Machine Route Advice

[huynhhh]

2 hours ago, AngryChris said:

Yes, there are ways to fudge the numbers to make it seem like the route does more than it does, but here are a few things that concern me:

The year end supposedly ends in September "for them."  This may simply mean that it's operating under a corporation and not an LLC.  That also makes me believe that a larger company owns that route, and not necessarily some guy.  Even so, most vending companies who sell out do so directly.  Locally, I have never heard of a company selling out through a broker.  It was always done face-to-face.  If it's being sold through a broker, then it sounds likely that the "route" is operated by a driver (who gets paid hourly, most likely) but is owned by a franchise, such as the healthy franchise.  Even if this is not true, and the owner is an actual person, it seems awfully suspicious that a broker is giving the information.  The whole thing sounds like a biz opp venture.  If it is a biz opp, then you are just getting stock numbers (ie. 60% net profit after COGS and taxes, 80k YTD, etc..).   Also, if it has done 80k YTD, then is that 80k from January - date or 80k from September - date?  That's a major difference in sales figures!!!  Again, the numbers appear to be presented to mislead someone.

Going by past commissions is an excellent way to verify sales to the hotel because almost no one would pay MORE commission than necessary.

Seeing as the route did "worse" last year.. before the hotel was acquired, then I would simply assume that the first year did no more than 40k without the hotel... which sounds like it did about 40k from 10 machines or so or 4k per machine.  While 4k per machine isn't bad at all, that's a lot to put on a single combo machine.  The red flag here is this: having a combo machine means very limited selections.  Unless this is entirely a healthy niche in which every machine only sells "healthy" items, then you are dealing with machines which likely sell a few varieties of soda and maybe 20 selections of chips, candy, and pastries.  In the end, you simply cannot maintain happy customers unless you service these machines once every week or perhaps once every other week.  The machines would start to look very bare after 2 weeks.  Even if they were stocked regularly, it would be very easy for another vendor to come in and offer a full size snack and soda with more capacity and better variety at the same locations.  I just don't see how someone could keep locations that average 4k/year out of single combo machines UNLESS it was strictly a "healthy" niche and these are located at places such as YMCAs and schools.  Even so, you would now be dealing with having to buy a bunch of healthy items...   And here is the catch to the "healthy" biz opps -- they want you to purchase the healthy items from them directly.  You may actually be able to make 60% after COGS and taxes, but that's because the prices are marked up so high and the products are from relatively unknown brands.  I'm not saying it cannot be profitable, but healthy niches are known to not be where you want to start.  On the other hand, the operator could be handling these accounts out of combo machines and I could be completely wrong.

The ride a long will tell you a lot.  Firstly, you'll see the prices.  Secondly, you'll see the dates on the products and see if it looks like they move fast (if any of them have short shelf lives).  The most CRUCIAL thing you will see, however, is how many people work or how much traffic is at these locations.  If you start seeing things such as an office with 20 employees or the healthy machine is located next to a full size soda and snack machine or anything that would have you wondering if it's actually a good location.. that would be a red flag.  It's very important to take notes of the accounts and how many people work there.  For example, if there is, say, an office with 20 employees with a single healthy vending machine located in the break room, then you should write that down.  When you have time to ask later, ask about the locations and say "Hey, you know the [account name] account?  How much do they gross each year?"  If you hear something like "about 4k" or anything like that, it's almost guaranteed to be a lie.  Simply report your findings back here and we can tell you whether the numbers add up.  A 20 person office with JUNK FOOD is likely to do anywhere from $15/week to $45/week, which is about $800-$2350/year.

