Do you remember the first vending machine you ever put a quarter into? Quite possibly, it was a bubble gum machine outside the supermarket or the one with the clear capsules that held rings and baubles. It might have been at the laundromat, where your mother bought small packages of laundry soap and fabric softener from a box on the wall. If you are old enough, you may even remember the big metal machines that dispensed packages of cigarettes. They used to be found everywhere.
Everyone is familiar with the ubiquitous soda pop and snack machines found in waiting rooms. When you're stuck at the hospital awaiting the arrival of a new baby or stuck anywhere with a hungry toddler, those machines can be lifesavers!
A cold drink or an ice cream on a hot day can make waiting for an oil change more bearable. A single-serve package of your favorite chips or cookies can tide you over until your next meal. These days, you can even pay with a credit card or the popular electronic "wallets."
Perhaps you've wondered how much money those machines pull in. Might this be one of the side hustles or a full-time business for you - is there a profit calculator? Are you looking for (almost) passive income?
Let's look at what you need to know before buying a vending machine route.
What is a Vending Machine Route?
You can think of a vending machine route as a small business with multiple tiny locations that need routine servicing. The business owner - that could be you - travels between the locations of the vending machines regularly to clean, repair, restock, and collect the money.
Some machines in prime locations may need service or maintainance every day or two, while others may only require weekly visits. Some machines are compatible with software that allows remote monitoring, which makes it easy to see which machines need attention.
Part of the beauty of a vending machine route is that you can start with just a few machines and add onto the route as the business grows. It will be wise to keep the number of machines at the maximum that can be serviced in a reasonable time frame. Of course, it's possible to hire employees if your route is large enough and profitable enough to scale up.
How Much Can You Make Once You Have a Vending Route?
Like any other small business, it depends.
While annual vending machine sales in the United States are recorded in the billions of dollars, that's not all profit. There are always costs associated with doing business. However, some route owners report that they show a net profit of 30 to 40% of gross sales, which is phenomenal! Few small businesses achieve that.
Much depends on how many machines you own and how many of them are in prime locations. A food vending machine near a busy office complex will likely make more sales than one in an out-of-the-way spot where people seldom go. Foot traffic is important for consistent vending machine sales.
And any place where people have to wait is also good. Doctor's offices, gyms, apartment complexes, vehicle repair shops, and schools - any of these can be an ideal location for a vending machine. Just be sure that you have a written contract with the property owner to place them there. The small amount of rent or commission that you pay for the privilege is a business expense that you will be able to deduct at tax time.
What you choose to stock in your vending machine also matters. Cans of soda pop, candy bars, and bags of chips sell well. However, the profit margin for more substantial foods like fresh sandwiches is going to be higher. Those items also have to be refreshed more often and require more specialized machines.
If you can snag an airport contract, you can sell specialty items that travelers need. Think of charging cords and earbuds, for example. A traveler with a dead cell phone will pay a premium for the right cord!
If you want to be exact about your shot at profitability, make sure you check our Vending Machine Profit Calculator.
How to Know If It's a Good Route to Buy
You can start from scratch and build your route from the first vending machine, but it takes time for a brand-new route to start making money. The purchase of an established route will allow you to start banking income much faster.
Of course, the initial outlay is higher, but buying an already successful route will save you a lot of hard work in the beginning. But how do you evaluate a route to see if you want to invest in it?
You can find routes for sale on several websites. Just search for "vending routes for sale" in the area that you are interested in.
First and foremost, you will want to see the sales data from the route or routes that you choose to investigate. Again, consistent sales and lots of foot traffic show that the location is a good one.
You may be asked to sign a confidentiality agreement before the owner/s allows you access to their financial information. It's not a bad idea to run any contract past your lawyer before signing it. But it is reasonable for the seller to expect that you will keep financial information confidential.
It's best to examine 3 to 5 years' worth of financial records, and your accountant can guide you through the profit and loss reports and tax records. You should be able to see that the route is profitable and that everything is above board.
How Much Should You Buy a Vending Route For?
Placing a fair value on a vending machine route is complicated. If you were smart and had your accountant and/or lawyer look at the financial reports, they could help you find the information needed to come up with a price.
Generally speaking, add up the cost to replace all of the machines and any other equipment and inventory included in the sale. Good bookkeeping records will show the purchase price and depreciation of these things. Then add 3 or 4 months of gross sales to that figure. This should give you a good number to start with.
Some machines and some locations will do better than others. So, while you will want to learn the sales of each machine and location, it's the combined sales of the route that you will want to see. You can always fill a machine with different items or move it to a better location after the purchase.
Unless the seller has used software technology to accurately track all sales from all machines, you may not get a true picture of the gross sales. Keep this in mind if all sales are cash only, and expect some exaggeration on the part of the seller.
When you are sure that you want to buy the vending machine route, it's time to approach the seller with an offer or counteroffer of the listed sale price. But make that offer less than you have budgeted for so that there's room for negotiation. It might take a bit of back and forth before both parties are satisfied with the deal. Know your maximum offer, and do not exceed that amount.
Red Flags to Look Out For
Some deal breakers might cause you to decline to purchase a particular route. They include:
- The locations are brand new.
- Demanding a deposit before allowing you to inspect the machines, it's probably a scam!
- You should inspect all machines thoroughly. Do not rely on the seller's word and photographs of the equipment!
- The used machines are in poor condition, dirty, broken, or so out of date as to be unsuitable.
- No credit card readers on the machines. Cash sales are notorious for being entered incorrectly to avoid paying taxes.
- No tax account or sales tax payments on record.
