Someone offered to sell us their route

[acvending]

I am still waiting for details but someone local to us offered to sell us their route. They said they bought it in July but don't have the time to devote to it. Its 50 triples at 50 locations. They claim they have not serviced it in 45 days and claim there is probably $3000-3500 in the machines. I don't know anymore than that yet. Originally they emailed me and asked if we would be willing to service the route for them and they would pay us something to do it. Did not discuss details. I posed the idea if selling the route to us and they got back to me and said they would. They found us because I had posted an ad on Craigslist looking for scouts to find locations for us. We were offering a $20 referral for each location. Didn't get any responses to the ad itself but this person apparently saw it and contacted me. Guess the ad was worth it after all. I'm thinking maybe we should service the route first to see the locations and get an idea of the potential. They could then give us a cut of the take. And then we can negotiate purchasing the route. What do you guys think? What do you gus think the route is worth assuming it is pulling in industry average?

Adam

[G-man422]

Well for the machines alone (for $3500) they're $70 a piece (not a bad price IMHO).  I wouldn't pay over $5,000 for everything.

[acvending]

Well for the machines alone (for $3500) they're $70 a piece (not a bad price IMHO).  I wouldn't pay over $5,000 for everything.

No not $3500 worth of machines. They claim there is $3000-3500 revenue sitting inside the machines since they have not serviced them in 6 weeks. That means that they are claiming the machines average $2000-2500 a month. I do not know how much they paid for the machines themselves since they said they bought the machines and route from someone else.

[thrash]

Well for the machines alone (for $3500) they're $70 a piece (not a bad price IMHO).  I wouldn't pay over $5,000 for everything.

i am with G i would not pay over $5000.00 either.

[caserri]

I'm thinking maybe we should service the route first to see the locations and get an idea of the potential. They could then give us a cut of the take. And then we can negotiate purchasing the route. What do you guys think?

Adam,

Good thinking. Negotiate a cut of the take for a "one time" service of the route. That will give you a much better idea of its value. Be sure to keep an eye out for unhappy locations as these will probably need to be re-located.

After you service the route you will be in a much better position than most to determine what it is worth to you. Not only will you get first hand experience of the revenue but also location demeanor and time required to service. You will also be able to uncover any flaws in the route. You will get all of this plus a cut of the take! If you are not happy you can walk away from it a richer man.

Steve

[The Master Key]

Some points to consider:

They contacted you about servicing their route and are now ready to sell you the whole thing.  If they don't have the motivation to go and empty out $3,000-$3,500 then they are officially done with this business.

For the income figures they gave you to be accurate, the average income would have to be $40-50 per location.  That is a really high average.

Some questions I would ask are:

What kind of machines?

Do the machines have a universal key or 50 different sets?

Are the locations charity or commission?

How big of any area does the route cover?

Without being able to verify the income, I would pay only what you feel is a good price for the machines and consider the locations a plus. 

I bought a route of 22 machines from someone that claimed they were making between $600-800 per month.  (Only 12 machines were located, the other 10 I had to find locations for.)  I paid $2,200 for the route, so pretty much $100 per machine, with the plus of 12 machines already being located.  The actual monthly income from those 12 machines turned out to be something closer to $100-$150 per month.  But, the route I bought did have a total of around $650 still inside the machines.  But, in my case this meant the route hadn't be serviced in probably 4-6 months instead of 1. 

Make sure you still come out good in the deal whether the locations are duds or not. 

Hope this helps.

Brian

I accidently hit the back button on my mouse twice, so this is the third time I tried to write this post.  :shock: 

[pusherman]

just know that it is probably 6 months not 6 weeks since they have been serviced when you are trying to figure out what the route is running.

[25cent_smile]

Adam,

 It is worth looking into. I would ask for some paperwork to support their last service date. Remember, they came to you. Don't pay too much.