You also want to ask about what the technology is that tells you what products to bring.  Aside from Payrange, which uses bluetooth, almost all other card reader technologies out there use either a wireless cell signal.  I have heard that wifi can be used but I have never seen it.  As I stated before, this technology requires a cell signal and you PAY for that service.  Many of us have card readers and we pay for the cell signal and it's a useful thing to have, but you don't have to have the card reader for the telemetry, you just need the telemeter.  The card reader connects to the telemeter and allows for credit card transactions, but the telemeter communicates as long as it has a cell signal.  The other possibility is that they are referring to DEX technology, which is a very common technology you can use in almost all modern vending machines.  The catch is that, without some form of communication, you have to get that DEX data directly from the machine.  So, if you don't have a way of communicating with the machine remotely, then you need to get the information on-site.  There's no point in driving all the way to the site to get the DEX data, only to have to drive back to tell yourself what to bring with you, is there?  If that's the case, you might as well just bring a whole truck and predict what you need.  Some operators use historical DEX information to predict their future sales, but this isn't going to be very accurate.  For example, an account might sell about 1 case of diet coke every week, and the DEX information would reflect that, but the account might actually only need 18 diet cokes or 28 diet cokes when you show up.  A telemeter can tell you EXACTLY how many items sold between the last fill and the time you took the report.  So you filled the machine at 12:28pm on August 1st, 2017, and you took the report on August 14th, 2017 at 7am, then it will tell you how much sold between that period, which may be exactly 23 diet cokes.  If that's the case, you can show up the next day and stock 23 diet cokes.  When you get there, it might be 2 diet cokes short of being completely up-to-par because 2 sold between the time of the report and the time you showed up, but that will be accounted for when you run the NEXT report starting at 7am on August 14th and ending on whatever date and time you take your next report, as it will include the 2 diet cokes that were sold after the report was taken but before you go there.  It just takes some discipline and understanding of basic accounting, as well as understanding how to pull the reports.

If they cannot provide you with information on their "eletronic monitoring" technology, then it's likely that they are making it all up and simply giving you fake reports so that you'll buy.  The technology is real, but the question is whether they are giving you real numbers or not.

Again, I need to bring this up... for the amount of money you are talking about, and for the value of each machine when you break it down ($80,000 divided by 16 machines is $5,000 per machine).  A BRAND NEW Royal Merlin IV 650, or a BRAND NEW USI 3500, or a BRAND NEW USI 5-wide snack machine should all sell for LESS than about an average of $4,000/EACH.  For $80,000, you should be able to EASILY purchase about 20 BRAND NEW full-size soda and snack machines.  Let me put this into perspective -- a Royal 650 can hold about 650 cans or something like 288 bottles.  A USI 3500 can hold about 500 cans or about 240 bottles.  A USI 5-wide can hold roughly 500~ snacks.  If the average price on an item in the snack machine was $1.00, and the average price on bottles from a Royal 650 was $1.50.  If you only sold HALF of everything in both machines, you would collect $216 from the soda machine (144 * $1.50) and about $250 from the snack machine before they were even half-way sold out.  That means, for an account doing $4,000/year or about $80/week.. or about $40/week in each machine.. it would take you about 5 weeks before you even sold HALF of the items.  Think about that.. Yet a combo machine might hold half of the capacity of snacks and maybe 1/3 the capacity of drinks that their full-size counterparts can.  Not only that, but when you have combo machines, you are losing sales because you don't have everything they want or the popular items sell out too fast.  I'm really trying to drive home that if you have that kind of money to spend, you should either look for a seasoned vending company looking to sell out or just buy your own refurbished machines and start out slow and use your purchasing potential to keep getting GOOD accounts early on.  All it would take is less than $20,000 and you could afford everything that a GOOD account wants, like a new glassfront soda machine, a new cold food machine, and maybe an additional stack vendor located somewhere else in a nice big break room in a hot factory with 150 people in it.  In a location like that, you could see numbers as high as $750/week in sales or almost $40,000/year in annual gross sales... all for $20k.  But I wouldn't recommend doing that either because you haven't gotten your feet wet yet.  For the money, you could start off with nice refurbished machines and get some good locations like factories with 50~ employees in it and make good money there without all of the risk.  There's nothing wrong with going big but $80,000 is a lot of money to risk for a venture that rubs me the wrong way.

