By some estimates, over forty billion dollars is dropped into vending machines by Americans every year. A vending machine business represents a great opportunity for entrepreneurs to start a home-based business with realistic profit potential. Smart businessmen and women realize that quarters and dimes can quickly add up to a lot of money when you own dozens of machines in good locations. This article looks at the vending machine industry in the US and offers an overview for those wanting to how to start a vending machine route that is profitable.
A Growth Industry
The vending industry in the US has grown at a phenomenal rate over the past few decades and that growth rate looks set to continue well into the future. This growth is driven by an expanding population, an expanding variety of new vending concepts and the increased need for convenience. An increasing variety of payment options also now means that consumers never have to pass up on a machines offerings due to not having any coins in their pockets.
Most sectors within the industry are seen as being insulated from economic downturns due to the fact that they are price competitive with retailers. Vended products such as coffee often represent a much cheaper option compared to retailers.
The industry is certainly competitive, like any business is, but competition is not always a bad thing. In some cases vending machines placed in the same location mutually support each other by forming blocks that offer better variety, value and convenience than nearby stores.
A Seasonal Business?
The industry is not seasonal overall. Certain machines doing hot or cold beverages for example certainly will fluctuate in sales volume throughout the year. Some locations can be better in summer or winter. Don’t forget that some locations may completely close down for short vacation periods leaving you with no sales at all.
Start a Vending Machine Route – Regulations and Compliance
Some states require vendors to have a business license (usually around $100), sellers permit, a sales tax license, or all of these things. Before you set up your vending machine route you should inquire and find out how to comply with local regulations. Depending on what products you are vending you may also have to comply with your local health authorities.
Most vending business owners go for sole proprietorship but a limited liability company also has advantages to offer. It is best to speak to an attorney or an accountant and try to determine the best legal operating structure for your situation.
Startup costs in this industry are reasonable. It is possible to start a vending machine route for less than a few thousand dollars. However, if you have more funding available then obviously you can start off in a better position and grow much faster.
The Nature of Vending Work
The work of a vending machine business operator can be divided into two basic areas. Firstly there is the maintenance and re-supply of the machines that the owner has in various locations. Secondly operators have to continually find new locations to place even more machines.
As a vending machine business owner you can choose to work by yourself, with a partner or hire teams to work for you. Most highly successful business owners in this area take on a sales role, continually trying to get more of their machines out there, while they hire teams to re-stock machines and maintain them when required. If you wish to hire staff to collect cash and re-stock machines then you need to develop systems to account for inventory and cash so that your staff don’t take advantage and steal from you.
Vending Machines and Repairs
The great thing about vending machines is that they are essentially your best employees. You can have a great deal of success even as a sole operator while leveraging on the productivity of your machines. Vending machines never need vacations and only require electricity to function in some cases (instead of a wage) and are thus the ideal workers.
Vending machines do have to be repaired from time to time and if you are not technically inclined then you will need to hire someone to do this. Having machines that are not functioning correctly for a period of time can result in your business losing sales volume and locations.
In the vending business it is essential to treat your clients well. This will not only ensure that you are able to maintain their account but may also lead to new business through referrals.
Customers hate it when they put money in a slot and nothing happens. If the manager responsible for the place where your machine is located gets too many customer complaints then they may decide that having vending machines onsite is just not worth the hassle.
The Importance of Good Locations
Locations for machines often don’t come free. Sometimes operators find that employers want to have machines on site as a convenience for staff and allow you to be onsite for no charge. More realistically though, companies and other locations may want to charge you a small fee for electricity or make you pay a set amount into a ‘social club’ or charity fund.
Some business managers will insist on a share of your machines profits and may demand anywhere from 5% to 40% commission for giving you the privilege of taking up a small part of their valuable floor space. How much you can pay for the right will depend on how much exposure and therefore how many sales your machine is going to get.
Working with a vending machine charity can help you to secure new accounts. Charities are often happy to have vendors represent them in exchange for a donation which can be set as a percentage of machine takings or a flat rate per machine.
A good location will see the owner visiting frequently to re-stock the machine. A worthwhile spot should allow the owner to collect at least $70 in cash each time they visit otherwise it is not worth the owners time.
The most profitable machines for a vending business owner will be the ones that are in busy locations that they are well suited to. They will have large capacities, not require a lot of servicing and have products with the best mark up. They will also offer a range of payment options and offer a good variety of products in a minimal space.
A Cash Business
Vending is a cash business and aside from the hassle of having to bank large volumes of coinage, business owners benefit by being paid up front for their products instead of having to chase customers up over bad debts.
As vendors are carrying large amounts of cash while they service their routes though they are increasingly having to look at solutions for their security.
Franchise or Independent?
New entrants to the industry will have to decide if they want to start a vending machine route from scratch, start out with a franchise or buy an existing route. Due to the number of scams in the vending industry over the past few years it is advisable to put in the hard work yourself and go it alone. There are many sharks out there offering unrealistic promises to naive newcomers and ripping them off so you must avoid these people.
Challenges facing the industry include the continual downsizing of businesses. There is a trend for factories and offices to hire fewer and fewer people and more people are starting to work from home. This can make great locations harder for operators to find.
Vending also generally has a bad reputation. Many people have had bad experiences over the years with vending machines. The general feeling among large parts of the population is that vending machines are often unreliable. People feel like if something goes wrong it is almost impossible to contact operators and that they have little chance of getting their money back. Many established vendors are starting to address these issues but there is still much that can be done to improve the industries reputation.
A Bright Future
The vending industry in the US and internationally should continue to expand rapidly over the coming years. For smart entrepreneurs who are prepared to put in some initial effort, starting a vending machine route represents an opportunity that is limited only by the owner’s drive and imagination. Some want to run a small route and only work three of four days a month while others want to build an empire. Either way, vending is one of the more attractive business opportunities around for Americans today.