Vending Tips

Let us look once again at the advertisements referred to earlier. There may not be any mention of Vending machines in the ad. Some promise security of your investment by stock (or inventory). There really isn't much "security" in possessing a machine (now second-hand) and a few cases of stock.

Look out for Inflated Profit Projections: There are few reputable statistics available in Australia on Automatic Vending so one should want to thoroughly check out the basis of any figures given.

Location Services: Companies or Individuals often offer "Prime Locations" to investors. Usually assistance with locating 'prime' sites ends once an establishment has been found that is willing to have a Vending Machine on its premises. Poor sites are not only unprofitable but invite vandalism. Most reputable Automatic Vending Machine Manufacturers or Importers do not offer to 'locate' or 'site' machines for operators.

Good deals on Machines: Treat the Purchase, Lease or Hire of machines in the same way as you would if looking for a car. Usually the old cliché "What you pay, is what you get" holds true in this area.

Training: A good proportion of an operator's time is taken up with Sales and "PR" You will have to find sites for your machines from time to time, promote your service to existing clients, handle enquiry’s or complaints, etc from the public. Training programs offered to you covering Sales or the Technical side of Vending e.g. Machine Operation, Service, etc. are often non-existent but in any case cannot be covered in just a week or two.

Generic or Little Known Brands of Merchandise: as a 'rule of thumb' it is the well-known nationally advertised brands of merchandise which are best suited for Automatic Vending. Remember you cannot be standing at each and every machine expounding the virtues of an unknown product brand so be cautious of accepting offers of "Cheaper" or "Discounted" merchandise.

Buy Back Offers: Make sure that any offer to buy back your machines or merchandise should you decide to leave the industry, are workable and enforceable. Promises are not good enough that any offer made is completely acceptable to you.

Restricted Areas: It is not possible for Companies or Individuals to offer sole "Restricted Areas" to investors for they are not the only ones interested in Vending in any particular geographical area. Even with their own machines or products promoters sometimes "allow" encroachment on the periphery of another operator's area. Payment of a premium for a restricted area can therefore become a donation to the promoter.

Take a little time to do some homework on your intended venture. Ask yourself these questions whether you are replying to an ad or approaching a Machine Manufacturer/Agent, Promoter, etc. direct.

• (A) If an ad states, or if figures are offered, is there any proof being presented which allows me to accept these figures without reservation?
• (B) If an indication has been given that the machines or products being offered to you are supported by a relationship with a particular manufacturer or distributor, have you seen written evidence, which supports this claim?
• (C) Are you clearly being offered an opportunity to enter the Automatic Vending Industry?
• (D) If sponsorship of the promoter by Civic, Charitable, Religious, or Fraternal Organizations is implied, have you seen any evidence to support this sponsorship?
• (E) If familiar brand names have been used in making details of the offer available to you, have you seen proof that permission has been given for the use of these names, or that the product will in fact be available to you?
• (F) Does any contract put to you state all the terms and conditions clearly. Can you have time to check the contract with your solicitor?
• (G) If locations or areas are being allocated to you have you seen confirmation that the sites are available, or satisfied yourself that the area is suitable? Have you checked these matters out?

If you answer NO to any of the above STOP. Have another look at the unanswered questions before going any further. Above all don't sign anything until you are happy with the arrangement.

So You Want to Consider Vending

New Vending Machines are available from local Aus distributors or 2nd hand eBay/Gumtree/FB Marketplace etc.

Types of Vendors Available:

Vendors can also be used with card readers and note changers. The cost for a CC Reader device is $500?+ plus a device monthly service fee of $15?+ and an individual transaction cost of 18c? each time a user makes a purchase with a Credit Card.

Renting or hiring of machines is not common, so the only alternatives are to purchase or lease the equipment.

Types of Vending Service Available

Full Service Vending - An independent operator supplies one or more vendors to a location and calls on a regular basis to ensure the efficient operation of the equipment. (Cleaning, refilling, maintenance) Products are sold for cash.