AngryChris, I would firstly like to thank you for putting so much time and effort into this post - as it may potentially save me from being scammed. Please let me comment here and please correct me and educate me on this matter. (Dissected your post and will address each comment accordingly)

Here is a loaded post:

• The company is operating under a corporation - for purposes that are beyond my scope. They have requested that I have a GST number ready for the transfer of assets. I suspect that they have assets under the corporation beyond the vending machines ie: vehicle, perhaps stocks, perhaps real estate, who knows. With that being said, does it truly matter who owns the corporation? if the sale will be the vending machine assets?
• I have not that much experience in vending, but I had a bulk vending business about 2 years ago- I have spoken to the same "broker" two years ago and she is still in the business. She seems nice and genuine, have yet to meet her. - Do you suspect that she is a part of a biz-op scheme?
• To address the comment on selling face-to-face I believe the broker's services are bringing a buying/selling party together - I have scheduled to meet with the broker, and route owner sometime early next week.
• The owners of the route are retiring, and they have portrayed the image of moving out of my city, and they have not made any indication of not servicing the route themselves. ie: hiring staff
• I do not believe that the company is owned by a franchisee, but I will ask to confirm - as I have asked where they get their product and they did not mention anything about a specific healthy foods vendor, they said Costco, whole foods, etc.
• I believe it is 80K sales to date, so likely from last September. - I come from a finance background so I will likely be able to decipher the figures quickly when meeting them
• They made it very clear that the REVENUES SINCE INCEPTION have been approximately 120K - 40K from the first year, and 80K from this year, increase in sales this year was claimed to be from perfecting products demanded on location
• The two locations with commissions are the two hotels, I will be asking for historical commission cheques - they have said they pay hotels out on a semi-annual or annual  basis - is this normal? The two locations are a claimed 50% of the revenues of the whole route ($3400 gross monthly from a total of 7 machines, 4 on 1 location, 3 on the other - on different floors of the hotel)
• They claim to service the hotels twice a week - which would seem to align with your statement in regards to a combination machine being restrictive. They have stated that these "healthy" vending combo machines are a perfect size - for space and the elevator and competitors would have a difficult time moving another combo/machine in (which would also mean I would have a difficult time changing machines) - Is this a load of dog crap? Seems like they meant well, but they were just pulling ideas out of thin air as a "competitive advantage"
• They claim that their margins are good because their price points in hotels are slightly higher - the hotels are located downtown so I assume they are catering to more wealthy individuals (cans of pops are $1.50CAD)
• I have requested to do a collection with them- they refused to do a full collection/stocking of products as they do not want to disturb the location owners by having 6 people huddled over a machine, especially if I do not purchase the machine. I have told them I would like to see the monies - and in the back of my head, I would like to see how full/empty the machine is in comparison to the money in the coinbox. 
• I truly only care about 4 of the top producing accounts, as they sum up to $5300 gross per month - so those are the only three accounts I will be going to see - is this a mistake? There are clearly a lot of people at the hotel. Most accounts are close proximity, but some accounts are bundled up on the other side of town, and will take a long time to drive back and forth, especially on the same service day. (Other 6 accounts; 6 machines sum up to $1500 gross per month)
• Should I still ask for employees that work at the smaller accounts - and the foot traffic?
• Their accounting technology they use to track sales and everything is called USA Technologies. Is this program good? is there ways to fabricate and tweak sales to make them look sexier than a girl at the club? - I have asked the broker about the fees in regards to the wireless transactions and tracking and she told me the owners would be more suited to address the questions. Does USA technologies company provide product/sales tracking? and if so, how accurate?
• I have asked them to bring all paper work when I meet with them - including receipts so that is a pretty sure thing to match expenses with the relative sales right? IE: Total money spent on produce + tax = 40% of total sales, if not then figures are fudged

 

To address your "start your business from scratch" the sole purpose of me doing this - is to have part time work hours for a regular stream of income. I am currently working a full-time job that is completely unrelated that I love (finance, but it is unstable and performance based). I will be doing this venture with a partner - so we will likely be splitting the hours. Hotel hours are 24/7 so they can be serviced anytime of the day.

I will not likely have time to knock door to door to find accounts to start the venture up - which is why I have resulted to purchasing a route, my partner would likely be doing this.

Also, both hotels have 1 year contracts - they have said upon the sale of the business they will re-new the 1 year contracts with the owners. 

 

Thank you again for your time and feed back.

[AZVendor]

I haven't been able to find anything about your machines just based on the Max Healthy machines so don't do anything until we can ID the machines for you.  There's too great a chance that you'll be buying cheaply made imported machines.

[huynhhh]

1 minute ago, AZVendor said:

I haven't been able to find anything about your machines just based on the Max Healthy machines so don't do anything until we can ID the machines for you.  There's too great a chance that you'll be buying cheaply made imported machines.

