Bulk Vending by Dave Clingman A Question and Answer Format
of my personal experience in
vending
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How did you get started in vending? How do you get the locations for your vending machines?How long should a machine sit on location before the spot can be judged to be a good location?How much do you pay for commissions?What other considerations are there?How much can I expect to make?How do I get more information?
How did you get started in vending?
I started by buying from a company all the
information needed to start my own bulk candy vending machine business and from whom I bought my first dozen or so machines. The information was good, but I don't know that it was actually worth the $500 it cost me.
Also, their machines cost quite a bit more than I could get the exact same machines elsewhere. Some companies will charge more than the machine is worth and actually be able to sell the machines for that price IF they can
convince the purchaser that their machines will sell more candy. After I located a more direct source for the candy machines, I could buy the same machines for about one-third the price. I use the small bulk candy
vending machines, the kind where you place a After a year and a half of selling candy, I bought five used sticker/tattoo machines as a trial. I found that it was more difficult to place this type of machine, because many
location owners feared having the stickers plastered all over their store. I still have one sticker machine on location, and it is fun just to see what kinds of things sell and what doesn't. Some day, perhaps, I will
focus more on that branch and get those other four machines out onto locations. The following year I bought out a person's snack vending route. Snack venders sell regular sized candy bars. My particular machines had
nine columns, which means that they could sell nine different snacks at a time. I enjoyed most of that kind of vending, but I found that it was more difficult to please the patrons. Often, someone would ask me while I
was servicing a machine if I could get a certain type of candy bar or cookie or chip, and then the next week I would put that into the machine. More times than not, I ended up not being able to sell that requested
item. So, I preferred to stick with the "regular", popular items. After a little over a year, I decided that this kind of vending wasn't for me, and I sold off that route. Nearly two years ago, I started
selling prepaid phone cards through vending machines. With the stiff competition in the phone card industry, it is difficult to get locations to sell through vending machines. Most locations already sell the cards over
the counter, and they can get a higher commission that way than what I can offer them. I have to pay for the vending machine, and that eats up the profits, which means lower commissions. Nevertheless, I have been
able to build a small phone card vending route by offering excellent service and quality cards.
quarter into the slot, turn the knob and receive a handful of candy. These are great little money makers, and they seem to be quite a bit easier to place than the much larger
snack and soda machines.
How do you get the locations for your vending machines?
This is the most difficult part of the
business for me, since I am not a good salesman. But I have had a couple of friends give me suggestions that have saved me much time each week getting placements. Of course, the type of machine you use will determine
where you can place it. My small candy machines can fit nearly anywhere. Many places that are good for my candy machines already have someone else's machine there. A location owner often does not mind having one more
small candy machine, if he or she already has one. The problem is that when there is competition like that, no one makes much money. So, I usually try to find places that don't have any other machine. I also will
sometimes be able to get a location because the other candy vendor does not service his or her machine well. If the candy goes bad, people won't buy it, the owner will receive complaints, and that location will now be
looking for a new source of candy. One problem with this scenario, however, is that if the candy went bad, it often means that the location doesn't sell much. If I have a different type of candy than what is in the
present machine, that may make the difference. There are locator companies, but I have never used one. Most people in the vending industry absolutely refuse to do business with those locators. I can see their points,
which I will discuss momentarily, but there can be times when hiring a locating company makes sense. Most locating companies will charge between $35 and $50 per location for small bulk vending machines. The lower end of
that range are the ones who will do it completely by phone. They will have you send them a phone book, or at least pages from a phone book, and then they will proceed to call various places in your town and ask them to accept
a vending machine. Since the company makes their money by getting the location to say, "yes," some companies don't really care what kind of location it is, whether it is a place that will sell a lot of product,
whether it is a place that will keep your machine safe, or whatever. Of course, most of the time, you still have the right to accept or decline each location. Other companies will send an actual person out to your town
to get the placements, and some will even offer to take you with them and show you how to do the selling yourself. If you are going to hire a locator, that would be the kind to go with, since you can learn from them.
Another reason to pay someone else to place machines for you is if your time is so absolutely tight that you simply cannot get out to do it yourself. Even if "selling" or placing machines is not enjoyable to you, as
it is definitely not to me, it is still wise to do it yourself if you have the time.
How long should a machine sit on location before the spot can be judged to be a good location?
I have found that
some places will take off like crazy at first and then falter after a month or so. Other locations, I have noticed, will do nothing for the first couple of weeks before people see that the machine is there. I always
leave a machine in a place at least a month to see what it is going to do. Then I will decide that if it doesn't do my minimum within the next month, I will pull the machine. That minimum has to be determined by each
individual, depending on what their overhead is, whether they have or can get a different location quickly, and other things. For me, I have decided that if a machine doesn't do at least $10 per month, I will have to find some
place else to put that machine. I used to leave machines in place even if they did less than that, figuring that at least it is doing something while I am looking for a new place to put it. But I have come to
realize that if it sells less than that ten dollars a month, the candy is going bad before it sells, and I am losing money.
