Healthy vending

[vendtex]

Hi.  I am new to this forum and haven't taken the plunge yet but have read a lot on here and some of the kindle books mentioned.  I get the concerns and hype with the franchise healthy vending business, but I was wondering some things.

 

One of the "attractive things" about the machines is the ability to get real time feedback on what is selling at each location and to know what products you would need to bring to stock these machines. I've noticed that many recommend buying used or refurbished machines, etc., but are there other machines out there that can give you that kind of information?  It would seem that would be very valuable in terms of reducing inventory, knowing which products aren't selling to reduce spoilage, and also allow you to plan your routes or alter the servicing of your routes as sales wax or wane.

 

Some of the "paid" references claim that they can make about $4000 per machine per year net.  Is that realistic?  

 

Have any of you used machines with this technology, and do they give reliable information.

Thanks for any feedback.

[AngryChris]

Assuming 50% COGS, the only way to get $4,000 NET per machine per year is to gross $8,000 in that year.  That comes out to $150+ each week.  That is certainly doable out of pretty much any full-size vending machine, but this is only realistic in good locations... and those good locations will want unhealthy junk, not the healthy stuff.

As for giving you information, let me first say that I don't use any vending software to monitor my sales, so keep in mind that I don't have experience with software.  Having said that, it's important to know that the information you can get from these machines is typically transmitted via an internet connection which is a service YOU pay for.  Even so, the machine has pretty much no way of knowing what's in a selection.  It can only tell you which selections have been selling and what the quantities are (ie. Selection A1 sold 7 items, A2 3 items, etc...).  It's up to you to set up a planogram so you know what those selections have in them.  On the other hand, you can do the exact same thing by showing up to the machine and simply observing what has sold and what hasn't and how much.  The reports sound great, but the way they market it makes you believe that you get this fancy detailed report in your hands and you had to do nothing to find out that you sold 3 sandwiches.

Furthermore, the talk about reducing inventory and all is kind of a moot point.  The issue is that you generally have to buy entire cases of product, meaning you may have to buy a 50 pack of Lays potato chips and use them all up before they expire.  So if the machine reports that it only sold "7" items for that week (in this case, lays potato chips), then you still have 43 lays left in the box after restocking.  That inventory is going to sit there whether you like it or not until you have enough equipment to go through everything quickly.  Much of what they tell you is true but misleading.

To answer your question, yes, many (but not all!!!!) used equipment CAN give you that same information with the right equipment and the right software.  You just need to realize that, in order to receive that information without going to the location, you need something with a modem that can send information to you.  Typically, you can use a credit card reader to do this as it is already set up to transmit transaction data.  This is not a free service.  Not only do you pay for the wireless connection, but the credit card company receives a fee for transactions made via credit card, but that isn't really relevant to your question.

Basically, what a lot of healthy companies do is try to sway you with fancy, misleading marketing.  They take an attractive machine, wrap it with healthy marketing, and jack up the purchase price for the machine.  In other words, they might try to sell you a combo food machine made by a company such as USI (if you're lucky, some use cheaper foreign brands), and rebrand it as though it's something else.  That same machine might sell from a distributor for $6,000 but they sell it to you for $10,000.  The data that you can receive only happens when you add a credit card reader which may or may not be included with the base purchase price.  The bottom line is that most of these healthy companies make things look as though you simply put the machine in and you can simply drive a car with a few items and restock it once a week.  In reality, much of what you learn about what sells and doesn't sell can be done by simply taking notes when you show up to restock.  Having the information is great, it really is, but you must know how to read and understand the information to make use of it properly, and practically any late model machine can do that for much cheaper.

[AZVendor]

Don't be mesmerized by all the bells and whistles.  Those are just more things to cause you problems and the last thing you need are technological problems if you're new in vending.  Start with the basics of good used machines and then only if you fall in love with vending should you think about further investment.  This is a tough business and it takes hard work and lots of time.  You have no idea what that means until you jump in.  Wait and see how 2 or 3 or 5 soda machines do for you first so you know if this is really for you.  Don't give all you money away in the beginning or you might find you hate this business and now all your money is gone, because you will only be able to sell it for pennies on the dollar if you give your money to a healthy vending shyster.

[lacanteen]

Assuming 50% COGS, the only way to get $4,000 NET per machine per year is to gross $8,000 in that year.  That comes out to $150+ each week.  That is certainly doable out of pretty much any full-size vending machine, but this is only realistic in good locations... and those good locations will want unhealthy junk, not the healthy stuff.

As for giving you information, let me first say that I don't use any vending software to monitor my sales, so keep in mind that I don't have experience with software.  Having said that, it's important to know that the information you can get from these machines is typically transmitted via an internet connection which is a service YOU pay for.  Even so, the machine has pretty much no way of knowing what's in a selection.  It can only tell you which selections have been selling and what the quantities are (ie. Selection A1 sold 7 items, A2 3 items, etc...).  It's up to you to set up a planogram so you know what those selections have in them.  On the other hand, you can do the exact same thing by showing up to the machine and simply observing what has sold and what hasn't and how much.  The reports sound great, but the way they market it makes you believe that you get this fancy detailed report in your hands and you had to do nothing to find out that you sold 3 sandwiches.