Valet Operation - Location owns or rents the vendor/s and the cleaning, refilling, maintenance is provided by a third party at a predetermined cost. This service is normally used by companies who subsidize or provide free refreshments.

Owner Operated - Location or business purchases the vendor/s and orders and stores stock and refills vendor.

A few companies use contract fillers to service their vendors. They allocate an area and normally pay on a percentage of sales. The contractor normally supplies a vehicle and occasionally storage for stock.

I trust that the above information answers any questions that you may have.

Vending (and vending machines) are of course a great way to make money....

In theory.

You have a route of pay phones, candy machines, or soft drink machines that do nothing but generate income. All you need to do is stock them and collect cash on the weekends. Easy, right? Wrong!

The vending business is really a small franchise with more work. At least with a franchise you most likely have a fixed location and some kind of name recognition. Not in the vending business. The people selling you the machines will tell you, "Oh, of course you have name recognition! You have heard of Coca Cola, haven't you?" I think they are missing the point! Plenty of businesses that carried these and many other products, have failed.

Vending businesses don't fail because of products, they fail because of location. When you go into a bowling alley and see the aspirin machine in the bathroom, who do you think placed it there? There are only two answers: either management or someone with management's approval.

The whole problem with vending is trying to find places to stick your machines. Many businesses want a kickback or fee to let you place your machine there. Many others are just going to get machines themselves. What do they need you for? Plus, you have to work in the factors of theft and vandalism. Remember, you aren't exactly protecting your machines 24 hours a day. There are literally thousands of vending horror stories. Most go like this:

A husband and wife decide they would like to make some part-time income but they aren't sure what they're going to get into. They check into many different types of businesses and decide on a simple vending business.

They check the business references of the company they are going to buy their machines from and even call one of the other people on the sales sheet who's having good luck with the system. (Never talk to leads that company’s supply. The company is paying most. Why else would they take your calls.)

So they decide to go ahead. They buy 30 gumball machines for $5,700. It seems like a fair price and well, heck, the brochure said some people are making $1,000 a month with just five well-placed units. They have 30. They take out their calculator and total up $6,000 for only one months work. They both can't believe how lucky they are. Their machines show up a few weeks later and they are off. Then, reality starts to set in..........

They get really excited at first and place three machines in a local arcade. The owner is a friend of theirs and says he doesn't care. Unfortunately, they don't have much luck talking any other local businesses into letting them place machines, so 27 of their 30 units sit in their garage.

Two weeks later they talk to a local small mall owner into letting them place five machines in two of his stores for half of the profit. Anything is better than letting them waste away in the garage, right? Two more weeks go by and two of the machines at the mall have broken and someone (the husband, who doesn't have that much free time) must go and fix them. Some money is coming in from the other machines but a lot less than they had expected.

Next, the three machines at the arcade are vandalized. All of the money is stolen from them and the machines are ruined. Their homeowners insurance doesn't cover this type of expense and the couple has become so busy with all of this extra work that they haven't had time to place any of the other machines.

After four really frustrating months they sell all 27 machines to the mall owner for $3,000.

Oh, but your story is made up, right, Matt?

Yes, But...

Stories like this happen all the time in the vending business. I mean, come on! If vending was so easy why would so many companies be selling machines? Why wouldn't they just place units themselves? Because they're making money selling the machines.

I would look for something that doesn't involve stuffing vending machines with candy. Believe me, vending (unless you work really, really hard at it) is not a sweet deal.

www.mazu.com/notrec/vending.html

Vending machines and vending opportunities are promoted heavily in business opportunity magazines and on the internet.

Vending machines are sold with a lot of hype... You are told that all you have to do is to drive around town collecting all your money. Your machines are strategically placed in super locations and you're just rolling in dough. Are you kidding?