 

Bryan

[acvending]

We are going to first service the route for a month or two before we make the move the buy it. She just emailed me back and she basically wants us to do all the  servicing including buying the candy. Then just send her checks with her cut of the revenue. She wants us to let her know how much of cut we are looking for. What do you guys think we should offer? We were thinking telling her 60/40 with us getting 60%. Do you think we should ask for more? What would you guys do?

Thanks,

Adam

[Beer980]

Do they have any candy to service the route with? Are they going to go along with you the first time? 50 triples could be a lot of candy to buy and test the route. How many varities of candy do they offer? Hope they don't have any nuts in them because they could be bad. I would say if you need to buy a bunch of candy for the first service then offer 10% and not more then 20% for the first round. I might try 70/30. You need to have something in writing dealing whith all things involved. What happens if any machines are kicked out for non service or damaged? What if the revenuse is way below stated ammount? Remind them of your initial cost if they balk.

[pusherman]

acvending wrote:

We are going to first service the route for a month or two before we make the move the buy it. She just emailed me back and she basically wants us to do all the  servicing including buying the candy. Then just send her checks with her cut of the revenue. She wants us to let her know how much of cut we are looking for. What do you guys think we should offer? We were thinking telling her 60/40 with us getting 60%. Do you think we should ask for more? What would you guys do?

Thanks,

Adam

i wouldnt get involved in any of this without every detail in writing. if i am going to service them and buy all of the candy necessary to service the route i wouldnt pay them jack. they can take their part off of the purchase price. but then again you cant settle on a purchase price until you have seen the route. i would want to see the entire route before i go out to service it. then you will have a better idea of what you want to offer them for the route. after you know what you want to offer them for the route, then you can negotiate the amount that you want to give them for servicing the route. and again, give them a low percentage and take that amount off of the agreed purchase price.

see the route first, then you will know what you are in for.

[pusherman]

also 60% is about right if they are buying the candy. if you are buying it, it is way too low.

[acvending]

Well the woman finally called me tonight. Story is she bought the route last summer. She had no vending business experience. She lives in Rochester NY but her friend who also had no experience lived down here by me. Someone tipped her friend off that this route was for sale. So her friend told her about it and so the deal was she put the money up to buy the route and her friend would service it. Well her friend had to move recently so now there is nobody to service it. So now she is stuck with the route and she said its just to far away for her to come down herself every month to service it. So she was looking for someone else to do it which is where we come in. Tonight I offered her 20% of the gross and she asked if we could make it 25% which I reluctantly agreed but told her i would have to discuss it with my partner first. I explained that we would simply cut her a check about every 30 days for her take. Once we agree on everything we would officially draw up an agreement and she was fine with that. Once an agreement is signed she will send me the route sheets and the keys. Everything seems on the up and up. Anything I should worry about at this point or anything else you guys suggest I do?

Thanks,

Adam

[thrash]

good job ac 75%

run it for a while and then see if you want to buy

[Beer980]

I would put in the agreement a time limit for you to buy the route. Maybe three months to get a good idea what it is doing compared to what they say. I would not want to get locked in on paying them 25% every month for very long. The money paid to them should go towards the route payment like said earlier is a good idea if they will go for it.

[acvending]

I would put in the agreement a time limit for you to buy the route. Maybe three months to get a good idea what it is doing compared to what they say. I would not want to get locked in on paying them 25% every month for very long. The money paid to them should go towards the route payment like said earlier is a good idea if they will go for it.

Below is the agreement as I have it currently written. She still has not seen it so I can still revise it. I didn't even think of discussing the 25% she is getting going toward the purchase of the route but thats an interesting idea. So basically you are suggesting that her cut is actually financing the cost of route if we decide to buy it. So lets say every month that 25% gives her $750 and we have serviced the route 3 months and thus have paid her $2250 total. So the entire $2250 or just a portion of it should be deducted from whatever the final cost of the route is should we decide to buy? If this is the case we should probably make that clear in our agreement to service, yes?. I was doing the agreement strictly for servicing the machines. Never discussed with her applying anything toward purchase. Guess I will have to introduce that to her.