Ride along is on Tuesday, I have just texted the broker requesting the max healthy machine model numbers - will get information then revert.

 

Thanks AZ

[AngryChris]

I will respond when i am home.

[falls]

8 hours ago, AZVendor said:

I haven't been able to find anything about your machines just based on the Max Healthy machines so don't do anything until we can ID the machines for you.  There's too great a chance that you'll be buying cheaply made imported machines.

I suspect they are the machines sold by http://canadianhealthyvending.com/ but I'm not knowledgeable enough to identify the base machine.

 

Obviously it has a custom header with branding and video display, but as to the machine? 

[musser]

Very solid advise AG!!! The only thing I can add is a "double down" on the broker issue. I have never seen a vending sale via a broker that was legit. This may be different but very very  suspicious.

 

[huynhhh]

36 minutes ago, musser said:

Very solid advise AG!!! The only thing I can add is a "double down" on the broker issue. I have never seen a vending sale via a broker that was legit. This may be different but very very  suspicious.

 

Hello musser,

Long time no talk:) 

What do you mean double down on the broker issue? 

[Southeast Treats]

A business broker sale can be legit, brokers exist as real restate agents who specialize in business sales.  While many vendors prefer to sell it themselves and avoid the broker's commission, some will use a broker for various reasons.  USAT is one of the largest telemetry providers in the industry.  If you are looking at their reporting directly, not downloaded onto a format that can be edited, it should be accurate.  As far as the hotel, if they have 5 combo machines in one location they have plenty of room to upgrade to full size machines there.  They are just making use of the equipment they have rather than investing in upgrades, not necessarily a bad decision, but a lot of extra service to keep them all stocked.  If the hotel is that busy you could consider those changes after purchase.  Machines on the floors are something that many hotel flags want but they are often less busy that they should be; again something to look at if you do buy the business.  If it's a condition of keeping the account and the account is that good so be it. 

[musser]

My reference to brokers is specifically as it concerns vending businesses. To me it signals the seller knows the price is too high. The broker is hired in the hope a buyer unfamiliar with the business will be found and will thus over pay.

[huynhhh]

12 hours ago, AZVendor said:

I haven't been able to find anything about your machines just based on the Max Healthy machines so don't do anything until we can ID the machines for you.  There's too great a chance that you'll be buying cheaply made imported machines.

Falls may have hit the nail on the head - I looked at the spreadsheet they sent me - the machine is: Max! Vendor Series - 2 Model: VCM-3000

[AZVendor]

The machine photo appears to be a USI machine rebranded to the healthy one.  If so then it should be good.  I think USI calls it a Summit 3000.

[huynhhh]

3 hours ago, musser said:

My reference to brokers is specifically as it concerns vending businesses. To me it signals the seller knows the price is too high. The broker is hired in the hope a buyer unfamiliar with the business will be found and will thus over pay.

Thank you Musser - I have read industry is 1 year gross, or 2 years net. I have hired an accountant to come with me to look at the financials - and really rip it a part. I am requesting bank statements with proof of cash deposits and everything.

 

[AngryChris]

Disclosure:  I am tired and not thinking as clearly as I normally do, but here is my response:

It sounds like you have a pretty good plan to analyze the numbers.  I did go to community college for an associate's degree in business (among a few other things on and off over the course of 10 years) but I did not finish the degree.  I do think I could obtain a master's in business if I really wanted to but that's because I am just naturally good at understanding business in general.  I'm not the best vending machine operator, but I have a good knack for figuring out how businesses work and what makes them profitable.  It's just in my nature.  My point is that analyzing numbers is great but just don't forget that numbers don't lie - people lie about the numbers.  2+2 always equals 4, but that information may not actually apply to the situation at hand.  There are ways to fudge numbers, even the cash taken from machines, but since the machines have USA Tech readers in them, that means there should be a report that they can log into to give you sales data for the past year.  

