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Outrageous Comission Request


Randy 805

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Now, I know this topic has been talked about a lot, but I had one of my locations call me today, an 80 unit apartment complex, the manager who I'm friendly with informed me that the management company for the property has changed, and the new company says they need a 55-60% comission on vending machines placed at their properties, I told her that was ludicrous, I've never heard of anyone giving more than 20%, and thats a big company with a big location doing thousands of dollars a month in revenue, this place on it's best month has never seen more than $300 total...I'm bummed about having to move machines again, but I can't / won't agree to those terms.  What's the highest commision you've ever heard of?  What type of location was it for?

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The bottling companies pay as high as around 40% in some situations. Tell them once they find a vending company to pay that let you know and you will schedule to have the machines picked up so they will not be without drinks and snacks. You might just get to keep it once the find out no one will pay that. 

 

On the flip side if it is only doing $300 a month I would have pulled it a long time ago. 

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The bottling companies pay as high as around 40% in some situations. Tell them once they find a vending company to pay that let you know and you will schedule to have the machines picked up so they will not be without drinks and snacks. You might just get to keep it once the find out no one will pay that. 

 

On the flip side if it is only doing $300 a month I would have pulled it a long time ago. 

I know, I really should, but I simply have no time to find locations, I have a night job that I work 14-16 hours a day and I literally sleep like 2-3 hours a day, I wish I had time to get some better spots...

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300 a month is not horrible... I disagree with anyone that talks down on 300 accounts, as long as its easy access no vandalism and account doesn't care about looks of machine...

 

 

If this is a single drink machine account it is close but imo not where it needs to be which is $100.00 per week in revenue.

 

If it is a drink snack account it is horrible no other way of looking at it. $300 a month before any commission, taxes, etc is $150 a month if you are at 50% cog. Divide that between two machines (drink snack) that is $75 per machine or $37.50 per machine per week after cog. 

 

So total revenue would be $1,800 per year net (again before any commissions, taxes, fuel cost, insurance, etc)  Lets say you pay 10% in commissions so take out $360.00 if you are paying 10% of gross sales.  Lets say you had a compressor or out on the drink and a validtor go out on the snack. What did that cost you? $350? Now you are down to $1090.00 before taxes, insurance, fuel cost, etc. With accounts doing that low of volume you are going to have stales no way around that for the most part unless you have some good accounts to rotate product to then you are just creating more labor and work. 

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If this is a single drink machine account it is close but imo not where it needs to be which is $100.00 per week in revenue.

If it is a drink snack account it is horrible no other way of looking at it. $300 a month before any commission, taxes, etc is $150 a month if you are at 50% cog. Divide that between two machines (drink snack) that is $75 per machine or $37.50 per machine per week after cog.

So total revenue would be $1,800 per year net (again before any commissions, taxes, fuel cost, insurance, etc) Lets say you pay 10% in commissions so take out $360.00 if you are paying 10% of gross sales. Lets say you had a compressor or out on the drink and a validtor go out on the snack. What did that cost you? $350? Now you are down to $1090.00 before taxes, insurance, fuel cost, etc. With accounts doing that low of volume you are going to have stales no way around that for the most part unless you have some good accounts to rotate product to then you are just creating more labor and work.

Pretty sure this is a one machine soda account!

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I had a location that contacted me years ago demanding something like 20% of the gross and they wanted to have control over pricing and everything. I told them I would gladly remove the machine when they found a new vendor. I still have it!

A fellow vendor just told me a few weeks ago that one of my accounts wanted new snack, soda, and food machines. I only do that account because it's neat and it was practically free as the location has no elevator and the machine is on the 3rd floor. No one will offer what they want.

My favorite though was the account with 65 cent canned soda (I need to raise it). This place is full of lawyers and they were out of diet coke one day, so they called and complained that they needed better service and the prices were too high. Don't get me wrong, it was my fault they ran out of diet coke, but I was nearly offended when they complained about prices. If their sister building didn't do so well, I would have changed their price right away.

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That is a joke! The worst request I ever had was 33%, i moved all my equipment the same day. If someone wants to take advantage of my company and me like that then I do want to do business with them. Most of my clients are very respectful of commissions because they know me. I have come across a couple large accounts in the last month that have actually turned down my commission offers, they just want full machines. They are large corporations and act as if my dealing with my commission is not worth the amount it will be to them.

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There are some vendors who promise those type numbers but do not really pay it. A huge independent vendor in our area won a bid for a local account that was sizable. Promised 40% on hot drinks, 30% on snacks, 33% on cold drinks, 15% on food. The old vendor was paying 15%/ 12%/ 8%/ 0%. After 1 yr the new vendor was replaced as their high rates were only generating 25% of what the account had been receiving at the lower rates. Some companies are unscrupuless.

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Whatever commission they want you have to add that plus a little to the non-commission price of your stuff. The highest I have is one snack account at 15%. It's at a hotel and easily gets the higher priced snacks. They don't care what I charge as long as they get their check by the 10th.