Thanks

Pasted copy if agreement as I have it currently written :

A & C Vending residing at ************** agrees to service vending machine route owned by ***** County Vending, residing at **************. A & C Vending will be responsible for collection of revenue and well as purchasing candy, maintaining and refilling product as well as any other maintenance of machines. In exchange ****** County Vending will give A & C Vending 75% of the revenue generated by the route. A & C Vending will then pay ******* County Vending the remaining 25% of the revenue via a company check about every 30 days. The cost of product (i.e candy and gum) or any replacement parts will be deducted from the revenue prior to calculating the agreed upon payment to ********* County Vending.

This agreement does not in any way make A & C Vending an employee or partner of ******** County Vending. A & C Vending is working strictly as an independent contractor and thus has no legal responsibility to ******* County Vending outside of what is stated on this agreement. This agreement does not become active until A & C Vending has received the keys and route sheets for the route associated with this agreement.

Either party may terminate this agreement at any time and for any reason at which point any outstanding payment for collections made by A & C Vending up to that point will be paid to ******** County Vending. A & C Vending will then return all keys and route sheets and any replacement parts purchased back to ****** County Vending at which time this agreement becomes null and void.

[25cent_smile]

Adam,

You should be the only one that can break the agreement!!!!   Also, both of you guys need to agree on a price for the route before you start servicing. Then, if the route is worth to you, the contract allows you to buy it from her at the agreed price. Otherwise, your hard work could bite you in the butt, and make her route more expensive to purchase.

  Don't be afraid to ask her how much she has invested. She might even settle for breaking even. Try not to let her profit from your hard work. I'm not trying to be mean, but business is business. She needs to understand that the best she is going to do is break even, or lose everything.

Bryan

[acvending]

The issue is we have no idea what the route is worth as we do not know what it generates yet. Thats why we want to service it for a couple of months. So we can see. How are we supposed to come up with a price not knowing. The only thing I would offer her ahead of time is just the cost of the machines at say $50 a head, so $2500.

Now if the machines are doing the 3k a month she claims they do and we take our 75% cut then if we decide to buy it we will simply use the money from the revenue. I don't think we really need to include buying the route in the agreement. If 2 or 3 months from now we want to buy it and she still wants to sell it and we agree on a price then we're set and we can use the money we made from her route to buy it so basically she is financing for us by allowing us to take the 75% cut. If we decide we don't want to buy it or she decides she does not want to sell it we can either continue to service it for her and still make nice money each month or we walk away with some nice money in the bank to buy more machines for our route.

25cent_smile wrote:

Adam,

You should be the only one that can break the agreement!!!!   Also, both of you guys need to agree on a price for the route before you start servicing. Then, if the route is worth to you, the contract allows you to buy it from her at the agreed price. Otherwise, your hard work could bite you in the butt, and make her route more expensive to purchase.

  Don't be afraid to ask her how much she has invested. She might even settle for breaking even. Try not to let her profit from your hard work. I'm not trying to be mean, but business is business. She needs to understand that the best she is going to do is break even, or lose everything.

Bryan

[Beer980]

This reads kinda funny to me so let me throw a change out there to you:

" In exchange ****** County Vending will give A & C Vending 75% of the revenue generated by the route. A & C Vending will then pay ******* County Vending the remaining 25% of the revenue via a company check about every 30 days. "

Change it to read:

" In exchange A & C Vending will keep 75% of the revenue generated by the route. A & C Vending will then pay ******* County Vending the remaining 25% of the revenue via a company check every 30 days after the contract is signed. This 25% paid monthly will apply towards the purchase of the route if A & C Vending decides to purchase this route at the end of the trial period stated below. "

Add this in there somewhere:

