Starting a business can be risky, and finding the right opportunity is not always easy. But if you’re looking for a business idea that is relatively low-cost to start and easy to operate, then you should consider starting a vending machine business.
Vending machines are a great way to generate passive income, and with the right location, they can be quite profitable. Here we’ll cover the benefits of running such a business and the steps you can take to get started.
The Advantages of a Vending Machine Business
There are a number of advantages to launching a vending machine business that makes it a particularly attractive opportunity.
Vending businesses have relatively low startup costs, with the most significant expense being the purchase of your first vending machines. After that, it’s just a matter of paying for stock, machine maintenance, and repairs.
It’s also an excellent method of producing passive income. The machine handles all the transactions for you, and all you need to do is go collect the money!
It’s also a very scalable business model; once you find success with your first few machines, you can expand and outsource the management to other people, giving you more time to focus on other business ventures or simply relax and let the money roll in.
However, to get your small business off the ground, you’ll need to take some steps to ensure success.
Figure Out a Business Plan
Before you can start your vending machine business, you’ll need to figure out what type of products you want to sell. Here we’ll look at some of the most popular products.
Food and Beverages
Vending machines that sell food and drink are the most common type, making up roughly 30% of vending sales in the U.S. Some vending machines offer more typical items like chips, soda, and chocolate bars, while others are more niched. For example, you could have a vending machine business specializing in healthy, organic snacks and target gyms or office buildings. Or you could have a Moët & Chandon champagne vending machine in a luxury boutique or upscale hotel.
Toiletries and Hygiene Products
Toiletries and hygiene products are other common items found in vending machines. These are usually stationed inside public restrooms and contain things like tampons, laundry products, condoms, and diapers.
Vending machines that sell office supplies like paper, pens, and staplers are often found in office buildings or universities. These types of products have high markups, so they can be quite profitable.
Hot food vending machines are becoming increasingly popular and can sell things like pizza, hot dogs, or pastries. These machines usually come with a microwave that can heat refrigerated or frozen meals fast. They work best in high foot traffic areas like malls or airports.
Coffee machines are usually found in office buildings, bus stations, and other high-traffic public areas as they provide a quick and convenient way for people to get their caffeine fix.
Bulk vending machines are often found in supermarkets and sell one item only, like candy, stickers, gumballs, or small toys. These usually have a lower profit margin than other types of vending machines but can make up for it in volume.
Another option is going with a vending machine franchise, which can be advantageous because they come with an established brand and product range.
They also usually come with support and guidance to help you get your business up and running. For example, Pharmabox is a franchise with machines that dispense over-the-counter medications like allergy meds, painkillers, vitamins, and beauty products.
Just keep in mind that franchises generally require more upfront costs that can range from $20k to more than $250k. You’ll also likely have to pay royalties, adhere to stricter guidelines, and have less creative freedom when it comes to your marketing or product range.
Do some research to determine which type of product would be most popular in your target locations.
Get the Right Licenses and Permits
Depending on your location, you might need to get licenses and permits before starting your vending machine business. This is particularly true if you’re selling food items, as there may be additional health and safety regulations you’ll need to comply with.
It’s better to be safe than sorry, so it’s always better to err on the side of caution and get the proper documentation before proceeding.
Although you can start a vending business with a sole proprietorship, you may wish to create a business entity like an LLC (limited liability company) or corporation. This will not only allow you to choose a business name but also help protect your personal assets and scale your business down the road. You can obtain an EIN or Employer Identification Number for free from the IRS, and websites like Legal Zoom, My Corporation, and Nolo make it easy to form an LLC or corporation online.
It’s essential to obtain a business bank account and credit card that’s separate from your personal accounts. This will help you keep track of your finances and make it easier to do your taxes come tax season.
Find an Ideal Location
Once you know what type of products you want to sell, it’s time to find an ideal location for your first machine. Look for spaces in commercial areas that aren’t too far away from potential customers. When possible, choose areas that have some kind of surveillance to mitigate the risk of vandalism or theft.
Some of the best locations include:
- Office buildings
- Grocery stores
- Bus Stations and airports
- Malls and shopping centers
- Medical buildings
- Apartment complexes
- Movie theaters
- Hotels and Motels
You may need to contact your local Chamber of Commerce to see if there are any zoning or compliance regulations you need to be aware of. Public spaces should also meet ADA compliance standards, which means you want to make sure your machine is in an adequately accessible spot.
Once you’ve honed in an ideal location, reach out to the property owner or regional manager about placing machines in their facilities. You’ll also need a proprietor contract that establishes the commission terms. Typically, the proprietor may request up to 25% of the earnings as compensation for the space and electricity.
As with all legal matters, it’s important to have a lawyer review any contracts before you sign anything.
Buy or Lease Your First Vending Machines
Provided you are not buying into a franchise, you will need to find a vending machine to dispense your products. The type of product you sell will determine the type of machine you need, whether that’s bulk, electric, or mechanical.
From there, you’ll need to source a machine to buy. You can buy them used on places like Craiglist and Kijiji, but you want to be cautious as these machines will likely not come with a warranty.
For a little more peace of mind, you can buy new from a reputable dealer or distributor. Expect to spend anywhere from $3,000-$10,000 for one machine.
Some vending machine operators lease their machines, which can be a good option if you’re starting on a tight budget. Just make sure to read the fine print and understand the terms of the lease agreement before signing anything.
Buy Your Inventory
The next step is to buy stock for your vending machines. Some suppliers you can consider include:
Membership stores like Costco are ideal for new business owners who only have a few machines and don’t require as much stock. You can find a variety of food and non-food items in bulk for a reasonable price. However, always do cost comparisons to ensure you save the most money. For example, candy bars may be cheaper at BJ’s than at Sam’s Club.
Ecommerce Wholesalers or Distributors
If you’re comfortable buying your stock online, consider e-commerce wholesalers or distributors. You can find a wide variety of products from these vendors and have them shipped directly to your door. Just make sure to compare shipping costs before making a purchase.
Some popular e-commerce wholesalers are:
Scale Your Business
Once you start finding success with your first few machines, you may want to grow. There are several ways you can scale your vending machine business when the time is right.
Add More Machines
This is the most obvious way to scale your vending business. You might want to branch out to more remote locations to reach more customers.
Offer More Products
Add more products to your machines to appeal to a broader range of customers. For example, you may want to add drinks to a vending machine that only sells snacks.
In the beginning, you’ll likely do all the machine stocking, maintenance, and collections yourself. But as your business grows and you add more machines, you may wish to hire an employee or two to do those tasks for you, which frees you up to focus on other aspects of the business.
Franchise Your Business
If you’re finding success with your vending machine business model, you may want to consider franchising it. Franchising allows you to grow much faster than if you were to add machines on your own. The franchisee essentially manages everything while you get a cut of the revenue!
With relatively low startup costs, minimal ongoing maintenance, and tons of potential to scale, a vending machine business is an excellent opportunity for new entrepreneurs who are looking for a passive income stream. Do your research and start small, and you can potentially grow your business into a highly profitable enterprise!
For more information on starting a vending machine business, check out Liam Buckley’s book, Start Your Own Vending Machine Business.