Four questions you need to answer before starting your vending machine business
While the vending machine business seems to be a great fit for someone on the look for a new part-time and home-based opportunity that requires no special skills or training, at the end of the day this “passive income business”, like any other business, still requires some business fundamentals such as business intelligence, planning, operational efficiency and dedication.
And even when you have everything set up you can’t call it passive as you still need to monitor and service your machines, and even more - now you need to deliver great customer service so to prevent competitors from stealing your locations away. (Learn how specialized vending management software can help you streamline operations, optimize inventory and achieve better customer satisfaction). On the other hand, it is true, the vending machine business is very simple – once the machines are in place, your only duties are to maintain and refill the machines when needed and collect the money. This type of business is ideal for families as your wife and kids can be easily trained to assist you with purchasing, replenishing, accounting, etc.
One thing is certain: the vending machine business has a lot on the “front end” – you have to learn a lot upfront to ensure a solid start for your new business which will make your organization successful right from the beginning. Don’t go into the wild before answering these four key questions:
1. How much should I invest to start a vending machine business?
Depending on the way you would like to operate your vending business, the cost of a vending machine will be either zero – in the case of a full-service program, or its price range might vary widely – from $40 to some tens of thousands of dollars if you decide to operate the machine by yourself and want to buy it. Depending on the machine type, size and the number of sections it has, you can have a 40-dollar gumball one or a $500-$1,100 mini vending machine for cigarettes. You can have a typical snack or soda machine for $2,000 to $3,000, while you will have to spend some $3,500 to $5,500 for perfume & toothpaste vending machines. Some one-stop-shop solutions might even hit $9,000. And hold your breath: a pizza vending machine, which can deliver a pizza, cooked to perfection in under three minutes, with a choice of three toppings will cost you no less than $20,000. Finally, a refurbished full-size soda vending machine can be found on eBay for less than $500, however, you have to carefully evaluate the risk of getting yourself a machine that needs a lot of repair jobs. Last but not least, some manufacturers would give you a good discount on brand-new vending machines, however, they will likely ask you to commit to purchasing a certain volume, like 5, 10 or even 20 of them.
We just wanted to list a few options that you have aiming to show the wide variety of alternatives and respectively price tags that you can get when acquiring a vending machine.
In a nutshell: your startup capital costs are relatively low – you don’t need a building or office space, the vending machine itself can be financed and no other equipment or machinery is required than a vehicle to service your routes.
2. Do I need any licenses to start a vending machine business?
Before starting a vending machine business, you have to carefully go through the process of acquiring permits and make sure to obtain all licenses, certifications and insurance requirements that are needed in order to operate.
Once you have a Business License, you have to get the right to sell food items. More importantly, every vending machine owner or owner/manager of the establishment in which the vending machine is located should obtain a food vending machine license from the local Department of Consumer and Regulatory Affairs. In some states, machines selling pre-packaged, non-perishable food (chips, candy bars, packaged gum, etc.), or bottled/canned non-perishable drinks, such as bottled or canned soda, or gumball machines are exempt from a vending machine food license. A complete application for a basic business license for the food vending machine category includes several items such as corporate registration, tax registration, certificate of occupancy, list of vending machines (a vending machine location plan might be required as well), list of foods to be dispensed, and application tax paid. The tax may vary from state to state (incl. category license fee, application fee, endorsement fee, and technology fee) and per number of units but in all states, the license duration is two years. Some states require that each vending machine location (an area or the room where one or more vending machines are installed and operated) has a food service operation license. A vending machine license is not required if the following items are offered for sale: cigarettes (special laws govern the sale of cigarettes through a vending machine. For more information, contact the State License Bureau or the Clerk of the Circuit Court in the county in which the vending machine will be located), magazines, newspapers, paper cups, paper or cloth towels, postage stamps, sanitary napkins, soap and toilet seat covers.
In a nutshell: While requirements differ from state to state, it’s clear that the pre-operation paperwork stage can be quite painful. Be sure to familiarize yourself with the process before making the next step and take it into account when making your investment estimations.
3. Should I find good locations by myself or should I buy an existing vending machine route?
Without a doubt, one of the most important ingredients of owning and running a profitable vending machine business is the quality of your machine locations. Sourcing a machine location by yourself and developing your own routes offers a high degree of flexibility – you can start with just a few machines to test the location (explore and verify customer preferences) and expand whenever opportunities arise. This is the most time-consuming scenario, though, as you will need to both service your location and spend time doing market intelligence and negotiating with new locations’ owners/managers.
Buying an existing route gives you the advantage of getting access to immediate cash flow, though it is crucial to investigate and understand beforehand why the current owner wants to sell it.
A comprehensive guide on how to select good locations for your vending machines can be found on our blog: Choose the Best Vending Machine Locations
In a nutshell: The vending machine business gives you flexibility and scalability – you can start with only a few machines and expand your business when conditions allow.
4. How to make my vending machine business profitable?
Once in the vending machine business, you are on a quest to maximize revenue and become profitable. Just like in any other business, you are not operating in a vacuum – you have to deliver great customer service to prevent your competitors from stealing your good location away, on one hand, and you have to optimize your operations to minimize cost, boost revenue and ultimately impact your bottom line positively, on the other. While you own just a couple of vending machines, you might be able to manage and optimize operations using simple tools like an excel spreadsheet, for example. When you start adding machines and locations, however, the amount of data that you need to process and analyze will grow exponentially. The only real solution then would be to rely on a solid vending machine software solution to automate all the decisions you have to make on a daily basis. You can leverage powerful data analysis to manage your vending machine inventory, maximize route efficiency and schedule machine servicing and merchandising. The tailored pre-kitting feature saves you time and effort loading your delivery van and eventually helps you take advantage of new business opportunities by analyzing the exact product mix each vending machine needs.
In a nutshell: You might not need any special tools when you operate a couple of co-located machines. Once you start adding machines and locations, however, you will not be able to manage them all by yourself, using a spreadsheet or a notepad. Think well in advance about your growth plans.
To understand how VendSoft can help improve your vending business operational efficiency and boost your revenue, take advantage of your 14-day free trial now