If all of the machines have had a telemeter in them over that time, then you will see all reported sales during that time.  Literally, it can tell you that machine "1" generated $x,xxx.xx over the course of the last 12 months.  These reports can also be adjusted to tell you sales from last week or just yesterday.  Simply choosing a snapshot like asking for the sales from January 1st to June 30th might be a good route to go since it would be difficult to fudge the numbers that were reported from telemetry.  If they fudged the numbers recently, that would show up in recent reports but they would have been wasting their time to fudge the numbers in the past.. and by fudging the numbers, I am talking about running cash through the machine and purchasing things only to restock them later.  HOWEVER.. if the sales from the USA Tech reports closely match their reported gross income from the route, then it's very likely that the numbers are true since it would be unwise for someone to be willing to potentially pay more in taxes just to exaggerate their sales figures for a potential sale later.  It's possible, but unlikely.  Of course, seeing the COGS will be a big factor in things because if the COGS + taxes DO only equal about 40% of gross income (leaving you with about 60% net operating income) then that's obviously a sign that the seller is telling the truth.  However, if the numbers REALLY show something closer to 50% or 40% net income AFTER COGS and taxes, then that's a major red flag and it would tell me, based off of what I have already seen, that this is indeed a bizopp scam where what they really want is to sell overpriced machines in underperforming locations for the most money they can.

Most vending companies I know are LLCs.  Most ways they sell are directly to potential buyers and not through a broker.  Most of them can allow you to ride along pretty easily and show you numbers directly.  In this instance, as it has been so far, you are purchasing either a corporation OR the assets to this corporation through a broker.  If you are purchasing a corporation, then all agreements and contracts come with it.  If you are purchasing the assets, then none of that technically applies.  That's not really important but my bigger point is that the whole things just seems to not add up.  If this is a mom-and-pop deal where they just formed a corporation for a vending business that they have been operating themselves and making pretty good money, then why move away from it?  If everything was as stated, and the route makes say.. 90k/year as-is with 40% net after most regular expenses, then you have a net income of about $36k/year.  Moreover, if you serviced 7 machines 2x each week, which might take 7 hours, twice each week, and you serviced the other 9 machines 1x each week for a total of 9 hours.. that's a total of 23 hours of service + maybe 2-4 hours of other activities such as stocking and paperwork.  So... making $36k by working 26~ hours each week... why leave that?  My question may not be relevant here because they might simply want to move, but "implications" don't mean anything for business.  What matters in business is cold hard facts and real numbers.  I have known of many hotels in the past where they changed vendors regularly for various reasons.. many of which were related to not getting enough commission or they simply didn't produce enough sales.  I just cannot see 3 or 4 combo machines supporting a good hotel for the life of me.  Giving them 10-15% commission off the top is obviously a way to make them not care about anything else, but I just can't see this working out.  Imagine if you lost the hotel account for ANY reason.  Now you lost your best accounts and you are stuck with a huge purchase of combo machines which the vast majority of us recommend to not invest into because of their lower capacity.  My gut feeling just doesn't budge but you should definitely continue on our plan to get the information and decipher it thoroughly as you are.  It could be a solid deal.  Of course, account that the hotel accounts get the big commissions, so that lowers your margins significantly at those locations.  If the net income after COGS and taxes is much lower than the claimed 60%, you have to take 10-15% straight off of what the real net income is.  You might find out that it could take you far longer to see your ROI than you had originally accounted for.  In that instance, taking a different route would have been better.

[huynhhh]

10 minutes ago, AngryChris said:

Disclosure:  I am tired and not thinking as clearly as I normally do, but here is my response:

It sounds like you have a pretty good plan to analyze the numbers.  I did go to community college for an associate's degree in business (among a few other things on and off over the course of 10 years) but I did not finish the degree.  I do think I could obtain a master's in business if I really wanted to but that's because I am just naturally good at understanding business in general.  I'm not the best vending machine operator, but I have a good knack for figuring out how businesses work and what makes them profitable.  It's just in my nature.  My point is that analyzing numbers is great but just don't forget that numbers don't lie - people lie about the numbers.  2+2 always equals 4, but that information may not actually apply to the situation at hand.  There are ways to fudge numbers, even the cash taken from machines, but since the machines have USA Tech readers in them, that means there should be a report that they can log into to give you sales data for the past year.  