- No written contracts with the location owners. It's not uncommon, but makes it risky to buy the route. There's no assurance that you will be allowed to continue to use the locations. Contracts are necessary!
- Unsafe Locations. Vandalism occurs in the best of locations, but it's practically guaranteed in poor ones. Here's how to safeguard against vandalism.
What To Ask When Buying a Vending Machine Route
Here are some questions to ask the seller:
- How much income is the route making per month? What are the gross sales per month for each machine on the route?
- Are sales consistent? Do seasonal changes in foot traffic affect sales?
- Is there sufficient foot traffic at all the vending machine locations to support the business?
- How old is the equipment, and what is its present value? Inspect each one and make sure that they work as advertised.
- Do the machines accept credit cards or virtual wallet payments?
- Are the machines set up with vending machine technology that accurately tracks sales for a true profit and loss report? If not, how are sales data collected and tracked?
- How long have the machines been at their present locations?
- Are the contracts with the owners of the vending locations in order and transferable to you? Are they people that you want to do business with? Talk to each of them before committing to the purchase.
- Why is the route for sale? Is the seller just making a life change, or is the business in trouble?
- What is the overhead for the route - commissions to location owners, cost of inventory management, vehicle costs for running the route?
- Are there any tax liens or lawsuits that will impact you as the new owner? Be sure to get a copy of the clearance letter from the state tax authorities stating that no tax is due on the account.
What Happens After You Agree to Buy the Route?
When you and the seller have come to terms, have your lawyer draw up a purchase agreement. This contract should include the following:
- The agreed-upon purchase price and terms of payment.
- A list of all machines, equipment, software, and inventory that is being sold.
- A warranty from the seller that they have a clear title for everything being sold and that the financial records used to determine the sales price are accurate and true.
As with any business venture, the first step is to find out what your city, county, and state requirements are to get started. Many places will demand that you get an annual business license and will undoubtedly expect you to pay sales taxes on your profits. In that case, you will need a state tax ID. If your route crosses state lines, be sure to understand the legalities in all jurisdictions.
Contact city hall and your state taxation department to be sure you have all the paperwork in order. It's much easier to do it right in the beginning than to pay fines later.
Unless you intend to hire employees, you may not need to get a federal tax ID, but it can come in handy when you go to open a business bank account. And you will want to open a business banking account right away.
If the seller is agreeable, ask them to sign a contract to be your advisor for a designated transition period. You can learn a lot from a successful businessperson. After all, they are the experts on the route and can help you learn the ropes faster than you can on your own. The consulting fee will be a small price to pay for their expertise, and you will pay them as a contractor instead of an employee.
Does your state require inspections and/or a license to sell food and drink from vending machines?
It's probably a good idea to sit down with an accountant early in the process of setting up your business. You will need to have a bookkeeping system and understand how to use it. Or you can hire a bookkeeper to properly enter all of your data. You will have to keep careful records of both sales and expenses so that you or your accountant can be ready to file your taxes every year.
Get Your Money Figured Out
You will need a written business plan to approach lenders once you are ready to buy your vending machine route. This will include a budget and quotes for purchasing your equipment and initial inventory. Here are some other things to consider when you write your plan:
- Since it will take some time for your new business to become profitable, how do you plan to support yourself in the first year or two? Do you have enough savings or other income to stay comfortable in those early days?
- What kind of insurance will you need, and where will you obtain it? Does it cover vandalism of the vending machines?
- Do you have a vehicle that is suitable for servicing the route? If you need to move (a very heavy) machine, how will you do that?
- Is this route going to be your full-time job or is it a side gig?
- Do you have the skills to make repairs on the machines, or do you have a repair person you can call upon?
- Are you in compliance with all federal, state, and local regulations? Don't forget to check the ADA (Americans with Disabilities Act) rules for vending machine locations.
- Do you have a space to safely store inventory? Food and drink must be stored in a pest-free environment under some temperature controls to keep them safe for consumption. You will need to pay attention to sell-by and use-by dates.
Don't go crazy here and ask for more money than you need. You want to be able to pay the loan back and still have the income to buy new inventory as your sales increase. You will probably be looking at a short-term loan instead of a standard loan. If you handle this part right, you will soon own your business outright and start banking the profits for yourself!
Closing the Sale
You will want to confirm the sale price with your lender, if you are using one, and pick up the cashier's check. Make sure that your lawyer is available to be at the closing with you.
You, your lawyer, the seller, and their lawyer should each review all of the documents. Any corrections should be made before signing anything. You will then pay the seller with a cashier's check and get the bill of sale for the transaction.
And just like that, you become the proud owner of an established vending machine route!
Which Vending Machine Is Most Profitable at Scale?
Once you have secured a route, it will be important for the longevity of your investment to start thinking about optimization for the future. Buying a vending machine route can include both buying the machines at this location outright, or buying the space itself instead of each individual machine. If you are considering purchasing a vending route, it's important to take into consideration expansion or replacement of machines that either were currently located at this space, or machines that fit within your overall portfolio of machines for ease of maintenance.
For a vast majority of locations, the SM2300 is the best option for those looking to purchase a new machine outright and not have to worry as much about availability of parts or product sections. We recommend this heavily primarily due to our experience with Seaga's machine line, as they tend to just keep working as you expect without having to be on top of the lifecycle of individual parts.
In Summary
Purchasing a vending machine route is a great way to get started in the vending industry, but it's important to be prepared for the upkeep and costs of having access to multiple locations at once. Vending machine routes are both a profitable investment and a solid foundation for anyone looking to start a business or advance their career in the vending industry.
