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Newbie developing business plan

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Hi all,

I've been reading for a while now. What a great resource!

A little background on me: I've been working in operations for the past decade and I ran a tech installation company (systems integration and automation) in NYC for about 7 years before selling in 2014.

I've been developing a business model for a vending machine business - a slim snack machine and a slim drink machine. 

It seems that people on this forum are generally not fans of touchscreen vending machines, but it's crucial for my concept (not a giant screen, just a small ~7in touch screen instead of the keypad). 

Given what I've shared, any advice you can offer on learning the trade before I jump in, brand/machine choices, or anything else related to this is greatly appreciated as I begin my research journey. 

Thanks all!

 

-Read

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Good luck in your venture!  I have been in vending for about 9 years now, so not as experienced as some on this forum, but since you asked I will share some thoughts...

Touch screens are pretty new on machines, so experience is limited.  I only have one in service, and not for very long.  I have no issues with it so far.  I wish the service menu was simpler but it works.  The machine is a Crane, which I like, but they seem to be at the top end of new machine pricing.  USI is making machines with a more modern look these days but I have not priced them recently.  Avoid imported machines at all costs.  Used machines are OK and make a lot more financial sense, but start with good refurbs from a reputable dealer until you get good at working on them and know what to look for in a used machine on the private market.

When you say "slim", is there a particular reason?   Space can be at a premium in a location, but size matters for several reasons.  Vending is already limited to "inside the box" as far a marketing space, and the larger the box the better off you are.  First, there is the matter of presenting a sufficient number of choices for your customers.  Second, you need to have enough capacity to keep product in stock without servicing too frequently.

A machine with 16 selections will probably not do as well as a machine with 32 or 40 selections.  The larger machine allows you to provide a choice for people who want more than snickers or ruffles, while still providing the traditional top sellers.   Depending on your location, your customers dietary needs might include diabetics, nut allergies, gluten sensitivity, kosher foods, non-GMO, vegan, paleo, no salt, no sugar.... you can't ever hope to cover it all!  But to be successful you will learn the best choices for each location. 

Same with drink machines... a 7 or 9 select stack machine is still useful, but for large indoor locations a good glass front is the way to go.  Again, you can provide more choice and have a lot more flexibility to make changes are you go.  Colas, waters, energy drinks, sports drinks, fitness drinks, coffee drinks, fruit flavors, diet drinks, caffeine free, sugar free....

The other side of all this is the more selection you have, the more effort required and the harder it is to prevent stale loss (which is a profit killer).   To be efficient you need multiple locations to keep product moving.  And of course you need the most current cashless payment system and to use telemetry to manage your inventory. 

As for service intervals, it's a balancing act.  Too much inventory in the machine and product goes stale, generating complaints and lost customers.  Too little inventory and you are running to the location for service but only collecting 30 or 40 dollars for your effort, or selling out (and losing customers again).  That can also happen if your machines are too small.  And if the location is too slow, you might have both problems.   I like to restock when the machine falls below 65% inventory, closer to 50% if there are not sold out items already.  Some larger vendors will try to get to 35% inventory before restocking, which can be OK with good space to sales planning to prevent excess sold outs.  And I like that restock to cover at least $ 70 in sales per machine, but $ 100 plus is the target.   Do I get that at all my locations?  Not yet, but I am weeding the slow spots out as I go. 

I hope that is helpful. 

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Thanks Southeast Treats! This is fantastic. Really appreciate the time you took to explain all this. 

When it comes to starting a new business, the less roadblocks and reinventing the wheel I can do, the better. And so I think I came up with a phase one workaround to avoid the touchscreen until I've got a few machines operating in locations that I can play with and learn from. 

As far as machine size, my concept is a curated selection of particular snacks and drinks that will be largely unknown to the average buyer. They will be effectively introduced to them by the machine, so I don't want to overwhelm buyers with a huge selection of products they don't understand. However I also don't want to have limited stock. The individual product margins will be higher than your average snack machine which should cover my having to restock more often.

