Evaluating and buying established routes

[WillisNYC]

I didn't really know where is the best place to post this, so someone please tell me if there is a better place to post this.

When you inquire about buying someone's rout, how do you verify their income and then how do you evaluate it?  Uncle's ebook says that you want to buy at 20-30% of the annual gross.  The big question is how do you verify that 'gross' number the seller tells you?   Then if it turns out to be wrong, what recourse do you have?

[nam]

Willis,

You've posted in the right area. You are the one that is reasonsible in the end. Buyer Beware as they say!

The safe thing to do is never pay more than the value of the machines. Never believe anything your told or shown. It's probably either a lie or a serious exaggeration. Other than business opps this is the best way to lose your shirt in the vending business. I would not recommend this to someone just entering the business. Scary enough for a pro to sort out fact from fiction.

nam

[WillisNYC]

Nam,

I understand your concern but I really want to learn how to evaluate a route and maybe some tricks on how to sort out the facts from the fiction.  Believe me, I agree that I would never want to pay more than the ebay or craigslist value of the machines, but most people list their routes at the bizop price for the machines.  They expect to meet somewhere in the middle I suppose.  Are folks so scared of giving information away that you can never find out the locations until after you buy?   Surely there are some creative ways around this and I am looking for them.

[leo7068]

Just tell the seller this is how you want to buy:

• Divide the total sales price by the number of machines and pay 1 unit up front. (so 25 machines for 2500 would be paid 100 up front.
• They take you on location to a machine, you remove the money, count it, and refill candy.
• You repeat this process until all machines are paid for.

At the end of this you should have a good idea of how much candy they use each service, and how much money they make. This should cover most common problems, but is not fool proof. It is fair for both sides though.

[T BIRD]

How long have you been in the vending business Willis? How many machines are you running?

[alyssamma]

Willis, this is for *bulk* if you are looking at full line it is different. However, I am quoting Jax from another thread:

Here is another way of looking at it from a buyers prospective. I like to get 3 different numbers when reviewing another route for sale.

1. Asset Value. Inventory all equipment on location and in storage and then determine a fair market value for it. Ebay is a good source for determining that.

2. Location Value. Inventory all locations and determine an "appropriate" locator fee that a "professional" locator would charge.

3. Cash Flow Value. Determine how much the route is really making and what that is worth to you - a not so easy task!

As a buyer of routes, I usually only pay for item number 1. This is because most vendors can not be trusted and have virtually no financial records to prove their claims. Some vendors will dump many machines in crappy locations just to say they have "X" number of locations. The more I can learn about a route, visually inspect locations and the more I can trust the vendor, then the more I am willing to pay for item number 2. However, there must be an extremely high degree of trust and documentation for me to ever pay for item number 3! I have never paid for item number 3 and most likely never will due to lack of trust and documentation. Even their tax return is insufficient since they most likely under-reported their income and inflated some expenses - of course NO ONE HERE would ever do that now would they??!!

Not sure if that helps, but the point I am trying to make it that the more information and documentation and visual inspections you can provide about the route, the more you will most likely get.

Also make the potential buyer sign a non-disclosure agreement before giving out to much information. If you are unwilling to give out too much information for fear of getting burned by the prospective buyer, then the most you can expect is cost number 1 plus a little of cost number 2.

Jax

[sharleeruby]

so i have a chance to buy a route for 1500 it has 18 bulk 9 single and 9 double half of them in place 4 snak mach 9 item counter top in locations the non electric type hes taking me around tues to see locations and service does this sound like it may a good investment

[nam]

sharleeruby,

What brand are those single and double head machines? Basically, that's about $50 average per head excluding any value for the locations which I wouldn't pay for anyway. Those counter top snack machines probably are only worth $25 or $30 each. I see those all the time in that price range. The guys price seems to be in a good starting range but would need to know more info before making anything other than a guess. From the info you have stated my best guess would be less - maybe offer him half his asking price and see what he says. Come up to a grand and walk on the deal if he says no. At least the guy isn't being crazy on what he thinks the value should be and probably just wants out. At this point the brand of machines and locations would make the difference on how badly I wanted it.

nam

[sharleeruby]

I think he said nw but i will know tue he said he was trying to raise some money for two crane mach that two of his other locations said he could put in so we will see thanks for the insight you have saved me some bucks before

[spdydre]

There is a guy selling two double head machines in my area and claims to NET $60-$75 each month combined. He is asking $360 is this to much or about right?

[nam]

I wouldn't believe his numbers although it's possible. The best they is not assume he's telling the truth and pay him what any other couple of doubles would sell for.

nam

[WillisNYC]

It is definitely a buyer beware attitude out there. I spoke to a bulk seller today. She said that they were selling off 1/2 of their route because they were 'too busy' to continue servicing the whole thing. She said they were keeping the best locations and trying to sell off the ones that did not do as well. She did say that the worse locations made 'at least' $15/month. She was selling triplehead machines in 13 spots. I don't think that $15/mos justifies anywhere near the $135/placed machine that she requested. $50 sounds about right to me and I am still skeptical. Regardless, I am just going to try to buy her tripleheads she never placed for $40 apiece. (1800s)  (She was asking $80.)

[nam]

Willis,

Are these the ones I sent with both new machines and used 800's? Kelly is right in that $80 isn't that bad of a price but sometimes you can find them for $50 and even new for $100. I was thinking the one ad had new ones for $100 I sent you?

The 800 machines are far better machines than the Vendstars so if you have both you're looking at and the price difference isn't real big, go for the 1800's!!! Those will be much easier to vend 850 gumballs - best profit item you have. And using the same gumball wheels for 1" capsules with toys, etc. The Vendstars you'll most likely get will only have candy wheels. Their still a good deal and a decent machine for the money but these need to be cheap!!!

nam