Operating a vending machine business can be a great investment. The major financial challenge involves buying the machine itself. The success of a vending machine business then hinges on two crucial aspects: placing the machine in a high-traffic area and stocking it with popular items.
If you're looking for a side hustle to supplement your income, consider placing just a few vending machines in local businesses. From there, you can scale up the business as much as you want, even turning it into a full-time job in which you rotate through each location on a regular basis to retrieve money and restock the machines. But there are a few things you need to know about starting a vending machine business before you get started.
Obtaining Licenses and Permits
First and foremost, you need to make your business legal in order to avoid trouble down the road. Your vending machines will be located in a jurisdiction that collects sales tax, so you need to go to the appropriate city or town hall to register for a license. For simplicity, choose just one city or county in which to operate your vending machine business. As you get the hang of it, you can expand into neighboring municipalities.
The license and permits you need will vary slightly based on local laws. You'll likely need a business license, a food vending license and/or a specific vending machine license. To show inspectors that your vending machine is legal, you'll be issued with a small sticker to place on the machine.
Finding a Niche: What Type of Vending Machine?
As you make your business plan, you need to consider all the different types of vending machines and how you will make yours successful. The good news about vending machines is that they tend to market themselves by their mere presence. However, you still need to make some smart decisions.
For example, if you've noticed an increasing demand for healthy vending machines, maybe this is where you'd like to focus your energy. Or, perhaps you have a very unique idea for a vending machine, such as a DVD, video game or book vending machine. Even toys can be vended. But of course, there's also snack food, candy and cold drink vending machines.
Decide what type of vending machine you want, exactly what you'll stock it with, how much it costs to purchase the stock and you much you'll charge in order to gain a profit. Don't forget to include a start-up budget for buying a vending machine in your financial plan.
Buying a Vending Machine
Prepare to spend at least a few thousand dollars for a basic snack or soda vending machine. You can look for used machines on sites like Craigslist, eBay, Facebook Marketplace or specialty websites like UsedVending.com. Brand new models can be purchased online as well through a quick Google search. There may also be a local vending supplier in your area.
Take a look at vending machine profit statistics and make some calculations based on your financial plan to understand how long it might take for the vending machine to pay for itself and truly begin to give you a profit. This can affect your budget for buying a vending machine.
Have a transportation plan in place for storing and moving this heavy piece of equipment. At the very least, you'll want a dolly, some strong individuals and a truck and flat-bed trailer to get it placed.
Approaching Businesses About Your Vending Machine
But before you dive in and make this purchase, it's wise to have a business already lined up to host your vending machine. Create a strategy so that you seek out high-traffic areas populated by people who are likely hungry or thirsty and willing to shell out some cash for convenient food. Good ideas include contracting out with sporting venues and arenas, schools, offices, children's camps and even gyms.
Be prepared to explain to each business that your vending machine will add value to their operation. You'll likely need to pay a "rental fee" to the company so that they can benefit monetarily. But you can also explain how the company can benefit from having customers or employees who aren't hungry or thirsty thanks to your machine. For example, everyone focuses better when they have a snack, and a vending machine is the perfect way to guarantee a quick and easy bite to eat.
Once you identify businesses to approach, try to approach them in person. Set up a time to meet with the office manager and have plenty of documentation ready to go to show that you're serious. Be prepared to leave some promotional materials that clearly outline the benefits to the host company in case they need to mull over your proposal, and don't be shy about following up.
Stocking the Vending Machine
Once you have a vending machine placed in a business, you need to regularly check on it. You'll make the host company happy by keeping it stocked. They don't want to have to call you all the time to get you to come out and stock it or fix it. That's your responsibility.
In the beginning, check on it often. Eventually, you'll get an idea for its average performance and how often you need to collect money or restock it. Be aware of times when you'll need to check the machine more often. For example, on hot days, your drink machine is likely to be popular. Or a snack machine at a college might run out quickly during finals week.
Always make sure you have enough stock on hand to refill the machine, and consider replacing poor-performing items with others. If no one likes a certain type of potato chip but the pretzels always sell out, there's no reason why you can't replace the potato chips with another row of pretzels. And remember to buy in bulk to save money.
Maintaining the Machine
Be careful – if your machine gets a reputation for being out of stock often, patrons will be discouraged from visiting it. The same happens if your machine malfunctions and "eats" customers' money without vending anything. Stay on top of problems.
You might also want to modify an older vending machine so that it accepts credit cards as payment. And even alternative payments are becoming more popular, like smartphone-based payment. The easier you can make the transaction process, the more likely people are to use your machine.
For example, if you contract with a university, students often use their school IDs to pay for items on campus. They're used to using their ID for everything, and it makes sense for your vending machine to be equipped to accept this type of payment in order to maximize sales.
Marketing Your Vending Machine Business Further
After you've successfully dipped your toe in the water, use testimonials and case studies from your other machines to help you persuade other companies to host a machine. You can build your business on great customer service and word of mouth. Establishing trust is very important in this line of work, because no one wants to have an abandoned or broken vending machine on their property.
Fortunately, once you have contracts with a couple of businesses, it becomes even easier to show that you deliver what you promise. The hard part is securing that first contract. Try to take advantage of your current connections, and don't give up!
- Insure your equipment.
- Check the new business registry with your state for any new businesses that may require vending machines and send them a letter.
- Consider creating an LLC, limited liability company, to keep your business finances separate from your personal finances. Talk to the SBA about creating an LLC.
- Remember to insure your equipment.
- Get everything in writing, everything.
- Don't be afraid to ask questions.
Cathy Habas specializes in marketing, customer experiences, and behind-the-scenes management. Cathy has contributed to sites like Business and Finance, Business 2 Community, and Inside Small Business. She served as the managing editor for a small content marketing agency before continuing with her writing career.