Minimum monthly revenue guarantee

[Jchunn28]

how many of you have contracts that have a minimum monthly revenue guarantee for you the operator?  I have a customer that is requesting I provide a certain type of bottle machine that i would have to purchase.  The machine is going into a High-end motel.  The customer is willing to sign a long term contract (5 years), with no commission due to him.  I am wanting to add a minimum monthly revenue guarantee to the contract to ensure i bring in enough to cover the expense of buying the machine.  i would request this for the first 24 months of the contract and it would basically be, MMRG - gross sales = amount invoiced to customer.  If the machines exceed the MMRG then they would not be invoiced anything for that month.  This would be my first machine with this customer and they have agreed to adding to the contract that i would be given first choice of all new properties for the remainder of the contract, as well as 1 or 2 of their existing locations being turned over to me a year if i want them.

If you have done this with any of your accounts, how has it worked out for you?

How did you word it in the contract?

Any help is appreciated.

 

[vendman0729]

Contracts are a rare thing in this business for independent operators.

I have none even though I have been in this business for years.

They are advantageous however and you sound like you know what you'r doing.

If your the only vendors there you should do pretty descent.

What about vandalism, especially since you would be buying a brand new machine? 

Where will the machine be placed?

 

I would probably make it more simple and state your minimum gross sales requirement.

Your profit should hopefully be good anyway since you wont have to pay a commission.

Also, I would take pics of meter readings from the machine so you will also have proof.

However, if you add a credit card reader than you will also have proof from USAT anyway or whichever company you would be using.

 

 

[Jchunn28]

Machine would be placed in the 3 rd floor of the building. First 2 floors are apartments. I added a clause about vandalism basically saying they would be responsible for repairs if it was due to their or there employees negligence. I will be using USAT and a VMS so the meter reading won’t be an issue. I just basically want to insure I get enough of a return to pay for the machine and not be too far in the hole with this account if it is slow.

 

i also added an early termination fee of $5000 if they decide to cancel the contract due to no fault of mine. Basically if I put the machine in and they decide to switch vendors because the other offers to pay a commission, then they can cancel as long as they pay the $5K. I can cancel with 60 days notice due to unprofitability.  

[QuikVend]

Have you talked about any of these conditions with the location? 

[Jchunn28]

31 minutes ago, QuikVend said:

Have you talked about any of these conditions with the location? 

Yes I have, and they are on board with it. Just curious if anyone else has done any contracts like this. 

[AZVendor]

To get any location like this that typically expects a commission to forego one is highly unusual.  The fact that they will give you a favorable contract that benefits you is rare as well.  I would bet that you are dealing with a highly naive manager or one who knows that a contract is only as good as each party's willingness to defend it, and they are betting that you won't.  Unless you are prepared to spend the money to sue them when they don't follow the terms then it's just a folly.  Go into this transaction with your eyes open and just hope it works out for you.  

As a location I would not agree to it and as a vendor I would not buy the machine unless I already knew what the account sales are.  Anything less is just speculation.  How about you put in the machine you want to provide first so you and the account know upfront whether the new machine needs to be subsidized.  Then there are no unknowns.  This just sounds too messy.

[Jchunn28]

9 hours ago, AZVendor said:

To get any location like this that typically expects a commission to forego one is highly unusual.  The fact that they will give you a favorable contract that benefits you is rare as well.  I would bet that you are dealing with a highly naive manager or one who knows that a contract is only as good as each party's willingness to defend it, and they are betting that you won't.  Unless you are prepared to spend the money to sue them when they don't follow the terms then it's just a folly.  Go into this transaction with your eyes open and just hope it works out for you.  

As a location I would not agree to it and as a vendor I would not buy the machine unless I already knew what the account sales are.  Anything less is just speculation.  How about you put in the machine you want to provide first so you and the account know upfront whether the new machine needs to be subsidized.  Then there are no unknowns.  This just sounds too messy.

Now this is kind of what I was thinking as well. It goes back to, if it sounds too good to be true, it probably is. They are a large corporation here, and I’m just a one man operation. They have the money and name to tie up any lawsuit in court for years, and it would probaby break me. 

This gave me some new insight on the situation, and I am going to approach them about placing another machine temporarily as a test, if it does good I can purchase the other one, if it flops, I will pull the machine and continue on without worrying about a large purchase to cover. 

 

Thank you