" ******* County Vending states that there is an estimated $3000 to $3500 in revenue in the machines and they have not been serviced in six weeks. This is a $40 to $45 average per month per machine. If this average proves true over the next three or four months (pick what time length you are comfortable with) then A & C Vending will enter in agreement to buy this route from ******* County Vending for the sum of $3000 to $4000 (pick a value here) less the total amount previously paid monthly. The sale will become final 30 days after the three or four months trial period(pick what time length you are comfortable with) ends. "

Remove this:

" Either party may terminate this agreement at any time and for any reason at which point any outstanding payment for collections made by A & C Vending up to that point will be paid to ******** County Vending. A & C Vending will then return all keys and route sheets and any replacement parts purchased back to ****** County Vending at which time this agreement becomes null and void. "

Change it to read:

A & C Vending shall give 30 days written notice for termination of the contract with the revenue payment if the route proves to be worth much less then stated amount. If A & C Vending terminates the contract then all keys and route sheets will be returned with the final revenue check to ****** County Vending at which time this agreement becomes null and void. "

If she has problems with these terms take her counter offer, advise her you will discuss it with your partner and will get back to her in 5 business days. Don't show her you are ready to jump on this, treat it as if you could take it or leave it. She is the one who is desperate and that is where you get sweetheart deals in the business world they say.

[acvending]

Do you thinks its fair that we take our 75% cut each month and if we decide to buy essentially also take the remaining 25% that was given to her by deducting it from the cost. I figured the 75% we are making servicing the route would toward the purchase and she gets to keep alittle something for giving us the opportunity to try before we buy. If we were splitting it 50/50 I'd have then said deducting half of her cut would from the final route price would be fair but taking her entire 25% cut for that purpose, not sure if thats a fair deal. Maybe I am seeing this the wrong way but seems odd to me. Want to hear what does everyone else here thinks?

Also again not sure if we should commit to a price for the route beforehand unless we lowball it and only offer her the cost of the machines which I am thinking around $2500 or so or about $50 a head. For all we know the half the locations could suck. Thats the reason we want to service them for a while before making any offer. Maybe I am wrong here too.

Oh and amazingly none of the machines on this route have charities or commission associated with them.

Attached below is the agreement with a few of the suggested revision by Beer.

[T BIRD]

No charity or commission?  That is amazing.  Very smart to take two months to see what the route generates. Good luck!!

[Bravo Duck]

The purchase price should be written into the original agreement and it should be based on monthly revenues generated by the route, say 4 months gross.

[Beer980]

Looks good to go. If it were me I would include something about the purchase price but if she seems reasonable about it then go with it. Just remember right now she is getting 0% until the machines get serviced. The longer they sit the more problems there will be. Has she indicated if the machines are within a reasonable area for servicing? Does it sound like you could hit all of them in a two day run?

[25cent_smile]

The issue is we have no idea what the route is worth as we do not know what it generates yet. Thats why we want to service it for a couple of months. So we can see. How are we supposed to come up with a price not knowing. The only thing I would offer her ahead of time is just the cost of the machines at say $50 a head, so $2500.

Now if the machines are doing the 3k a month she claims they do and we take our 75% cut then if we decide to buy it we will simply use the money from the revenue. I don't think we really need to include buying the route in the agreement. If 2 or 3 months from now we want to buy it and she still wants to sell it and we agree on a price then we're set and we can use the money we made from her route to buy it so basically she is financing for us by allowing us to take the 75% cut. If we decide we don't want to buy it or she decides she does not want to sell it we can either continue to service it for her and still make nice money each month or we walk away with some nice money in the bank to buy more machines for our route.

Yes. You need to start with a low price and agree how much the price will go up depending on x# of months.

Bryan 

[Big Mike]

Im getting in on this thread way late and I have not read most of it. BUT. Never look at it as a route or locations. Just look at it as machines. If they want the money the machines are GOING to make they should keep the route.

 

Mike