Questions About Vending Machine Business

[Dn310]

Hello All,

I am looking to get into the vending machine business. I would like to know more about your experiences doing so. How would I get started? Is this something that can be done as a full time operation, or a side thing at best? How much money can I make per year, and what is the annual ROI per machine? How many machines would you recommend owning? How much time do you spend working on the business and working on the machines, and what are your day-to-day tasks? What is the profit split between you and the owner of the retail location where the machine is placed? Which machines do you best recommend? Is it also better to buy machines new or used, and where do you buy your machines from? Also, I know nothing about repairs. Is it easy to find technicians to hire to help repair machines? How often do machines get to the point where they are in need of repair? Thank you!

[AngryChris]

2 hours ago, Dn310 said:

Hello All,

I am looking to get into the vending machine business. I would like to know more about your experiences doing so. How would I get started? Is this something that can be done as a full time operation, or a side thing at best? How much money can I make per year, and what is the annual ROI per machine? How many machines would you recommend owning? How much time do you spend working on the business and working on the machines, and what are your day-to-day tasks? What is the profit split between you and the owner of the retail location where the machine is placed? Which machines do you best recommend? Is it also better to buy machines new or used, and where do you buy your machines from? Also, I know nothing about repairs. Is it easy to find technicians to hire to help repair machines? How often do machines get to the point where they are in need of repair? Thank you!

All good questions but very broad questions with no easy answers.

How do you get started?  The simplest way is to find a distributor.  I have no idea where you are and so I likely have no idea which distributors work in your area, but many distributors do ship out.  You can try reaching out to local vendors and seeing who they use too.  That's just not something we can answer without knowing where you are.  And, while we are on that question, it's usually better to buy used/refurbished when you are starting because new machines are very expensive.  It takes a pretty suave person to be able to land big locations fresh out the gates with no vending experience.  And those big locations are the only ones you want to purchase new equipment for.  By big locations, I mean locations with hundreds of workers on-site in a blue-collar setting likely working multiple shifts.  For smaller locations (under 100), you want used or refurbished equipment.  Distributors can help with that and local vendors might even be willing to sell you some of their locations.

Can it be a full time operation?  Of course.  Why would you question that?  A vending business can be anything from a side business to a national company being operated across multiple states.  Of course, it's going to start out as a side business and the toughest thing you would deal with is balancing your time between working a full-time job (because you need the income) and growing a side business that also needs your time.  To expand your business means you need more time invested in it, which can potentially clash with your full-time work schedule.  That's something you have to figure out when that happens.  Personally, I had a flexible schedule with my employer and I kept growing until I felt I had enough business income to quit my FT job.  Once I did that, I had plenty time to gain new locations but not really enough profit to pay my personal bills AND expand quickly.  With a full-time income, I was able to reinvest all of my business profit.  It was a tough transition but I did it.  Now I do this completely full-time and I actually need my wife to help me because there's so much work to do.

How much can you make per year?  What is the ROI?  That's impossible to answer.  Vending is about volume.  To make big bucks means you need as many vends as possible, generally.  What sells more?  10 pizzerias that sell 100 pizzas per day or 1 pizzeria that sells 1,000 pizzas per day?  The answer is that they sell exactly the same.  That concept is also true for vending.   Higher volume locations mean more sales, so you don't need as many high volume locations as you would need small locations.  And, as you grow, you need a dedicated vehicle to handle the additional volume.  You may need to hire someone to work part-time.  You may hire a technician to do repairs.  Your profit is based off of your expenses with the COGS (cost of goods sold) being the most significant.  But that depends on various factors and no one can answer that.  However, a simple percentage I would say is that you can expect about 50% gross profit after COGS assuming you double your costs with your pricing.  If you work out of your car, profit will be higher initially.  Once you buy a vehicle, get a warehouse, hire someone, profit drops significantly.  And you don't see a big increase in profit margins until you expand with many routes.  It's just impossible to give you ROI or profit at all.  You'll make as much as you're willing to make but it will take time and a lot of money invested.

How much time do you spend working on the machines and the business?  Working on the machines IS your business.  Not necessarily repairing, but restocking.  I am infront of machines nearly every working day.  I do try to spend one day each week just in the office, and I only do repairs maybe once or twice each week, but those repairs are done while I am already out working anyway.  This is my full-time operation.  I only use a repair tech when I don't have the time.  Unless you have a lot of money to invest, running a vending business is NOT a matter of sitting in an office and making phone calls.  It's a matter of getting out there and stocking machines, keeping them clean and making sure they work.  Vending is a blue-collar occupation.  If you dream of passive income, this is not the investment for you.

