Menu
Close
Evaluating vending locations is an important part of expanding your business. Buying a vending machine location may be the easiest way of enter the vending machine business, but there are still things you need to consider before making an investment in a location.
In this article, we cover 5 of the most important factors to consider when buying a vending machine location.
When you opt to purchase an existing vending machine location, you are capitalizing on several immediate benefits. First and foremost, this approach saves you time. Establishing new vending machine locations from scratch involves negotiating with property owners, researching demographics, and, crucially, conducting a fair amount of guesswork regarding potential foot traffic. By buying a location with machines already in place, this groundwork has been done for you.
Furthermore, securing a location with existing vending machines means sidestepping the logistical challenge of machine placement. No need to worry about the complexities of delivering and installing heavy equipment. The initial investment may be higher, but the advantage is the reduction in your legwork and the bypassing of many of the initial set-up costs.
Ease of entry is another significant advantage. For those new to the vending machine business, acquiring an equipped and functioning site offers a gentler introduction. You learn the ropes with an already flowing operation, which can be considerably less daunting than starting from zero. You are positioned for success, as long as due diligence is done in evaluating the location’s profitability before making the purchase.
When selecting a location for your vending machine, the number of people with access to it is crucial. It is directly proportional to your potential monthly sales. You need to ensure that the location has a sufficient flow of prospective customers to justify the investment.
A minimum benchmark to aim for is a location with at least 50 people who have regular access to the machine.
However, there’s an exception to this rule:
If your machine is in a spot that's open to the public, such as a busy shopping mall or a train station, you can disregard this number entirely since the daily foot traffic will be considerably higher. A location with 20 employees but an average foot traffic of 100+ people can make for an amazing location.
Here's a quick breakdown:
Remember, your revenue is tightly tied to the number of users. Taking the time to assess the potential customer base at different locations will serve as a strong indicator for your vending machine's success.
When selecting a location for your vending machine, understanding the type of establishment is critical. It significantly impacts sales as it ties directly to the working hours and the demographic of the customers.
For instance, locations such as offices typically have consistent weekday traffic but are quiet on weekends. Conversely, establishments like gyms or shopping malls see a steadier flow of potential customers throughout the week.
The demographic is also pivotal. An establishment frequented by health-conscious individuals, like a gym, will likely yield better sales for healthier snack options. Understand the profile of the people who will interact with your machine.
Furthermore, some venues may come with additional considerations. A machine placed within a school needs to comply with specific nutritional standards. On the other hand, those in a transport hub might have longer operation hours, affecting restocking and maintenance schedules.
Keep in mind the conditions of the location:
Evaluate carefully; balance potential sales against any conditions and costs to ensure the best choice for your vending machine location.
When assessing a vending machine location, closely inspect the current condition of the machines. Machines in poor working order may necessitate additional repair costs. It's essential to factor these possible expenses into your business plan. Here's what to check:
Consistent breakdowns hurt not only sales but also your reputation. If the previous vendor has become known for unsightly, unreliable machines, this can increase your risk of losing the location to another vendor.
However, machines in less-than-ideal condition aren't always a reason to walk away. Improving them with either repairs or replacements can lead to improved sales and a positive business image. If you can do this, the location can still be worth considering and can even set you up for success.
When exploring a vending machine location, it is EXTREMELY important to take the relationship between the owner and current vendor into consideration. A good relationship will make the location much more pleasant to service and will make for a smooth transition. Conversely, a bad relationship can lead to you losing the account before you even start servicing it.
Here is what to consider:
Before finalizing your purchase, perform due diligence on the owner's credibility—you are inheriting their business environment. Your success partly hinges on the existing relationship dynamics; therefore, tread carefully and make informed decisions.
This should go without saying, but you absolutely need to consider the revenue of the location. It needs to be making enough to be worth the investment.
If the past vendor has card readers installed on the machine, ask for the records. Also, try to get records for as many months as possible. You want to be able to get as complete a picture of the monthly revenue as possible, and it’s easy to be misleading about the sales by using a small sample size.
Owners will typically present you the gross revenue, which reflects the total sales without accounting for any expenses.
If you would like to know the net revenue (which you should), an easy way to do it is to subtract expected costs from the gross revenue. For the average vendor, the expected costs are usually about half of the gross revenue.
In other words, if you want a rough idea of the location’s Net revenue, simply divide the gross revenue by 2.
Armed with this information, evaluate if the net revenue meets your financial goals. Remember, a promising vending machine location should offer a return that compensates adequately for the effort and costs involved.
When acquiring a vending machine location, be cognizant of the hidden costs that can emerge from the existing contract terms. These expenditures aren't just limited to the initial outlay but can include ongoing financial obligations to the location's proprietor or associated parties.
When evaluating a potential vending machine site, thoroughly review all contract stipulations. Be aware that these expenses directly impact your profit margin and necessitate careful consideration to establish if the investment is financially viable.
Remember, each additional expense is not just a deduction from your income but also a variable that could make or break the location's profitability. Secure a full understanding of these costs to ensure a well-informed decision.
When considering the purchase of a vending machine location, thorough due diligence is crucial. Below are answers to common questions that can guide you in evaluating the potential of a vending machine site.
To estimate the profitability, evaluate the site's current sales records and compare them with the operational costs. Additionally, consider the location's traffic and accessibility to ensure it has a high potential for steady customer flow.
Agreements may vary, but commonly include details on the duration, rent or commission to the location owner, and maintenance responsibilities. Review the terms closely to ensure they align with your business goals and installation process.
Unfortunately, there’s no cut and dried way of doing this. This is something you’re just going to have to get a feel for with experience.
We hope you found this article helpful in evaluating vending machine locations and ultimately growing your vending machine business.
For more guides and tips on succeeding in the vending machine industry, click here to visit our blog.
If you're an establishment based in Toronto or the GTA area looking for vending machine services, click here to contact us.