So ideally I'm looking for machines with fewer overall selections (maybe 30 snacks - 18 big, 12 small and 8-12 drinks) but a decent storage capacity....any machines come to mind?

Thanks again!

 

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As far as snack machines, most 4-wide machines would probably work.  You will find USI machines with 6 shelves and a fairly standard setup of 4 snack (big) and 2 candy (small).  with 4 snack rows on each shelf that would give you 16 snack and 16 candy.  A good refurbisher should be able to swap a snack shelf in for one of the candy shelves if you prefer.  Newer Crane machines may have one convertible shelf that can be snack or candy.    If you are looking at USI used machines prior to the GVC series control boards it will probably need a replacement control board to do the cashless. 

For a drink machine I would look for a BevMax 3800-4 glass front vendor.  has 7 selections across and 5 shelves for 35 slots, each slot will hold 9 12 oz cans or 8 20 oz bottles.  Using 2, 3, or 4 rows for each item depending on sales volume gives you the desired number of selections and a very nice visual display.  If I understand your marketing plan correctly I would not even consider a stack drink machine, the marketing value of the glass front will be important to offering unique selections.

Your marketing plan sounds like a variation of the "healthy vending" marketing concept.  You should look on the food and beverage forum and search that term to see what others have encountered.  I think a lot of it may be relevant to you.  Most vendors stay away from stocking expensive or unfamiliar products.  You have to be very particular about choosing locations for that type of vending.   The typical vending location will want mostly familiar products and low prices, and has to gain confidence in the machine and the service to start purchasing the higher margin product when it is added. 

All of this is just my opinion, which is worth about what you paid for it!  Best of luck!

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Thanks so much!

This is great advice (worth way more than I paid for it!). Will start looking into those machines.

As far as locating, my concept is definitely niche, so finding the right locations will absolutely be hurdle number one for this business. But given the uniqueness of the products/concept, I'm hoping for some novelty attention to get things started, assuming I've put them in good places. But plenty of research to be done!

 

Thanks again!

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What novelty products are you thinking will sell?  It's still a soda, snacks and candy business.  Healthy can do well in certain places but is a ton of work and hard to profit from, if that's what you think is novelty.

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It's definitely not healthy snacks - think more global snacks, but would rather not elaborate as I'm still in the early phases. But will be reading up on the challenges of healthy snacks to see what pitfalls would apply. I've definitely seen that mentioned in a negative context so will look into it further. Is shorter shelf life one of the healthy snack issues?

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Yes and if you're doing ethnic snacks you will fare well ONLY in those specific ethnic areas of cities.  Definitely not a concept I would ever try, but to each his own.  Keep in mind that your investment will become worthless if you can't produce profits.  This isn't a diverse country, no matter what percentage of minorities live here, so the now actually huddled masses will not be interested in global snacks. 

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I've been warned! Thank you. 

Will definitely be testing my assumptions over and over before I even have a single machine or approach a potential location. 

 

And yes, our current "huddled masses" situation is certainly not a good situation for this! But it's something I'm working on for the future, while I'm huddled.

 

Thanks again!

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You will find plenty to read under healthy snacks.  Obviously the "Biz Opp" scams won't apply unless you get suckered into buying their junk machines!  Healthy is slowly growing, but the better selling healthy snacks are the better known ones as well (think Clif Bars, etc). Vending unfamiliar products requires a lot more marketing than most vending operators are set up for, things like free sampling sessions on locations, promoting special trial pricing, etc.  I'm not sure if the foodies who seek out the types of items you seem to be thinking of are frequent vending users, so that would take some outreach as well.... one of the reasons many locations are going from vending to micro markets is the tactile element; people are more likely to buy a new product that they can pick up and examine first (they also seem willing to pay more in that environment).

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Interesting! The micro market is definitely something I should be looking into as well. Although I'm assuming there are downsides to an unmanned, open rack of items...but great suggestion, will look into it. Thanks!

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