Possible route to buy. please give opinions

[s.weir]

Hey everyone,

So there is a route I am looking at buying it has the following characteristics:

3 locations owned by the same company

10 machines-combo's and coffee

10% commission to business for coffee

15% for chips, pop etc.

$4500-$5000 profit per month (English wasn't his first language I don't think so I didn't really understand if this is after commission and after buying product, therefor making the real profits more like 60%ish of these figures)

He is asking $35 000 for all of them and I must say if I can get financial records and some sort of agreement to pay him back over the course of like a year I think I will go for it.  What do you guys think?

[vendman0729]

I am no expert but this is my opinion.

You should try to find out as much as you can about this route.  Your talking about a lot of money here.  Obviously the 4500-5000 numbers would be more like gross sales.  For 10 machines, thats around 400-500 gross sales/machine.  It would be important to somehow makesure these machines are pulling in this much because thats a good amount/machine. 

Good rule of thumb to go by is to buy a route that would pay for itself in 1 year time of gross sales.  Seems like from what I am reading it would.  If these numbers are right, I would go for it.  But again this only involves 3 locations so its important to find out these numbers for sure.  What if somehow 1 location was bad or something in this deal,  thats going to cost you  a lot.

Also I would find out if these locations have contracts and check to see how the locations are and all that stuff.

[mizugori]

what worries me is, why is he REALLY selling? that's a lot of money. if he just doesn't want to do it anymore he could pay someone a small wage to run the route for him. there has to be some other reason.

[vendman0729]

Yeah, thats just something your going to have to ask him.  who knows maybe it could be a good reason.  he could be moving, has health problems whatever or it could be a scam for all you know.  Has he not given you a reason at all?  Whatever the reason is, i would look much further in this sale as it seems like a good deal.

[mxer518]

35k for this, no way no how that is wayyyyyyyyyyyyyy overpriced unless it is all brand new equipment with top of the line coin mechs and DBA's. Even then I would want to see this wrapped in a 5 year contract with options for several renewals. Of course if you buy this make sure that you no matter what get the seller to sign a non compete contract for a minimum of 5 years.

[mission vending]

My first reaction is that the profit numbers are wrong. If he is making 4500-5000 PROFIT on a monthly basis, that is around 10K in sales. Unless you are servicing on a daily basis I don't see those numbers coming out of a combo machine.

Are these coin operated coffee machines? What kind?

If they are really doing those kind of numbers then why has the current guy not gone ahead and put in large full size stuff?

If the 4500-5000 is gross sales then something around 18-20K would be more like it unless the equipment is very new and has all the latest technology on it.

[tedk]

I'm with Mxer and Mission. I don't have a combo that makes $1500 a month profit let alone three of them. If they are Seaga combo's there is no way.

[s.weir]

I have been giving this some thought today and my thoughts are summarized in what all of you have replied with.  I will be giving this guy a call to find out more specifics and if things seem legit then I will start scouting out how realistic the locations are, the machines, etc.  He didn't know what type of combo machines they were (brand/model etc.), but he knew it was a saeco coffee machine.  I am wondering if this is like the guy I will be working for this year, if any of you have read my earlier posts he had listed his route as like $30 000 or something (20 some machines, all mechanical) saying they made loads of money blah blah blah.  It later turned out once I talked to him that he had massively screwed up his calculations and this was before paying for product, best case scenario and even then it was off.  It turned out he was only making $800 or so profit a month, when he had originally said like $4000.

I agree, what type of combo machines could handle those sales???

I will give him a call and see if this is even for real.

[mxer518]

I agree, what type of combo machines could handle those sales???

NONE

[s.weir]

Not sure if this could make a big enough difference, but I just realized it is not just combo and coffee machines, but also pop machines.

[mxer518]

it could make a decent difference but based on my own judgment and experience on route buying and such these numbers seem inflated which is very typical, you just don't want to me the one to eat the bullshit.

