want to see their P & L's for a couple of years and any contracts they hold with the school districts.  You want to see a long term left on the contracts so you don't get outbid for the vending shortly after buying.  You need to remember that schools aren't open year round so you will have 2-3 months of low or no sales.  If there are 9 months of school, then your weekly gross sales per machine, on average, would be about $222 per week per machine.  That's not bad but if the products are true healthy items then your product cost will be much higher than traditional snacks and sodas, leaving you a much lower gross profit.  Until you know what the gross sales are minus the cost of product and commissions to the schools, you won't know what this might be netting.   

 

The asking price is probably way too high and I would bet that the seller wants their original investment back if they bought into a franchise.  Speaking of which, if this is a franchise arrangement then what fees do they pay for that?  The price divided by just the number of machines is $7300 per machine which is probably double their original cost.  They are therefore asking for a ton of blue sky in this deal.  This gives you a lot of room for negotiation.  

[hoosier96]

In addition to what AZ said, I'd also ask if the schools require timers on the machines.  If so, what are the times they are required.  I have 3 schools and they all require timers.  One of them recently asked me to shut the machine off after lunch until the end of the school day.  Needless to say, sales are way down and I am trying to decide if I want to pull the machine.

[happycamper30]

Net after commission and cost of goods is about $50k. Seller claims to have tax returns to match up with the numbers. The machines have been there for a few years but he does not have long term contract with all the schools.

Are those machines worth $3-4K each? Most of items he is selling are from Sam or Costco.

Thanks

Happycamper

[AZVendor]

In addition to what AZ said, I'd also ask if the schools require timers on the machines. If so, what are the times they are required. I have 3 schools and they all require timers. One of them recently asked me to shut the machine off after lunch until the end of the school day. Needless to say, sales are way down and I am trying to decide if I want to pull the machine.

Here in Arizona many districts require the machines to be disabled from the first lunch through the end of school because they don't want the machines competing with the cafeteria, and then the kids can't use them anyway until school is out. One of the accounts I had was a Jr. High where the machines were closed off from lunch til after school and we still did $1000 per month from 2 snacks and 1 soda. So don't get discouraged with a time restriction unless you're nowhere close to being profitable already.

I should add that our machines were outside so we had tons of business before and after school.

[hoosier96]

Most of my schools require timer to be on 30 minutes before lunch to 30 minutes after.  This school not only requires the timer to be off until the end of school, they also asked that I remove my best selling item.  It was Cheetos Baked Hot.  They told me they were tired of the kids smashing them in the carpet and wiping their hands on everything and staining it from the red coloring.  These two changes caused my sales to drop by about 65%.  Thanks for all the advice AZ!