How to Start a Vending Machine Business: Everything You Need to Know
If you want to know how to start a vending machine business, you'll be entering a $7 billion industry that earns an estimated $64 million in annual profits. 3 min read
Facts on the Vending Machine Business
If you want to know how to start a vending machine business, you'll be entering a $7 billion industry that earns an estimated $64 million in annual profits. Individual vendors can make up to $5 million per year according to the National Automatic Merchandising Association, most of which is made up of cash transactions (75 percent). Before entering this industry, familiarize yourself about common scams by doing research on any companies you'll be doing business with through the Better Business Bureau and the Federal Trade Commission.
The United States is home to about 4.6 million vending machines. Soft drinks, juice, and water make up about 56 percent of sales. In some jurisdictions, vendors are mandated to provide healthy options. These are reported to outsell less nutritious options by about 300 percent.
Things Needed to Start a Vending Machine Business
When you're considering starting this type of business, you'll need certain supplies before launching. These include:
- The machines themselves
- A wholesale supplier for your snacks
- The snacks and products themselves
- A ledger or software program to track revenue and expenses
- Sales sheets
- Secure bags to collect money from the machines
Advantages of a Vending Machine Business
Some of the benefits of starting a vending machine business include:
- The ability to scale by starting small and adding more machines as your profit and time grows.
- Low startup costs, since you can finance the vending machines and don't need warehouse or office space. The other major expense is a vehicle to cover your route.
- Your only duties are to stock the machines and collect the cash.
- The flexibility of this business allows you to make your own hours. Family members can be trained to help with functions like stocking, making deposits, and basic accounting.
Ways to Start a Vending Machine Business
Each method of starting a vending machine business has unique pros and cons. Some vending machine entrepreneurs start from scratch by sourcing their own locations and purchasing their own machines. Market research and planning are critical to success with this route. You'll benefit from the flexibility of this approach, but you'll need to do the hard labor yourself when it comes to finding and buying machines, and then locating ideal locations and negotiating with the owner for placement. In some cases, you can work with a vending machine distributor who also sources locations.
You can also purchase an existing vending machine business or route. While this will provide immediate cash flow, you'll need to ascertain why the owner is selling the business. Do thorough research into the business accounts, condition and location of the machines, existing business contracts, and other aspects of the company that could illuminate potential issues.
You could also buy a franchise, which is the simplest way to enter this business. A franchise has the advantages of an established business model and specific products. You'll need to pay a startup franchise fee and in most cases, either a monthly fee or percentage of profits. You may be required to purchase or rent the vending machines from the franchise company.
Finding Machine Locations
As with most businesses, location is one of the most important aspects of a successful vending machine business. Choose places with a lot of foot traffic like office complexes, schools, malls, airports, and similar areas. Look for places with a lot of people walking around and few vending machines. Avoid areas with high crime, including frequent theft and vandalism. These factors can quickly minimize your profits. Consider choosing very visible areas or those covered by security cameras. In many areas, the best locations are taken. Once you find the best places for your machines, choose the products carefully. Consider the target market who provides the most traffic at your chosen locations.
Signing a Contract
The National Automatic Merchandising Association recommends signing a contract in every vending machine location. Business and property owners will charge you for using their location and electricity. This is typically a percentage of overall sales, often 10 to 20 percent depending on how many machines you have at that location and how big they are. You'll need to regularly provide the business owners with financial statements.
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