40% commission on a triple in a laundromat worth it?

[acvending]

My friend checked out a laundromat who has 5 capsule machines, a gumball spiral tower, one small gumball machine and one machine with Bananaramas.  The manager claims he gets a 40% cut each time the guy comes and collects which is about once every 6 weeks or so. He even showed my friend the receipt the guy gives him. The guy says the vendor counts the money in front of him and gives him his cut. He would agree to a machine from us for the same 40% cut. I am not dippy over giving a cut like that. 10-15% is the max I try to stick to. We would use one of the triples and my friends thinks we should fill it with M&I's, PMM and Skittles, though I am not sure M&I's and Skittles in the same machine make sense. Seems to be a waste considering unlikely the machine would generate more than maybe $60 a month.   Do you guys think we should take the location or is it waste? Remember, we are just starting out and don't have many placed yet.

[Gourmet]

At 40% commision, you will have no profit, after you factor in cost of product, cost to get to the machine (gas and repairs), and your time.

Not worth it in my book. 

[pusherman]

no :X

[caserri]

no :X

[acvending]

At 40% commision, you will have no profit, after you factor in cost of product, cost to get to the machine (gas and repairs), and your time.

Not worth it in my book. 

The candy cost around $8 for 56oz's of PMM, $7 for 5 lbs of M&I's and $6 for 54oz of Skittles. Unless the location is real hot its my guess that the machine will make less than $50 a month, likely closer to $30 if its doing ok which is a little over 100 vends for the month. After we factor in his 40% cut less our candy cost what do you think we can reasonably expect. I calculate somewhere in the $10-12 range assuming we generate only $30 for the month. My feeling is unless the machine is generating at least $75-100 a month its not worth it. You agree?

Oh the place is only 2 minutes from me so gas isn't really a factor.

[lurker]

Hi acvending.

Well I guess that 40% isn't negotiable, is it?

Since he wants 40 and you pay 10 to 15, doesn't sound like

exen 25% would work in that location.

I would pay that, (25%), only if I could make it up in

volume. The machine would have to do upwards of $100 / month.

Those locations are few and far between.

What about a charity machine?

If you can't do that, then my advise is walk away.

I wonder who's paying him 40%!?! His brother-in-law maybe?!?

Good luck,

Dave

[Big Mike]

Dont even think about it!

[acvending]

Hi acvending.

Well I guess that 40% isn't negotiable, is it?

Since he wants 40 and you pay 10 to 15, doesn't sound like

exen 25% would work in that location.

I would pay that, (25%), only if I could make it up in

volume. The machine would have to do upwards of $100 / month.

Those locations are few and far between.

What about a charity machine?

If you can't do that, then my advise is walk away.

I wonder who's paying him 40%!?! His brother-in-law maybe?!?

Good luck,

Dave

No he is pretty much locked on that 40%. He's not interested in charity as that how myfriend actually pitched it to him originally but he was not interested. He immediately pointed out that the other guy is giving him 40%. Its possible he is lying though he had a receipt with the breakdown from the vendors most recent collection which was a gross of about $425 which the according the guy was 6 weeks worth of revenue. That was a rack with mostly toys and a gumball spiral.

[G-man422]

Don't do it.

[West Coast Vend LLC]

40% sounds alright to give him if you are going to sell 50 cent products for $1 and 25 cent items for 50 cents. At these prices you could give 40% and still come out making money.

Here are a couple of examples of what I mean.

2" Capsules

Cost $.19 each  (this covers the cost of product & shipping)

Sell @ $1.00 each (you will have to pick items that look like they are worth $1)

Comm @ 40% ( you are paying him $.20 on each dollar)

Profit $.61 each  or 39%  (this does not include the cost of gas, etc.)

1" Gum Balls

Cost $.03 each

Sell @ $.50

Comm @ 40%

Profit $.37 each or 26%

Gary

[westlakevending]

I would accept his offer and place toy capsule machine or even gumballs. I have single heads at laundry matts that do 50 a month.

 

[acvending]

I would accept his offer and place toy capsule machine or even gumballs. I have single heads at laundry matts that do 50 a month.

 

Gumballs are out as the other vendors already has a spiral with 1" gumballs and a regular head with small gumballs. Thats along with his rack of capsule machines. So we can really only place candy like M&M's and Skittles.