If all of the machines have had a telemeter in them over that time, then you will see all reported sales during that time.  Literally, it can tell you that machine "1" generated $x,xxx.xx over the course of the last 12 months.  These reports can also be adjusted to tell you sales from last week or just yesterday.  Simply choosing a snapshot like asking for the sales from January 1st to June 30th might be a good route to go since it would be difficult to fudge the numbers that were reported from telemetry.  If they fudged the numbers recently, that would show up in recent reports but they would have been wasting their time to fudge the numbers in the past.. and by fudging the numbers, I am talking about running cash through the machine and purchasing things only to restock them later.  HOWEVER.. if the sales from the USA Tech reports closely match their reported gross income from the route, then it's very likely that the numbers are true since it would be unwise for someone to be willing to potentially pay more in taxes just to exaggerate their sales figures for a potential sale later.  It's possible, but unlikely.  Of course, seeing the COGS will be a big factor in things because if the COGS + taxes DO only equal about 40% of gross income (leaving you with about 60% net operating income) then that's obviously a sign that the seller is telling the truth.  However, if the numbers REALLY show something closer to 50% or 40% net income AFTER COGS and taxes, then that's a major red flag and it would tell me, based off of what I have already seen, that this is indeed a bizopp scam where what they really want is to sell overpriced machines in underperforming locations for the most money they can.

Most vending companies I know are LLCs.  Most ways they sell are directly to potential buyers and not through a broker.  Most of them can allow you to ride along pretty easily and show you numbers directly.  In this instance, as it has been so far, you are purchasing either a corporation OR the assets to this corporation through a broker.  If you are purchasing a corporation, then all agreements and contracts come with it.  If you are purchasing the assets, then none of that technically applies.  That's not really important but my bigger point is that the whole things just seems to not add up.  If this is a mom-and-pop deal where they just formed a corporation for a vending business that they have been operating themselves and making pretty good money, then why move away from it?  If everything was as stated, and the route makes say.. 90k/year as-is with 40% net after most regular expenses, then you have a net income of about $36k/year.  Moreover, if you serviced 7 machines 2x each week, which might take 7 hours, twice each week, and you serviced the other 9 machines 1x each week for a total of 9 hours.. that's a total of 23 hours of service + maybe 2-4 hours of other activities such as stocking and paperwork.  So... making $36k by working 26~ hours each week... why leave that?  My question may not be relevant here because they might simply want to move, but "implications" don't mean anything for business.  What matters in business is cold hard facts and real numbers.  I have known of many hotels in the past where they changed vendors regularly for various reasons.. many of which were related to not getting enough commission or they simply didn't produce enough sales.  I just cannot see 3 or 4 combo machines supporting a good hotel for the life of me.  Giving them 10-15% commission off the top is obviously a way to make them not care about anything else, but I just can't see this working out.  Imagine if you lost the hotel account for ANY reason.  Now you lost your best accounts and you are stuck with a huge purchase of combo machines which the vast majority of us recommend to not invest into because of their lower capacity.  My gut feeling just doesn't budge but you should definitely continue on our plan to get the information and decipher it thoroughly as you are.  It could be a solid deal.  Of course, account that the hotel accounts get the big commissions, so that lowers your margins significantly at those locations.  If the net income after COGS and taxes is much lower than the claimed 60%, you have to take 10-15% straight off of what the real net income is.  You might find out that it could take you far longer to see your ROI than you had originally accounted for.  In that instance, taking a different route would have been better.

Thanks again,

Both hotels which produce 50% of the total route's income are on 1-year contracts that will be renewed under my LLC/Corporation upon the sale of the business.

I have modeled a projected Pro-forma of a 2% per month sales decline, and an assumed loss of hotel locations after the 1-year contract. After 2 years - total net profits would be approximately 60K, including the estimated gas/insurance/repair costs.

Under a different analysis, I also projected that the hotels have renewed the contracts, total net profits would be estimated at 70k after 2 years.

As you can tell - I am being relatively conservative. Is this a good and smart way to approach it? 

[AngryChris]

1 hour ago, huynhhh said:

Thanks again,

Both hotels which produce 50% of the total route's income are on 1-year contracts that will be renewed under my LLC/Corporation upon the sale of the business.

I have modeled a projected Pro-forma of a 2% per month sales decline, and an assumed loss of hotel locations after the 1-year contract. After 2 years - total net profits would be approximately 60K, including the estimated gas/insurance/repair costs.