Furthermore, the talk about reducing inventory and all is kind of a moot point.  The issue is that you generally have to buy entire cases of product, meaning you may have to buy a 50 pack of Lays potato chips and use them all up before they expire.  So if the machine reports that it only sold "7" items for that week (in this case, lays potato chips), then you still have 43 lays left in the box after restocking.  That inventory is going to sit there whether you like it or not until you have enough equipment to go through everything quickly.  Much of what they tell you is true but misleading.

To answer your question, yes, many (but not all!!!!) used equipment CAN give you that same information with the right equipment and the right software.  You just need to realize that, in order to receive that information without going to the location, you need something with a modem that can send information to you.  Typically, you can use a credit card reader to do this as it is already set up to transmit transaction data.  This is not a free service.  Not only do you pay for the wireless connection, but the credit card company receives a fee for transactions made via credit card, but that isn't really relevant to your question.

Basically, what a lot of healthy companies do is try to sway you with fancy, misleading marketing.  They take an attractive machine, wrap it with healthy marketing, and jack up the purchase price for the machine.  In other words, they might try to sell you a combo food machine made by a company such as USI (if you're lucky, some use cheaper foreign brands), and rebrand it as though it's something else.  That same machine might sell from a distributor for $6,000 but they sell it to you for $10,000.  The data that you can receive only happens when you add a credit card reader which may or may not be included with the base purchase price.  The bottom line is that most of these healthy companies make things look as though you simply put the machine in and you can simply drive a car with a few items and restock it once a week.  In reality, much of what you learn about what sells and doesn't sell can be done by simply taking notes when you show up to restock.  Having the information is great, it really is, but you must know how to read and understand the information to make use of it properly, and practically any late model machine can do that for much cheaper.

At a 50% cost of goods, and $8000 gross sales, $4000 is gross profit. You still have sales tax, warehouse/storage expense, vehicle expense, income tax, product liability and general liability insurance, product damages & stales, equipment repairs and depreciation, monthly data fees and card processing fees, to mention the more important expenses to get to net profit.

 

The rest of your post is spot on. "Outsiders"  may see you empty the bill acceptor and coin box and see all that cash. Well over 90% of that cash has a destination before you even get back to your truck.

[vendtex]

Thanks for the responses.  I am looking into vending as a way to supplement income to make other investments, perhaps rental properties.  The attraction to me of the bells and whistles is the potential to limit some unnecessary time on the road.  I'd like for this to me more or less a weekend business so I'm also considering just doing bulk vending but it seems like the number of units necessary to make any reasonable amount of money could also be time consuming.  I saw a post much earlier I think by NYvendor or something like that whose situation is similar to mine.  It looks like there are American made machines with similar technology.  I think crane and USi? Do any of you use those?  I can see that if you have large routes and make scheduled runs it wouldn't be necessary but if it's just part time it would seem helpful to me.  To use the chip example, what if you had bought a case of chips but just put 7 in 7 machines until you know how they sell then you could adjust the stocking based on the real time information.  

At a 50% cost of goods, and $8000 gross sales, $4000 is gross profit. You still have sales tax, warehouse/storage expense, vehicle expense, income tax, product liability and general liability insurance, product damages & stales, equipment repairs and depreciation, monthly data fees and card processing fees, to mention the more important expenses to get to net profit.

 

The rest of your post is spot on. "Outsiders"  may see you empty the bill acceptor and coin box and see all that cash. Well over 90% of that cash has a destination before you even get back to your truck.

 

If that is all taken into consideration what percent of the gross sales is really income then would you guess?

[AngryChris]

At a 50% cost of goods, and $8000 gross sales, $4000 is gross profit. You still have sales tax, warehouse/storage expense, vehicle expense, income tax, product liability and general liability insurance, product damages & stales, equipment repairs and depreciation, monthly data fees and card processing fees, to mention the more important expenses to get to net profit.

 

The rest of your post is spot on. "Outsiders"  may see you empty the bill acceptor and coin box and see all that cash. Well over 90% of that cash has a destination before you even get back to your truck.

 

lacanteen is absolutely correct.  The figures I used were literally a best-case-scenario.  In reality, you might need an account that grosses $300/week to turn a $4,000 annual profit, and an account like that will want full-sized machines and a ton of junk food.

[AngryChris]

Thanks for the responses.  I am looking into vending as a way to supplement income to make other investments, perhaps rental properties.  The attraction to me of the bells and whistles is the potential to limit some unnecessary time on the road.  I'd like for this to me more or less a weekend business so I'm also considering just doing bulk vending but it seems like the number of units necessary to make any reasonable amount of money could also be time consuming.  I saw a post much earlier I think by NYvendor or something like that whose situation is similar to mine.  It looks like there are American made machines with similar technology.  I think crane and USi? Do any of you use those?  I can see that if you have large routes and make scheduled runs it wouldn't be necessary but if it's just part time it would seem helpful to me.  To use the chip example, what if you had bought a case of chips but just put 7 in 7 machines until you know how they sell then you could adjust the stocking based on the real time information.  