First... Some Do-Gooder will get the State or City to pass a law that requires all cigarettes to be sold over the counter so that someone will check an I.D. on every purchaser. That dumps your cigarette vending machines in the trash heap ! Well, not all of them because they left you with the ones in bars since the presumption is that the saloon owner won't let anyone in the place that's under 21 anyway. That's great because you saved half of the machines you are leasing from those high priced bandits who purchase the vending machines for peanuts and then lease them to you at ridiculous rates. If you want a good business... that's the one... Leasing. Those guys have mark-ups you can't believe. Vending? Well, keep on reading...

There is no question that vending machines are a legitimate opportunity, but it is hard work and mostly promotion to location owners... not just driving around collecting money from your vending machines. The key to success in the vending business is the same as a real estate success:
Location... Location... Location...

The other aspect to keep in mind is that the vending business is really a pain. Someone is always fooling with the vending machine. Haven't you ever put some money in a coke machine and nothing came out? Your money didn't come back either... Now you're irate ... What was your first reaction? You kicked the vending machine... Right? .... Well... maybe first you looked around to make sure no one was looking... Then you kicked the vending machine!

So now you own a bunch of these vending machines with everyone in town trying to kick the daylights out of them when they don't function properly... what kind of maintenance problems do you think you will have?

When I owned a lot apartments and an office building, I decided to go into the vending business with the locations that I had on an exclusive basis. After all, I owned the locations, so why not take advantage of a little extra income.

The numbers sounded so good... all I had to do was to buy a case of Coke for about 20 cents a can and sell the can for about 65 cents. Great numbers... So... I assigned the job of buying the coke to the apartment managers and when I deducted what the manager drank, along with the handyman and their other friends, plus the quarters, nickels and dimes that they managed to ' lose' into their own pockets... I didn't have enough left to pay the wildly exorbitant leasing payment to the lessor on the vending machine rental.

If you want to get into the vending business... You can have all my locations and we'll just split the profits.

Another side of vending is the business of washers and dryers. Most of the apartment buildings that we had were serviced by washers and dryers, which were owned and operated by an outside company. The companies owned the vending machines and they installed them and collected the money, which they split with the owners. When the lease with the company expired it was advantageous to replace the company with our own vending machines. The income from our own machines increased by much more than the 50% the company was supposed to be paying us, which tells me that the company was not paying us our fair share.

The difference between owning laundry machines and selling product from vending machines is a great one. The vending machines are more sensitive to outside influence and the product has to be constantly resupplied and the machines serviced... whereas the laundry machines need only to be maintained in good order and the money collected. The laundry equipment will wait for you to come for the money a lot longer than the Coke machine. Given the choice, I recommend the laundry business.

When I had retail commercial real estate, I had a tenant that would lease space from us that was in the laundry business. They loved the low-income areas where many people do not have their own machines and leased several stores from us. They claimed to have done over 1,200 different locations and mostly sold them as franchises. When I asked them why they franchised... They replied that the initial start-up was a loser and yet once the unit was around for a while it became very profitable.

They also were in the business of providing the machines and parts so they made money on the mark-up of the products. However, when questioned about the units... they agreed that they wished they had kept all the units... With 1,200 little cash cows out there they would have been retired long ago. So, if you have a lot of exclusive locations... the vending business isn't so bad.

The following is a posting from our 'Forum".

I own and operate a small vending company. I ran a district for someone else for several years, so I had a lot of exposure to the market before I went out on my own. It's a lot of hard work. Securing sites, assembling machines, installation so that vandalism is kept to a minimum. Optimum site location is sometimes hard to achieve because of cost, as electrical power is required for the machines I operate. The maintenance is unending as anything mechanical will break down.
Promotion fees of as much as 40% must be paid. Collecting monies is the easy part, but bulk quarters must be taken to main banks for counting and I'm charged a fee for "cash verification". I enjoy being in my own business. I would not discourage anyone. Just be ready to do what it takes, no matter what.
It goes without saying that you need good credit to be able to grow your business.

THANK YOU

David

http://xarda.com/vending.html