What is the split (ie. commission) between me and the "retail" location?  Firstly, "retail" locations usually refer to businesses such as clothing stores or other places where customers can simply walk on in and shop.  Those locations usually aren't great.  They can be decent at best.  And they often DO require a commission because large "vending management" companies get the contracts and they subcontract that work out to vendors since the management company doesn't actually do anything beside hold the contract and send them some amount of commission (collected from you).  That commssion is anywhere from 10-20%, but 10-15% is more common.  However, beside a handful of locations, I do NOT pay commission to my locations.  I don't want to.  I am providing a service and I am trying to offer my products at the lowest prices I can to allow for the best experience to my customers.  I pay to move the machines.  I pay for all of the product.  I pay for all of the repair costs.  The location pays nothing expect a nominal amount of electricity.  If they want commission, they need to be a very good location that is capable of getting commission elsewhere.  Small locations will only get that from rookie vendors who are desperate to get new locations, even if it drives their business into the ground.  Don't bring up commission unless they do first.  And if they do, say you have to raise prices to adjust for commissoin so you strongly discourage it for reasons I already mentioned.

You can usually find technicians through distributors but you really have to find local vendors and ask them too because we (people on this forum) are from all over the country and even all over the world.  Only people local to you would know who you can find to work on machines.  Unless you live around Dayton, Ohio, I have absolutely no idea who is in your area.  I only buy american-made machines even if they are older.  I never buy foreign made machines.  American brands are AP (Automatic Products), AMS, USI (aka Wittern, Fawn, and others), Royal, Dixie Narco, Vendo, National, Crane, and some others I may have forgotten but those are the ones you want to see.  And you want full-size machines any time you can.  A lot of fly-by-night vendors start off with combo machines because they look nice and they seem to be easy to place at new locations, but you can quickly run yourself ragged trying to restock machines with low capacity.  Again, vending is about volume so you want to stock as much items as you can and sell as much as you can without making the machines look too empty AND you want to avoid stale/expired product losses too.  In other words, you want locations with enough volume that you can completely (or almost completely) stock machines and service them every couple weeks or so.

Repairs are not too often on machines in good working order, especially if you have invested in good equipment and good components, but repairs become more and more common when you have more machines, simply because of the volume.  It also depends on what kind of machines and what kind of locations.  At an office, your machines will likely stay very clean and rarely ever be rocked or beat on, but your sales might not be great either.  At a dirty factory with lots of temporary employees, you might see the machines beaten on daily with boot prints on the bottom, but sales may be good.  Your unpaid job as the vending operator is to fix them as fast as possible and your reward is to profit off of the sales of the items in the machine.

If this seems overwhelming to you, just settle on this-- you want to sell as many items as you can and keep the machines clean, stocked, and working.  It requires you to be there.  Small locations won't generate as much as big locations.  You are providing a service to the customers and all you want in return is for them to buy your products.  If they don't buy your products, move on and find better locations that will and your sales pitch is that you will provide a better service than the current vendor.  Service, service, service.  And if they have a problem with your pricing, remind them that you are providing a service and this is the price you need to make it worth your time.

 

[Dn310]

Very detailed answer. Thank you!

[ABCVending]

I am a side hustle ham n egger - been at it for 15 years.  It's easy to grow too big to keep it side hustle...buy machines/locations off of Craigslist to start, made some mistakes learned pretty quick to stick with newest US made equipment - never bought any chinese stuff but did buy a few ancient machines that were more hassle than they were worth - they looked ok, and were on location but when people tell you not to bother with can only machines or old Rowes you should listen.

Have had as many as 30 machines out on location and that was too many for side hustle - broke them up into routes of 6-10 machines and either sold them off or leased them out to family/friends so they could try vending - not for everyone, one brother took to it and has a half dozen locations, I usually run 12-16 machines now and am pretty picky about location - if we're not netting $150-$200/mo per machine will generally sell or move em.  

Stuff that has been important for us:  Shop space - locations come & go and you need a place to store & work on equipment.  Ability to move the machines - forklift was a big purchase for us but worth every penny - drop deck or platform lift trailers with pallet jacks and room to store them.  Space for inventory to be kept organized, fresh and secure.  Dedicated delivery vehicle - we use older Chevy Astro vans, they work for us and usually can be had in decent shape for under $5k.  Good bank & tax guy.