Under a different analysis, I also projected that the hotels have renewed the contracts, total net profits would be estimated at 70k after 2 years.

As you can tell - I am being relatively conservative. Is this a good and smart way to approach it? 

To assume the worst (reasonably speaking) is my strategy.  The question is always: Will this still be profitable/worth the investment if I lose a few accounts?  Given what information we have to work with, 30k/year sounds very reasonable if not overly conservative... if the numbers are true.  The reason why I personally agree with that method is that you know what you have to work with in a "worst case scenario" situation.  Keep in mind, though, that vending contracts often don't hold much weight but they can definitely be upheld through legal manners just like anything else.  It just may not be worth going to court over if they breach the contract due to legal expenses.  Basically, everything sounds good on paper but your ride along on Tuesday will be worth tens of thousands of dollars worth of information.  I just want to throw things like this out there -- a 20 oz bottle of Pepsi or Coke (or their other flavors) can easily cost you $1.00 per unit after COGS and taxes, whereas cans can be anywhere from 30-45 cents depending on your source.  If they are selling such items for something like $1.25, then you know those prices are way too low, so take note of the products being sold and their pricing.  If possible, give a general idea of items (ie. small chips for 60 cents, LSS (larger size) for $1.00, pastries for $1.25, candy for $1.10, etc..).  From that, we can likely determine if prices sound good or not.  This deal doesn't have any definite red flags yet, but we'll know so much more after your ride along.  Also, try to get copies of those reports from USA Technologies.  Try to get a YTD report as well as something like the month of May, 2017 and maybe a single randomly chosen day.  That way, you can compare reports to make sure they are giving you actual reports of the accounts being sold and not reports of random machines somewhere else.  But, again, if tax returns seem to be aligned with everything else, it would be very difficult to fudge things up.  About the only way to lie to you at this point is if all of the information they give you are from OTHER accounts and not the ones located at these locations.  The ONLY way to really ensure that the USA Technology reports match up with the actual machines you are being shown is to record the serial numbers on the USA Technology telemeters at each location.  The telemeters are usually located inside the machine near the top somewhere.  You can tell what they are as they have 3 black wires coming out of them with one going to an MDB harness, one going to a Dex cable, and I forgot what the third one is for lol, maybe to hook up to the card reader.  There should also be an antenna hooked up to each device and located on top of the machine.  Simply following the wire from the antenna will direct you to the telemeter as it plugs directly into the telemeter.  If you can just write down a few (or all) serial numbers, which may say something like VJ2500321, then you can compare them with the reports given to you.  The work it would take to fudge all of that would be substantial, but any serious, honest seller should be more than happy to allow you to write all of this information down and give you copies of the reports.  If for some reason they don't want you to look at everything or the telemeters don't seem to exist, then that's a major red flag.

[anoncow]

I bought a route through a broker, it has been a few months and it has not turned out to be a scam, but I was very leery at first.

 

 

[CapitalCityVendingLLC]

any updates?

[huynhhh]

On 9/4/2017 at 6:42 PM, CapitalCityVendingLLC said:

any updates?

I decided not to go forward with the route. 

Risk to Reward was too high in my opinion. I did a little further due diligence and learnt that the broker posted an add a few months ago trying to sell the business for 120k with a 50% GPM, and the one I offered on had an initial sell price of 95K with a 60% GPM of which I talked them down to 80K.

For 80K, as mentioned by a few people in this thread is too good to be true, although they seemed genuine, the risk was too much for myself and my partner whom I was going to go into the venture with. 

I also thought to myself that if it is so good, and the broker has been in the industry for 20 years.. why does her current network not golpher up the route? Hotel locations in a downtown area?? Seems prime to me.

 

Seemed fishy. Perhaps I let go of a diamond, who knows 

[AngryChris]

Best case scenario: you missed out on a good route that would take a few years to see a return.  Worst case scenario: you got ripped off for tens of thousands and many years of bitterness.

[huynhhh]

2 hours ago, AngryChris said:

Best case scenario: you missed out on a good route that would take a few years to see a return.  Worst case scenario: you got ripped off for tens of thousands and many years of bitterness.

Exactly.