[Powertechvending22]

well i would not cout out the gumball game yet. you could sell time bomb jawbreakers or maybe nerds gumballs as for toys try some high end toys like spy ears or finger lights. If your toys look cooler then the other guys toys you could take away some of his customer base

[kaiwakong]

that is a big cut...but the funny thing is at the resturant where i work on weekends, my boss gets a 50% cut on the vend machines there. Then one day I asked if i could place my vendstar there and she was like sure go ahead. I pay no percentage, only charity. I own that location now...hahaha

[bacho]

IMHO, I would walk away. You really don't need a location like that. What you could do is write up a contract for him. Tell him he gets that cut after the cost of the product but the machine has to do no less than $50 a month for three months. Also tell him he is liable for 50% of the machine if it is vandalized or stolen and then throw the knock out punch. Tell him he will receive a 1099 form at the end of the year because he will be considered an employee of yours. If he agrees to all that, which I doubt, then try it for three months like suggested and go from there. At that rate you might make some profit out of it and at the end of the year use it as a loss on your taxes.

[caserri]

Adam,

You need to walk away from this. This is not the only location out there. 40% is a ridiculous amount for you to give away especially considering the slim margins we have in this business. The only reason he is asking for 40% is because he has already gotten it. That was the mistake of the vendor before you. Don't get sucked into his mistake. It is time we all stand up for our businesses and simply refuse to give locations such outrageous commissions. I wouldn't give anyone 40% even if it were profitable for me. It's a matter of principal. The more vendors start offering up these commission amounts the more accepted they will become industry wide. Before you know it, none of us will be able to get a location for less than 40% commission.

Steve

[bacho]

I agree with you 100%, Steve. The mere mention of a 1099 form will put a damper on his thinking he is going to pocket free money. He sounds like a con artist and he won't want to mess with Uncle Sam!

[acvending]

I guess what I'll do is offer him a variable commission option each month and see if he bites. 10% if it generates up to $40 a month. 20% if it generates $40 to $75 or 40% if it makes anything over $75 a month. Being that its right around the corner from me its an easy monthly visit so as long as we are turning a profit it couldn't hurt. Unlikely it will generate more than $40-$50 at best so it would be the 10% anyway.

[Smiley]

Unfortunately, the average commission rate for a location that generates $300/month in revenue is 30-35%. The operator that offerred 40% was a bit too generous, but in the ballpark. He is most likely a medium to large-sized  operator whose COGS is around 25%. He also probably has other locations nearby that enable him or his employee to pick up over $1000/ day in collections.

It's funny. You guys are in the same business as him but it's not really the same. You look at him and wonder how he makes any money. He looks at you and wonders the same thing.

[The Master Key]

It's funny. You guys are in the same business as him but it's not really the same. You look at him and wonder how he makes any money. He looks at you and wonders the same thing.

That's hilarious!

Brian

[bacho]

Unfortunately, the average commission rate for a location that generates $300/month in revenue is 30-35%

 

Which is why I said hit him up with a 1099 form at the end of the year. Do you do that or just absorb the big chunk of money you loose to these places every year? With those numbers, you loose close to $100 a month, $1200 a year and that's just at one location.

[Smiley]

Unfortunately, the average commission rate for a location that generates $300/month in revenue is 30-35%

 

Which is why I said hit him up with a 1099 form at the end of the year. Do you do that or just absorb the big chunk of money you loose to these places every year? With those numbers, you loose close to $100 a month, $1200 a year and that's just at one location.

I don't follow, bacho. The commission is a tax deductible expense.

[bacho]

How do you prove you are paying out commission? In an audit, you will be asked for proof. Without a 1099 or some kind of letter signed by the owner of the business, you have no proof. Heck, I could say I'm paying out 50% but without proof, you don't have a leg to stand on. I just hope you don't get audited. Believe me, I'm talking from experience. It wasn't through a vending business but was on the same lines of commission paid. A 1099 form will also show up on the business owners tax report and he will have to justify the FREE money he got.

[Smiley]

I have a signed receipt for every collection. We've been around for over 40 years. So far, no problem with this method.

[bacho]

Thanks for the reply, Smiley. My auditor said there was three ways to cover my butt.

1. A signed contract with the percentage amount listed. Guess your signed receipt would qualify under that.

2. Pay the commission by check. Make sure the word commission is on the check. Save the cancelled check for proof.

3. A 1099 form

 

Me personally, will never deal with paid commission again. I was young and learned the hard way. Most people on here are not aware of the legalities of commission. That's why I asked you how you handled it. Thanks again for clearing that up. 40 years in business means alot of living and learning. My hat is off to you sir.