Questions re: starting a bulk route

[Bender]

I'm planning to start a new bulk route in the San Francisco Bay area, specifically, Alameda and Contra Costa Counties, perhaps San Francisco, San Mateo, or Santa Clara Counties.  So far I've gotten together a batch of 1800 triple machines, and half a dozen various other triple heads. 

After reading up on the forum (very informative) I have a few questions perhaps you might be able to answer:

1. County health permits and fees.

2. City by city business tax license.

2. Liability Insurance.

3. Replacing all the locks.

1. County health permits and fees.

I am wondering about Health Permits.  I have called the Alameda county Environmental Health, and the guy I spoke with says I need a permit ( I mentioned gumball candy vending machines).  He asked me if I have a commissary.  I told him I am not operating and at this point I am gathering information.  I can't get a handle on the fees, and it's unclear if I am required to get a health

department permit.

Here's the Alameda County schedule of fees:

http://www.acgov.org/aceh/billing/new_generalfees.pdf

1808 Commissary for vending machines (without food preparation) $260

2066 Vending Machines $26

2089 Food Safety Class $181

And the Contra Costa fee schedule:

http://cchealth.org/groups/eh/programs/retail_food_fees.php#vending_machines

Vending Machines, 1-4 $168

Vending Machines, each additional over 4 $29

I asked some other bulk vendors I met recently and they said "fly under the radar", suggesting they bypass such licensing, if required.  I don't like this advice.  However, I have also noted the California Health and Safety Code Section 113938 language seems to suggest that gumball and bulk vending machines are not classified as vending machines, which leads me to believe that bulk vending (aka gumball) machines might be exempt from such permits.

http://www.leginfo.ca.gov/cgi-bin/displaycode?section=hsc&group=113001-114000&file=113728-113941

"Vending machine" means a self-service device that, upon insertion of money or tokens, dispenses food without the necessity of

replenishing the device between each vending operation and that operates in conjunction with a commissary. "Vending machine" does not include any device dispensing exclusively peanuts, nuts, popcorn, gum, or hard candy, prepackaged candy, cookies, crackers, or similar snacks and beverages that are not potentially hazardous food, and prepackaged ice.

2. City by city business tax license.

I have the state reseller license and my local business license.  It looks like each city wants me to get a business license to operate in their city.  Some cities have fees for "coin operated amusement devices" ($75 ea) or "vending machine license fee" ($206 for 12, plus $5 each additional).  Would the CHSC 113938 exclusion exempt bulk vending machines from such a fee?  The retired bulk vendor complained about double taxation and compared it to trucking companies and contractors, saying a they do not get permits for every city they work in.  However, cities like Oakland and Fremont make it clear, if you conduct business in their city, you need a permit.  Oakland does have an "outsider's" permit.  This makes it complicated vending across city lines.

3. Liability Insurance.

Okay, so I'm looking at liability insurance.  The last time I priced a policy, I was quoted $500 annually for $1 million liability coverage.  Is this a fair price?  Any recommendations or referrals?

4. Replacing all the locks.

I really like the design of the 1800 machines, but I'm not happy with the fact that there is a brisk market on eBay for vending keys.  I bought machines from two separate people, and the machines all use the same key!  And my exact key number is for sale on ebay!  I want to change these locks.  I have been shopping locksmiths online but I can't find exactly the same lock.  Is it a T-PICO lock, with 4 keyways?

Here's the lock on eBay:

http://cgi.ebay.com/1800-Vending-Machine-T-PICO-Lock-and-Keys-

Set_W0QQitemZ300370997235QQcmdZViewItemQQptZBI_Vending?hash=item45ef81aff3

This looks like a good replacement but it only has two keyways rather than 4.

http://www.ralock.com/lock/tubularbulkvendinglock/

So I'm looking for a local charity, considering a national one, and planning on working with my wife to locate them, and maybe hire some locators for a few to get rolling sooner.  Any advice is gratefully appreciated.

[Mikey B]

I know all states are different, but in Indiana the only time you have to have a Food Safety Certification, Is when you have an establishment that takes raw food and serves it cooked...  Basically Restaurants and Catering businesses.

With bulk vending, you are taking product from the bag, and placing it in the machine.  It doesn't take a rocket scientist to figure out that you need to:  Wear gloves, be sanitary, and don't sneeze, cough, or drool on the goods.

[dperry]

You are thinking way too much.

You are worrying too much about the trappings that go along with a business, and not worrying enough about the core business itself.

What if you go about and spend all that money to get those licenses, permits, LLC's, Tax ID, etc, that you don't really need, and then you find out that you don't really like this business?  That will be way too much money and effort expended just to find out this business isn't for you.

Buy your machines, buy your candy, buy your charity stickers and go get some locations.  Run your route for several months and decide if this is what what you want to do.  If it is, then you can start worrying about that other stuff.

[The Mage]

I slightly disagree with dperry on LLC.  But only depending on your financial situation.  If you have something to lose in a lawsuit, get at least the LLC in place, or a good liability policy.  But if your starting from the ground up, and don't really have anything to lose, then it shouldn't matter.

The risk is slim, but it is there.

I've decided I have no risk in this area myself, and have decided to wait until next year for the LLC and the insurance.  But we have just dug ourselves out from under some medical bills, (and some foolish debt,) so other then a 401K that should be safe from potential lawsuits, I don't have any real risk of loss.

I do recommend you keep reading this site, and then go slowly.  Get just one machine, get it placed, then do it again, and again.  Or buy a small route, not too many machines, and find out if you like the business or not, and figure things out along the way.

[lurtsman]

WOW. That was a long post. I'm feeling lazy and skimmed.

1. County health permits and fees.

2. City by city business tax license.

2. Liability Insurance.

3. Replacing all the locks.

1. Close your eyes and wish they didn't exist

2a. You should be able to get one for the whole county, if you are talking sales tax it should be free

2b. This is a big cost for having 0 machines. Figure out if you like it with 2-5 small machines in break rooms before you blow a couple hundred on something that does not produce money.

3. Replace locks only after you suspect theft in a location. Otherwise the cost is significant and slowing your start, or if you fail, it has not raised your resale value significantly.

Here are my steps.

1. Get money

2. Get money

3. Get money

4. O hey look at all this money, business is working, I'll go take care of other things.

Keep in mind over 90% of new entries will fail. Find success, then pay your fees from your success. If you fail, your city won't refund whatever anti-business fee they came up with to punish you for trying. It's sad, but that's how it is. Until you can do step "get money", the rest of it just different ways to throw your own cash away.

[sherlock]

I slightly disagree with dperry on LLC.  But only depending on your financial situation.  If you have something to lose in a lawsuit, get at least the LLC in place, or a good liability policy.  But if your starting from the ground up, and don't really have anything to lose, then it shouldn't matter.

The risk is slim, but it is there.

I've decided I have no risk in this area myself, and have decided to wait until next year for the LLC and the insurance.  But we have just dug ourselves out from under some medical bills, (and some foolish debt,) so other then a 401K that should be safe from potential lawsuits, I don't have any real risk of loss.

I do recommend you keep reading this site, and then go slowly.  Get just one machine, get it placed, then do it again, and again.  Or buy a small route, not too many machines, and find out if you like the business or not, and figure things out along the way.

I agree with all of the above.

I set up an LLC, including a tax id and seperate bank account for my vending biz.

As a newbie, I can't say 100% that I did the right thing.

But, as The Mage posted, I do have financial matters and outside ventures I will not risk with this vending biz.

So the LLC gives me some protection in that area.