 

If that is all taken into consideration what percent of the gross sales is really income then would you guess?

 

It's impossible to say... but start with a figure such as 25%.  If you collect $100, and you work out of your car, expect to keep at least $25 assuming your pricing is up to par with the industry in your area.

As for supplementing income, vending is something that you can do on the side but not generally on the weekend.  A vast portion of businesses are closed on weekends.  The same problem happens in bulk vending but a big portion of bulk vending takes place at restaurants.

It sounds like you are looking for something where you can sit back, stock the machine once a week, and collect hundreds of dollars in profit.  If that's the case, then vending isn't for you.  To collect any significant amount of money, even $500/month, will take several good accounts and at least a full business day dedicated to stocking machines.  If you are going to be on the road most of the time, then full-line vending is not for you.  Should someone need you to repair a machine and you won't be available for one week, they'll quickly find someone else.  Most machines are relatively reliable but customers can be unforgiving.

 

There are things we recommend to people who simply want to get their feet wet and make a little extra money, but your proposed healthy vending idea is not one of those things we recommend.  Bulk vending actually sounds better for you because the investment cost is very cheap and you can stock machines once each month.  Service calls are rare as far as I know with bulk vending, so there is less to worry about from an investment standpoint.

Just keep this in mind.  Vending is not a get-rich-quick scheme.  Practically none of us here became super wealthy and thus retired because we made a fortune from vending.  Many of us do this full-time OR have a mixed schedule between a regular job and vending.  Can you make decent money with vending? Yes, you can, but only when you have a large enough route.  If you are looking at investing into a business where you can start making up to $40,000 year IN YOUR POCKET within the first 5 years, then I suggest you avoid vending entirely.  It took me over 5 years to get to the point where I fully supplemented the income from my previous job.  I'm hoping to break $40,000 within the next 3 years.  It's a full-time occupation to make that much by myself.

[Southeast Treats]

Lots of good advise here.  We are all into vending and we all believe it is a powerful business when operated well, but it can be a lot of work and the margins are razor thin.  Small accounts are not hard to come by, but GOOD accounts are very hard to get into and everyone is competing for those.  New equipment is great but expensive, and the depreciation in value is worse than buying a new car.  Good used equipment can be found, and as you get a few good accounts you can add on the telemetry to most newer machines.  Look for machines that use MDB changers and validators and have a DEX port (Multi Drop Bus and Data EXchange) so that telemetry can be added.  Be aware that even some machines with DEX can have older software that needs to be upgraded to work properly with telemetry.  And it can be a hard business to operate on weekends; if you limit yourself to accounts that can be serviced on your schedule you will have a hard time growing.  Good luck!

 

Oh, and as for the "healthy vending" part... the PC crowd seems to be looking for another scapegoat in the form of vending machines.  The machine does not care what it sells, and any good operator will stock the products that sell - that is why we are in business!  BFY (better for you) products are getting better, but they can be more expensive and mostly unknown brands to your customers.  People want to buy products they know and pay prices they feel are reasonable.  Most operators stock a selection that appeals to the range of clients at a location, and that includes some BFY's, but putting out a whole machine of them is usually not successful.   

[vendtex]

This forum has been extremely helpful.  I got interested in vending after an email about healthy vending franchise opportunities.  They talk a good talk.  Of all the ironies, I was thinking of trying to put a machine in a local gymnastics place which is also a daycare.  Low and behold, yesterday when picking up my son I saw they have a new healthy vending machine.   It'll be interesting how long it lasts.  I've seen lots of these routes advertised now on craigslist expecting large amounts for their machines......fortunately I didn't make that expensive mistake......you guys are great.  Thanks.

[Southeast Treats]

This forum has been extremely helpful.  I got interested in vending after an email about healthy vending franchise opportunities.  They talk a good talk.  Of all the ironies, I was thinking of trying to put a machine in a local gymnastics place which is also a daycare.  Low and behold, yesterday when picking up my son I saw they have a new healthy vending machine.   It'll be interesting how long it lasts.  I've seen lots of these routes advertised now on craigslist expecting large amounts for their machines......fortunately I didn't make that expensive mistake......you guys are great.  Thanks.

The kids will buy a lot of drinks there if the machine stocks what they like.... if it's full of little known, odd flavor items it will die a quick death!

[vendtex]

The kids will buy a lot of drinks there if the machine stocks what they like.... if it's full of little known, odd flavor items it will die a quick death!

 

So far it appears that your prediction is holding out.....lots of little known snacks that all look filled.   I can't see the drinks but it looks like the snacks will be spoilage.

[Southeast Treats]

So far it appears that your prediction is holding out.....lots of little known snacks that all look filled.   I can't see the drinks but it looks like the snacks will be spoilage.

The sad thing is it could do pretty well if someone took the time to find the right product.... I had a middle school snack only account that did about $300 a week; had a heck of a time sourcing products that qualified for school vending but got some good ones.  Had to close it down after just a few months because of vandalism and breakins, the school would not provide a secure enough location....