[Poplady1]

I would be very careful on this one.  If you are going to invest $35000 in vending you can do it in a lot of other ways which would bring you income and good machines.  When I hear combo I hear low volume or a small space.  There is a place in vending for combo's but not in a account with this type of income reported.

And being tied up in one company is very risky.

Blue Moose

[s.weir]

If you are going to invest $35000 in vending you can do it in a lot of other ways which would bring you income and good machines

Yeah I agree.  I can invest the money in much more efficient and safe ways.

[TGL Vending]

I have 3 combo machines and hate them all. I think its a scam. I think someone else said it best, if they were doig such high volume why aren't the full size in there.

[gogo]

If his numbers are accurate (for combo machines), he must be filling them three times a week.

I have bought 10+ locations/routes in the last year, and every single seller but one (a die-hard evangelical Christian) has over-stated revenue ... EVERY SINGLE ONE!  People subconscioulsy lie out of convenience. Some knowingly lie outright. You have to go into detective mode and find the truth. Follow the route for a few weeks. Insist on counting the money yourself, before he touches it.

I hate to say it, but I have met the most despicable people in the vending industry. Even seemingly "nice guys" have lied to me about revenue. Be a hard-golpher. It will serve you well in your transaction.

Don't let the language barrier throw you. I have been ripped off by both Indian sellers and Hispanic sellers who seemed honest but conviently had "communication problems" regarding numbers.

You must know what you are buying! Keep them honest. Make them answer the hard questions!

Just my $.02

[BenG]

I'm kind of new to vending, but here is what I based the recent purchase of my route on.

I figured a  value for the machines (on location and not on location).

This way if the numbers were inflated (which they were slightly) I would have myself covered.  If for some reason I couldn't  keep the route or I lost all the locations I would be able to re coop the money I spent by selling all the machines.

Hope this helps.

Ben G.

[jt13]

From what I've been seeing and reading on this board probably $20,000 would be fair.

[Mikey B]

anymore updates to this?

[s.weir]

anymore updates to this?

Not really, I decided pretty quickly i wasn't going to pursue this one for many reasons, many of which are outlined earlier. 

Currently I am looking into a few different things:

1.  Found a locally owned and long time established/reputable business that basically sells turn key vending business, they even scout out locations to the nth degree and have a bunch of different options.  I obviously don't need a vending business (already have one) so I am trying to use them as a locator since they seem to be quite successful with it, securing some great locations.

2.  This one family is (they have 6 year old triplets and a son who is diabetic) are raising money for a charity and they don't have time for vending anymore.  Anyhow they have 2 machines a new snack full size snack and a full size pop for sale for $4500 (I know way too much) so I am finding out some details right now and if the financial of it are good (hopefully that is why it has the high price tag) then I might look into offering them a lower price and paying most of it off on a monthly basis using the machines' profits.

3.  I am looking to expand my business into my home town (I am away 8 months of the year for university which is where my current route is) and possibly hiring one of my best friend to fill and maintain the few machines (he is reliable, intelligent and legitimately a good guy and he seems happy to help) on a wage or some sort of deal like that.

So that is my goal for this summer and probably a little into September and October too.

Cheers,

Scott

[mission vending]

3.  I am looking to expand my business into my home town (I am away 8 months of the year for university which is where my current route is) and possibly hiring one of my best friend to fill and maintain the few machines (he is reliable, intelligent and legitimately a good guy and he seems happy to help) on a wage or some sort of deal like that.

I'm not going to tell you not to do this, instead let me ask you a couple of questions.

1. How are you going implement cash audit controls? It doesn't matter how good of a friend he is, if there is no accountability sooner or later every employee will begin skimming cash.

2. What are you contingency plans for if/when he gets a better offer or gets tired of vending? Commute back and forth to service machines in two cities?

