Chris Robertson, author of Vending Business Tactics, reveals his secrets for success in the vending business. He shares great tips about how to find the best vending locations, which vending products are most profitable, and how to get vending machines for pennies on the dollar — even for free! [23 min.]
To learn more about his vending machine business book, click here.
Why don’t you give kind of a general overview of how the coin-op vending business works.
Essentially people like myself, like a vending operator or a vending business entrepreneur, what we do is we actually go out into the community and we set up vending machines in local businesses. Now for me specifically I set up the full-sized pop machines, soda machines, and snack machines. I do a little bit of coffee and food vending as well. So really what we do is we go out into the community, we set up these vending machines in local businesses, we offer services for free to the companies so that there’s no obligation on their part, and really we earn income through the sales of our products in the machine. So we make it real easy for the business owners in the area to have access to the machines. We’ll set them up for free, deliver them, and all we do is just maintain them and fill them, and that’s how we earn money in the business. So it’s really a simple process like that.
What kind of start-up costs are involved?
You know there are many different factors when it comes to looking at the vending business and the different types of vending you want to get into. So for me, I always suggest people get started with a soda machine first because they’re the least expensive to buy. There are so many of them out in the marketplace. Some of the start-up costs typically to buy a soda machine or snack machine for example, when you are looking at buying a used piece of equipment versus new, you could spend anywhere from $800-$1,000 for a used soda machine. Or you can spend $1,000, $1,200 up to $2,000 for a new machine. And then when you look at things like the snack machines where you sell chips and chocolate bars, you can buy a machine for $1,200 used, all the way up to about $2,000 used, and then once you get into the new stuff it gets a little bit more expensive. You’re looking at $3,000-$4,000. What I always tell people to do when they start out is to look around because there are so many out in the industry and you can buy machines from other vending operators, you can use different resources like online classifieds, and you can even pick them up sometimes for $500, $600, $700 in some cases. It really just depends on what their situation is. Really there’s very little start-up costs, I mean it’s not the kind of situation where you’re jumping into the business and you have to drop $20,000-$30,000. You can get started at a relatively low cost with only a few thousand dollars.
I can think off the top of my head of several different that I buy from vending machines on a regular basis. Soda, candy, water, coffee, chips, snacks, gum, bulk candy, nuts, I think the list goes on and on. Talk about the different types of items you can vend, and which are the most profitable.
I set up my machines in a certain manner. I’ve been in the business now 10 years, and I kind of know the products that sell well, but I also have to look at the products that people want in the machine and what they’re requesting at the same time. So some of the products that I find that sell well are things like your typical drinks like Coca-cola, Diet Coke, things like that. I found those to be most profitable as well. Things like bottled water. You can buy bottled water at a low cost, sometimes as low as where I live, 17 cents a unit and sell it for a dollar, so there’s a good profit margin there. Other items that sell well are things like juices, energy drinks and things like that. Because more people are looking nowadays to get into having healthier items in the machines versus having just simple sodas and soft drinks and that kind of thing. But once you get into the snack vending end of things, like you’re saying, there’s such a variety of different products. I always set up my machines with usually a few rows of chips, then I put in a couple rows of chocolate bars, and then in the chocolate bar area what I like to sell a lot—I’ll set up a row or two of gum, then I’ll put in some healthy items, bar items, like Nature Valley bars and things like that. Because people are looking for those type of items. They do have low cost, and you can sell them for a good mark-up and make good profit margins as well. And then things like peanuts and trail mix and that. Usually in the bottom row of the machine I always set up things like cookies. I’ll put in like oatmeal cookies, chocolate chip cookies, some fruit snacks, some candies and stuff like that. So I find when you mix up the machine with a good variety and the machine looks appealing and people like what they see and it looks organized and structured properly, then you can sell a lot of variety of different products.
Questions on vending machine forums seem to have a recurring theme: basically, how do I find the best locations for my vending machines? Is it all about that old real estate adage, “location, location, location?”