How much do you pay for commissions?
I have one simple rule: Pay as little as
possible for commissions. Unfortunately, the commissions structure is often dictated by competition. If you pay too small a commission, the location may sell out to a higher bidder. Of
course, service is a large factor in whether or not the location owner does this to you. I have had some owners turn down offers from other distributors of phone cards, even when that other distributor is offering double what
I can pay. The difference, they tell me, is the service that I offer. If you offer excellent service, all you have to do is get into the location and prove it to them. Having said all of that, now I can tell you what
kinds of commissions you can expect to pay. For bulk candy vending, the commissions vary widely. Some operators don't offer any commissions at all. I have placed a few machines simply as a service to the business
or store, and so they don't get any money out of the deal at all. Going with a charity can save some money, but many people these days seem to be less trusting of an operator who wants to place a machine that way.
The charity machine works like this: You sign up with one of the many vending charity organizations as a sponsor for your machine. They will then send you the number of stickers that you request. You put the
sticker on a machine and place the machine in a location. Then you send to the charity each month one dollar or a dollar and fifty cents per sticker. So, each location is costing you only $1.00 or $1.50 per month.
Some location owners will ask how much is going to the charity, and they seem to want to hear something more than just a dollar or two. Large bulk vending machine operators (those with thousands of machines) will pay 35% to 50%
commissions to their locations. That is what competition has made necessary. You see, years ago an operator might have paid a location 15% or 20%. Another operator came along and wanted that person's
account, so he offered the store 25%. Then someone else comes along wanting to grow his business, and he pays 30% to the store. And so the commissions grow. If you are placing machines in chain stores, you can expect
to have to pay those higher commissions. However, if you are putting a double head (two types of candy on one stand) machine into a local "mom and pop" store, you may be able to get by paying only 10% or
15%. Or even nothing at all. When I am trying to get locations for my small bulk candy machines, I will usually go through my little sales pitch without even mentioning a commission. If the store owner says,
"Yes," then I have a no-commission location. If the owner hesitates or says, "No," I will then bring up the fact that this is a way to make a little extra free money. Of course, that then leads them
to ask, "How much?" If you start with a lower offering (10% or 15%), you can always go higher if they don't think that is enough. But if you start out by offering a higher commission, there is no way to lower
the amount later.
What other considerations are there?
Other things that cost money in the vending industry:
Travel costs (gas, oil, auto insurance, wear and tear, etc.)
Office
expenses (stamps, envelopes, checks, printing, bookkeeping, etc.)
Machine parts (replacements and repairs)
Merchandise (candy, gum balls, etc.)
Shipping for merchandise, if you mail-order
Insurance (Carry liability insurance at the very least.)
Education (conventions and seminars)
Vandalism and Theft
How much can I expect to make?
According to the latest Census of the Industry (sponsored
and published by Vending Times Magazine, New York, NY, 1-212-302-4700), the national average for bulk candy vending machines is $200 per year. For gum sales, the average is $100 per year. So, if you have a double head
machine (two mechanisms on one stand, one with candy and the other with gum), you can expect to GROSS $300 per year, or $25.00 per month. I have found that my own averages are just slightly lower than that, at $20.00 per
month. So let us take that lower average (just to be on the safe side) and figure how much our bulk candy vending route will provide for us.
Gross per month per machine: $20.00
Less the cost of the candy (about 20%) -- 4.00
Less the commission (let's say 20%) -- 4.00
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Gross profit per machine: $12.00
From this amount, you now have to take out the cost of running your business (listed above). If you have twenty machines on location, each doing your average, you can make a GROSS
PROFIT of $240 per month, which comes out to $2880.00 per year. If you have fifty machines on location, each doing your average, you can make a gross profit of $600 per month, which comes out to $7200.00 per year. From this
amount, you still have to take out the cost of running your business (listed above). Since a good quality double head machine (metal) will cost you approximately $120.00 (including shipping costs), you can see that in a year,
you will have doubled your investment. The initial investment of $120 per machine can reasonably be expected to be paid off in six months. ROI (return OF investment) == 6 months.
ROI (return ON investment) == 200%
For More Information:
Contact Dave Clingman
Check out these web sites for more info: The information, comments and opinions are those of the author (
Get Rich Quick!? --- Not likely.
National Bulk Vendor's Association (NBVA)
National Automatic Vending Association (NAMA)
Toy 'N Joy -- A bulk vending company
The Hanna Company -- Sells all kinds of venders
Directory of Better Business Bureaus
Federal Trade Commission -- For
background info on Biz-Op and Franchises
© 2002