Valuing a route with bottler owned drink machines

[OVend]

Hi guys

I understand the typical standard of valuing a route would be 1 year gross sales, going up / down depending on locations, equipment, etc. So my question is how do you guys value a route where all the drink machines are bottler assets? I am looking at a route right now but all of the drink machines are owned by Pepsi. This makes the value of the route go down to me, but the seller does not seem to think so. Any thoughts please let me know. thanks

[AZVendor]

Only worth 6 - 12 months net. Will the machine leases transfer?  If not then you will waste your money.

[cvending]

With bottler owned machines it can be tricky.  Do you have an account with Pepsi? Will they transfer all the assets to your account? Are there any requirements from bottle for you to keep the machines at no cost?  Talk to Pepsi before you make an offer to clarify all this. Also request at least the past 2 yrs. financials. Do not just take the word od the seller. 

[OVend]

On 2/13/2022 at 5:36 PM, AZVendor said:

Only worth 6 - 12 months net. Will the machine leases transfer?  If not then you will waste your money.

Ok great just wanted to get another opinion. I thought so as well. Seller is asking 1 year and 9 months gross, with a claimed 40% profit margin.  

[OVend]

11 hours ago, cvending said:

With bottler owned machines it can be tricky.  Do you have an account with Pepsi? Will they transfer all the assets to your account? Are there any requirements from bottle for you to keep the machines at no cost?  Talk to Pepsi before you make an offer to clarify all this. Also request at least the past 2 yrs. financials. Do not just take the word od the seller. 

Thank you for this. I do not have an account with Pepsi or Coke, I own all of my own machines, which is why I was unsure of this. Seller said that Pepsi would transfer all the machines to me no problem, but I agree that I need to call Pepsi first and ask them some questions. Seller also claims that Pepsi never checks order minimums for keeping machines on account, but I was worried that if they do check on me, they may pull the machines out. The only good news is seller said he will provide tax returns for proof of sales.

[AngryChris]

Unless the machines make big bucks and have a contract that you can buy, they are asking way too much.  I know many companies have been sold around 6 months gross

[AZVendor]

Bottler machines can easily be used in someone's slower accounts but are always used because the operator has no cash they wish to invest, doesn't worry if the account sells much product, accounts are vandalized, etc. Especially when the operator doesn't have any Coke machines should you be concerned that you are sharing accounts with Coke or that you could lose accounts to Coke.  In most markets Coke has more popular flavors than Pepsi.

As an operator I used both Coke and Pepsi machines as a tool to quickly put machines in the field and so I didn't have to invest machines in more marginal accounts. I only used Pepsi for several years with good success until I finally convinced Coke that I was a serious vendor that could put their machines in highly visible locations. That's what the bottlers want, access for more people to buy their products.

You do have to beware of any product purchase minimums though and about any contracts clause that call for you to fix your own machines (sometimes with their parts, sometimes not.)

[OVend]

18 hours ago, AngryChris said:

Unless the machines make big bucks and have a contract that you can buy, they are asking way too much.  I know many companies have been sold around 6 months gross

These are medium size accounts (average 4k / yr) and no contracts. I had been willing to possibly pay 1 year gross, but this makes me think otherwise. appreciate it

Edited February 15, 2022 by OVend

[OVend]

14 hours ago, AZVendor said:

Bottler machines can easily be used in someone's slower accounts but are always used because the operator has no cash they wish to invest, doesn't worry if the account sells much product, accounts are vandalized, etc. Especially when the operator doesn't have any Coke machines should you be concerned that you are sharing accounts with Coke or that you could lose accounts to Coke.  In most markets Coke has more popular flavors than Pepsi.

As an operator I used both Coke and Pepsi machines as a tool to quickly put machines in the field and so I didn't have to invest machines in more marginal accounts. I only used Pepsi for several years with good success until I finally convinced Coke that I was a serious vendor that could put their machines in highly visible locations. That's what the bottlers want, access for more people to buy their products.

You do have to beware of any product purchase minimums though and about any contracts clause that call for you to fix your own machines (sometimes with their parts, sometimes not.)

Yup I also was worried about losing sales from not having Coke products. I would certainly prefer to own the machines, but I see how using bottler machines could be a good strategy to pick up a large volume of accounts quickly without as much capital required. This advice is all making me want to back off on this route unless the seller is willing to negotiate significantly. thanks

[AngryChris]

I'd be suspicious if someone was selling locations averaging 4k/year and all beverages.  It's such easy money, why sell it?  Unless they do far far less than that. And then selling for such a big amount would be an absolute ripoff.  Fraudulent even.  Of course, I have no idea if it's legitimate or not.  I'm just saying.. why sell?

[OVend]

On 2/15/2022 at 9:37 PM, AngryChris said:

I'd be suspicious if someone was selling locations averaging 4k/year and all beverages.  It's such easy money, why sell it?  Unless they do far far less than that. And then selling for such a big amount would be an absolute ripoff.  Fraudulent even.  Of course, I have no idea if it's legitimate or not.  I'm just saying.. why sell?

I apologize I may have explained it wrong. The route has some snack machines which are owned by the seller, but all of the drink machines are Pepsi assets. I agree thought he more I am looking into it it seems like a ripoff. Would take 4 years just to break even.

[OVend]

I already was suspicious that this was a bad deal, I just wanted to see everyone else's thoughts on valuing accounts with Pepsi / coke assets. Thanks everyone for the input.

[putrevus]

How do you calculate net . Does it not depend on the way company is operating. Bigger companies have so called bigger operating cost s compared to a small company with one or two employees.

[AZVendor]

Gross profit is gross sales less any direct costs such as product cost, gas, driver pay, commissions, machine repairs/moving, etc.

Net profit is gross profit less indirect cost such as building rent, other payroll, income tax, etc. 

For a small operator the net profit is the money you put in the bank/pay yourself less the income taxes you pay at the end of the year, IF you are incorporated.  If not incorporated then your net is simply what you pay yourself.  That then becomes regular taxable income to the IRS so those taxes are on you, the individual.

[putrevus]

2 hours ago, AZVendor said:

Gross profit is gross sales less any direct costs such as product cost, gas, driver pay, commissions, machine repairs/moving, etc.

Net profit is gross profit less indirect cost such as building rent, other payroll, income tax, etc. 

For a small operator the net profit is the money you put in the bank/pay yourself less the income taxes you pay at the end of the year, IF you are incorporated.  If not incorporated then your net is simply what you pay yourself.  That then becomes regular taxable income to the IRS so those taxes are on you, the individual.

Your point of 6-12 months net cannot work. As net profit varies from operator to operator.

[AZVendor]

Actually it should be 6-12 months gross for operator-owned machines but with bottler machines it's less so 6-12 months net is realistic as you are not buying any assets.