You’re right about that. Location is a definite plus in this business. And that’s something that needs to be addressed when looking at the vending machine business. I would say by far that is probably the biggest question I get from people about getting started in this business. You have to get things set up properly first before you get started. You have to know where to buy your machines, where to get your products, do your homework and research first, and then start getting out there and looking for locations. Now, getting locations… there are different strategies and tactics that I’ve used over the years. By far I have found in this business that no two locations are the same. And I always say to myself, people come to me and they’ll say how much money do you make at location A versus location B, and every place is different. So as a vending operator you’re kind of testing the waters all the time. You’re testing each place and location that you’re going to. Now obviously when you think to yourself, well if I set up my machines at a high school and there are 500 kids there you’re going to make money, that’s pretty much a given. But when you look at different places like offices or factories, and say they have a make-up of… one place has 50 people and then another place has 50 people, it all depends on the demographics on what’s going on there. The people that are in there, their wages, if they even buy those products. Because locations, they’re all different, and you’re going to make different amounts of money at each and every location, but by far the biggest thing is you’ve got to test out the waters for each location and find out “Is this going to be a profitable location?” that’s for sure.
There are businesses out there that offer to help you place your vending machines. How does that work?
I’ve never personally used a vending locator myself. I’ve called locators just to see and research what kind of pricing they are looking for. When I first started in this business the one vending distributor that I bought my machines from had indicated to me that there was a locator in the area selling locations. But, I had found that the locating fees were exceptionally high, and I couldn’t justify spending my hard-earned money on that. So typically the way a locating company works is you will contact them and say hey, I live in XYZ town, I’m looking for a location for my vending machine or a couple machines, you tell them the types of machines that you have. And really what they do is they just go out into the community and find the locations for you. They’ll do a number of different marketing strategies to try and find locations, and then they’ll just sell you the location. The thing is, you have to look at the fee that they’re charging, and decide if it’s going to be a profitable investment for yourself. Because I can’t personally speak for myself and say I’ve tried it and this is the result that I got. I know from many people that have tried hiring locators, I’ve never heard of somebody coming to me and saying they had a good result or a great result with hiring a locator. What I try and tell people and teach people all the time is there’s a number of different strategies that you can use on your own to get locations yourself, and it doesn’t always have to be where you’re the person running around trying to find the locations. If you implement and learn a few different ways to get the locations, some of these things can be automated for you so that you can get on with your day-to-day activities like your full-time job. Most people get into vending and they start out part-time and they just want to build their income up slowly and have something to supplement their income and make some extra money. From a locating standpoint, if you are going to hire a locator, I would test it out slowly. Do some research, find the right locator that you think might be best for you and try it once and see if it works. If you feel it’s a good investment then look at doing it again.
Do you have to rent space from businesses or give them a share of your profit in order for them to let you put your machines at their location?
Not necessarily. A lot of people have this misconception that when you bring in your machine that you have to be paying them money, a commission, that you have to rent the space. I’ll give you an example. I set up a location just a few weeks ago, the first time I came in to fill it, one of the employees came up to me and they said, “how much do you pay to keep this machine here?” I said, “I pay nothing.” They’re like, “you don’t pay us any money?” I said, “I don’t charge you any money either to have this machine here. It’s a service. So we’re a vending service providers. I’m providing a service to the company, I’m making the investment in the equipment, and I’m the person doing all the work, and this is how I build my business and drive income into the business.” Now if a company approaches me and says what’s my cut, what do I make, or if they say we want to earn some money for a social fund or something, I just simply tell them that’s no problem. But here’s what you have to do. You have to make smart educated decisions on how you’re going to set up your machines at the location. I’m very straightforward with people, and I always say this is the way you do it. You say these are my costs, theses are the prices that I need to set on the machine for me to run my business effectively. For example if I’m selling a can of soda for $1 that’s what I need to make money in my business. If they want to earn a commission, then we just up the price from that, say to $1.25 per unit for a can of soda. Basically after I remit my taxes to the government, I can offer them a percentage of commissions. And typically what people will offer are things like 10-15%. For you as a vending service operator, your goal is to make money in this business, pay off your machines, and then buy more machines, and build your business. So whatever you do with commissions, it’s not as set in stone when you bring in a machine that you have to pay commission, I always just try and work the numbers so that the company has an opportunity to make money, but at the same time I do. If it justifies it. And I also tell them, too, that the sales have to justify it as well. If I’m only selling two cases of pop a week and we had to up the price to get to that sale of two cases of pop a week, that’s not reasonable to take a commission. So there’s been many times where people have said I would like to earn a commission, and I said sure, let’s set up the prices properly so it benefits both of us, but after a few months of running the machines I realize that the sales volume doesn’t justify paying a commission, so I would just simply approach my contact at the company and indicate to them that we’re going to have to stop paying a commission. So for me, ten years in the business, I’ve been doing it a long time. I know how to approach people like that. When I first started, would I have gone with that approach? No, because I wanted to get my vending machines on location to make money, I’ll do anything to make the sale, right? But I think that’s the kind of approach you have to have, and look at when you’re building your business, because really you are in business to make money. The company that’s there, they’re in a whole different genre business that they derive income to build their business. So that’s how I look at it.