[s.weir]

Mission as usual your points are valid and while i will answer both of your questions I must admit #3 "expanding out of my current route" was just a possibility, i will not necessarily do it. 

Cash controls I will implement as follows:

1.  Install seperate lock on cash box.

2.  Require my employee to provide me with all reciets of purchases of product (this way I can see when, how much and where my product was bought)

3.  Remove the money the twice or so a month I am home. 

This will allow me to be able to compare the money in the cash box to the the money I should be making off of the amount of product bought+amount still in the machine.

2.  If he decides to leave I will find a different employee, I have many possible ones I can use and one or two vending knowledgeable relatives (my brother and parents) who I could use on a temporary basis. 

[mizugori]

for bulk machines they have cheap electronic devices that you can put in the machine and they somehow know exactly how many quarters have dropped into the machine. they must have some kind of option like this for full line too?? Maybe the bill reader can be set to somehow record the bills accepted?

with the devices for bulk machines, you cannot reset or reprogram the device, so you could just check every few months and compare the numbers to see if he has been skimming.

[s.weir]

All of the machines that are being serviced by an employee have a wireless inventory tracker built in that I can see exactly how much of what items and how much is being made in real time online.  I know these systems are usually tens of thousands of dollars, but in a later thread once everything is finalized (I will also explain what I am talking about ha ha  ) I will explain how this is happening.  As a hint though and I will explain once everything is in writing and I am handed keys, but as it stands now I may have 7 new top of line machines (fully loaded) on pretty high volume locations, a new division of my company in a different city (hence the 7 new machines), a valuable new business associate of sorts and best of all its all paying for itself under written, business backed guarantees.  I will explain how this seemingly (when written here and not taken in proper context) unbelievable turn of events came about... at a later time. 

Cheers!

Scott

[davekro]

s.weir,

Glad you decided to pass on the original $35,000 purchase! 

Any serious, legitimate seller (especially one asking many thousands of dollars!) will have clear information on: number of locations, specific equipment at each location, gross monthly sales by location, which accounts have contracts and for how long, etc.  Even if they cannot tell you right away, do not even consider them legitimate or serious if they are not willing to get back to you with that info.  There is absolutely no reason for a seller not to fully describe exactly what he is selling.

It is very common for people looking to buy a business to 'want to believe' rosy income scenarios.  Very common!  Over the years I have had a number of people contact me for advice on buying routes with counter top snack machines with 'wonderful stories' of the income and potential for this market.  They say because these accounts are too small for regular vendors, there are tons of opportunities.  The only person making money in this scenario is the equipment salesman selling you the highly overpriced machines, or a guy who bought a number of machines (to get a 'deal' hah!), still has half of them in his garage and is not making money on the ones on location!

As stated above, buying a business REQUIRES that you become a detective to find out what must be known, even if the seller is reluctant to tell you.  Do not take wishy washy, partial or' language barrier excuse'* answers.

If a buyer wants to make a prudent purchase, he'll find someone who speaks the language to translate.  A seller not wanting to fully disclose the info he should, will find endless ways to put you off.  If you let him/her, you are greatly increasing your opportunity to be scammed or at least get a much poorer deal than you thought.  Caveat emptor, let the buyer beware!

My 2 bits...

PS. On the $35,000 route.  From your description, it sounded like the 3 locations were 3 separate buildings owned by the same company.  ??  A huge red flag.  They could be planning a big lay off,  going out of business or just ready to throw him out!  Personally, I would never contract to buy where the biggest sales accounts were not under (a strong) contract. Have him show the contracts to you !(company names can be blacked out to keep you from trying to bid them)  Also, try to get some gaurantee that if an account drops you in say six months (not from your neglect or poor service) , you get  some of your money back or an equivalent account.

Verify, verify, verify! 

[s.weir]

Thanks davekro but I actually just forgot to post the results.  They gave me every single bit of info I could want.  It was a great route, but i had to turn it down due to lack of financing at this time for it.