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Whatever commission they want you have to add that plus a little to the non-commission price of your stuff. The highest I have is one snack account at 15%. It's at a hotel and easily gets the higher priced snacks. They don't care what I charge as long as they get their check by the 10th.

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Yes, but let's take a 20 oz soda for example.  Let's assume that the bottle costs you roughly $1.00.  If they want 50%, and you charge $2.00 for that same bottle, you'll only break even.  If you charge $3.00 for that 20oz bottle, you'll only make 50 cents on that bottle.  A 2 oz. bag of chips being sold for $1.50 would only bring in maybe 30 cents profit per unit.  For vending, 50%+ is extreme.  Once you get the prices that high, people will often stop buying.  And let's face it, it's an apartment complex and not a hotel.  If people LIVE in this complex, they'll quickly get sick of paying $3.00 for a bottle of soda when they can buy a 2 liter for half of that.

 

I don't disagree with what you said about adding it to the price, but a 50% markup would just make prices so high that you wouldn't actually be profitable. 

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I am almost positive they mean 50% of the profit (20 to 25% sales) which is actually what most school districts and government contracts are setup on

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I have never seen any contract setup based on profit other than some vendor playing with the numbers to someone that did not have a clue. I have NEVER seen any school or government setup that way it is ALWAYS based on gross sales. I have had plenty of schools including high schools, middle, elementary, college, city and county government, and it was always based on gross sales and usually never over around 15% of gross sales.

The only time I have seen "net" is net after sales tax is taken out not after profit which could mean about anything after cog, tax, fuel, insurance, etc.  

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What I am saying is the account might not know the difference between 50% of the net or 50% of the gross I have a few accounts that call their commission a percentage of the profits!

 

That is not what you said in that post however if that is the case it is wrong on many levels. First the account should no based on the vendor correctly explaining. Second, anytime commission is involved their should be some sort of service agreement that explains exactly what the commission structure is and spells it out for them. This will avoid any doubt as to what they are getting paid for so no one can come back and complain that they don't "think" they are getting paid what they should. 

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wrong that the account wants to call it a "profit share"? I get that there are a lot of variables to get to the profit but if an account whats a percentage of the profit and not gross why do you feel they are wrong?

 

Like I said they can call it what they like but in the end you as the vendor have an obligation to explain things to the customer so they have a clear understanding. That way they "call it" what it is correctly and have an understanding as to exactly what and how commissions are paid. 

 

Things like this is why it makes the entire vending community and business look bad because vendors either take advantage of people which has already been mentioned on here with high commission number and fuzzy math or they try and do the old commission based on "net". 

 

When I am knocking on doors and the account tells me that they are getting paid a net commission I always ask them "net of what? I ask how that is calculated they say net of profit I guess. I say how do you know what "profit" is? When they cant answer me I explain to them that we pay based on gross sales minus sales tax and that can be verified by meter readings, or wireless remote monitoring software. I have taken many accounts over the years from vendors that do not explain the commission structure and the account has a clear understand of it. If the customer has an doubt they are not getting their fair amount then they will look to find a vendor that makes it clear.

 

You do as you please but my experience knows the way it should be done to avoid any issues or possibly loosing an account because of someone feeling like they really don't know if the vendor is being honest with them.  

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Let's take a moment and way overthink this, shall we?

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Thats what I am trying to help vendors avoid but some dont see it that way. If a customer cant understand what and how they are getting paid then it is not a good situation. A customer would have to "overthink" if they are trying to figure out what "net" is. 

 

Its simple pay a percentage of gross sales minus any sales tax and make sure the customer understands this. If the account does $66 in sales for the month and get 10% after sales tax and sales tax is 3% they know they should be getting $58.20 in commission. Simple with no "overthinking" at all.  

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There has been accounts I have walked into that they tell me they are getting 50% of the profits, how would you explain to them that your 15% of the sales is better then the current 50% of the profit?

 

First off NO ONE is paying an honest 50% of profit even if it is just taking out tax and COG in the drink/snack full line vending business. If so they are fools. I am not sure you are getting it because the account can NOT explain to anyone what the profit is unless they are seeing all associated cost. They cant actually see they are getting their honest commission. I will explain to them that we call that "vending math" used by vending operators that even themselves cant show how they arrive at the amount paid each month.  Tell them to ask for a break down of exactly how they are getting to the numbers. For the vendor using this method to "calculate" commissions they would have to break down each item, item by item the cost that was sold through the machine each month. You going to show drinks you caught on sale? It is nearly impossible to do commissions this way.

 

I have even seen vendors say they also take out "stales" out of the commission. I explain to the customer it is my job to manage and monitor the stales. I ask them how do you know how many actual stales they had that month? They say "I guess based on what the vending company tells us." I don't have to tell the customer that they are being lied to to leave them with some doubt they might be getting fleeced on commissions. That is all it takes many times for them to switch vending companies.  

 

If you have accounts setup that are getting some form of "net profit" you had better hope a sales person that knows what they are doing does not call on them or you may be loosing they account. I can tell you if I called on them you would be at risk unless you are very well liked and commission is pretty much an after thought and they don't really care if it is an true honest commission in the first place. 

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