How much can one person realistically expect to make doing this business by themselves? Is it a part-time job, or can you make a true full-time living from it?
I believe that you can make a full-time living from it. And I’m living proof of that. For me, ten years ago I started in this business, I was working a full-time job as a city bus driver. I got motivated real quickly when I realized I’m making an extra 75-80 bucks a week. So I thought to myself: what am I making here driving a bus? I’m pulling in $500-600 bucks a week take home, $30,000-40,000 a year. For me I got motivated and got out there and started building the business. Now, I didn’t go full out with it right away. I built it up slowly over the years one machine at a time, finding location after location. You have to remember when I first started I didn’t really understand the whole marketing and business-building part of the business. I just had this vending machine distributor that said to me: Go out and start knocking on doors and getting locations. So until I actually started learning strategies and how to really build the business, I was building the business from a part-time standpoint. And I was making an extra $200 a week when I started, built it up to $500, $600, $700, $800 a week. Until finally, over the last few years I started really turning on the engines with this business. When I started really turning on the engines in the business I found that I was getting more locations, building my business faster, more effectively. And for me, the end result was I created a situation in my business where I was spending more time working the vending business and I had to cut back my hours at my full-time job, and really what ended up happening is I quit a full-time job making $50,000 a year with full benefits to pursue the vending business full time because I had built it up to the point where I could afford to do that. And I’m not a single guy, I have a wife and three kids at home, too, and a mortgage just like everybody else. So it’s totally possible to do that, it’s just a matter of how motivated are you to actually go out there and build your business. There’s local businesses operating in your area, even though there might be a ton of other vending operators out there, there are ways you can get a lot of new business. And that’s what I did. I just started adjusting all my marketing and all my advertising and everything that I do around my business about focusing on helping those companies. And my business literally exploded.
What are some reputable vending machine manufacturers and distributors?
That’s a really good question because there are so many companies out there that are selling vending machines and all different types and makes and models. You just scan the web and type in “vending machines” and you’re going to see all kinds of stuff that comes up. What I always tell people is you have to look at your area where you live. What is prominent in your local area? Because essentially that is where you’re going to be working building your business. There’s a couple companies that I use, and I’ll give you a few different soda vendors and a few different snack machine vending equipment suppliers. So for soda and pop vending, a few different of the main manufacturers are Dixie-Narco, Vendo, Royal Vendors. Those are just a few. And they’re very prominent in the industry. They’ve been around for 30, 40, 50 years. Those are very prominent machines in the marketplace for pop and soda vending. Then when you get into snack vending machines, Automatic Products, National Vendors, U.S.I. (U-Select-It), those are some of the companies that are very prominent in the industry. And those companies also make things like coffee vending machines, and you get into food vending a typical company is National Vendors for food or Rowe. That’s another company. So those are prominent ones in the marketplace, and if you just look on eBay you can find all sorts of machines.
What about buying used vending machines? Are the savings really worth it?
