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 markups
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 markup 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