Definitely. The biggest thing here is that there’s so many out there, you’re going to see all kinds of people that are selling machines. Depending on people’s circumstances and their situation, you can buy machines for a few hundred dollars, very inexpensive compared to going to an actual vending machine distributor and buying something brand new. If I went to my distributor in my area right now, and I wanted to buy a brand new snack machine, it would cost me $3,000-4,000. Versus if I went and found another vending operator or I went online and I found somebody in my local area that had a machine for sale, if I could work a deal with them I could probably pick something up for $1,200-1,300 and have a really good machine that works well. I’ve had machines that I bought 10 years ago when I first started in the business that are still running perfectly fine today without problems. There are so many out there and you can find them cheap. Even if you can’t buy a machine, you can always rent a machine, and there’s even ways to get free machines. So it’s not like there’s a shortage of machines out there, it’s just a matter of finding the machine that you want and working out the deal.
How can you get a free vending machine?
Some of the major bottlers out there, like Coca-Cola and Pepsi, you can get machines from them. Not free where they actually give you the machine, but they’ll let you use the machine for your vending business. And there’s ways that you can do to try to work that situation. Essentially what they want you to do is buy product from them. And then in turn they’ll lend you machines that you can use in your vending business. The cool thing is it cuts your costs in half right away. Think about it. If you’re setting up a soda machine and a snack machine at a location, for me, I just call up my rep at Coke and I just say: Hey, I need a machine, here’s the selection, set it up for this price. The cool thing, too, is that if it breaks down they’ll actually come out and do the service work and repair work. When you’re first starting out I wouldn’t recommend somebody just running to Coke or Pepsi and say: Hey, I need machines. I would say get your feet wet, get started in the business for a little bit, and then you start working those other avenues to build your business.
Are there vending machines or vending route scams to watch out for?
The truth of the matter is: there are companies out there that all they want to do is sell you machines. They want to sell them to you at an over-priced rate, they want to find people that are new to the business really. They want to basically sell you machines. So a typical situation where you may be getting scammed would be: you respond to a newspaper ad, you get invited to a seminar in a small hotel room or a small conference room. And basically they pitch you all about the benefits of the vending business, and all the great things and that, which there are many great things about the vending business. But at the end of the presentation what they’ll do is they’ll try and sell you machines. They’ll try and get you to invest thousands of dollars in some cases. I’ve had people come to me and say: Hey, I read your free report, and thank you so much because you saved us over $20,000 because we were almost going to sign on the dotted line and buy these machines. We realized that was not the way to go, so before you even spend a dime in this business you have to go out and do some homework and research. Don’t even think about buying a machine until you know exactly the types of machines that you should be buying in your area, and you have to keep your eyes open because I’ve talked to people that have lost $50,000 just getting started by buying machines that they didn’t need. And there are scam artists out there that will even take your money and run. I’ve seen all kinds of posts on news sites where they’ve taken their money and ran. And they get caught and they’ll be prosecuted, so you just have to be careful when getting started in the vending business.
Chris, what’s the single biggest mistake people make when getting started in the vending machine business?
I think the biggest mistake that people make when getting started is that they don’t do enough homework and research first. They don’t take enough time to actually really think and structure and plan out their vending machine business. A lot of people get started in this business, they have the big idea and they get excited and they want to get out there and get going, and you know what? I was kind of the same way when I first started. I had a friend give me a machine, that was great, but you know what? I made a few bad deals along the way. I got ripped off a couple times on a few machines. I overpaid. The biggest thing is that when people get started is that they end up in a situation where they don’t do enough research and homework first, and then they end up overspending on the vending machines that they buy. And then to find out later that they could have saved a lot of money if they had just sort of looked into it a little bit further. And I still get e-mails and calls from people all the time that come to me and say, I kind of started off on the wrong foot. I got sucked into this, but I’m trying to get out of it and I want to actually build this business right. Can you give me some tips? So that’s why it’s important to read as much as you can on the Internet, read articles, watch videos, I would even say you’re making an investment in a business. Buy a few e-books if you can. It could save you thousands of dollars. You have to remember one thing, it’s a business. So you want to make sure that you know exactly what you’re getting into ahead of time. So just do some proper research first, and make sure you know the prices of the machines and what you’re getting into and make sure you can get the best deal possible.
Chris Robertson is the author of Vending Business Tactics.