What to know when buying a new vending location?
So you want to get into the vending business? A lot of new entrepreneurs want to start a new business from scratch. But as Codie Sanchez, owner of Founder and CEO of Contrarian Thinking says - it’s faster and easier to get started by acquiring a business than it is to start your own.
Here at Super Vending Bros., we are focused on growing our business by acquisition and by prospecting new locations to place our vending machines. This is called inorganic and organic growth. Focus on buying a location with machines already in place - it’s about as turn-key as it can get.
What should you be looking for when buying a vending machine location?
Foot traffic - the amount of people that frequent the location, whether employees or customers is the make or break factor to profitability. Assess how many employees are in a specific location and how many you can estimate per day. The more traffic, the better revenue you can generate, especially if it’s located in a good spot within the premises.
A good price & quality machines - the next thing to look at is the quality of the machines and if you are getting a good price for them. The average cost of a new machine is anywhere between $3,000 to $6,000+ whereas used machines can come in much cheaper. Since you are buying the location with machines, they will be used. Ask for the model and research the cost to buy the machines. Once you are at the spot checking them out - be sure to test the machines, check out the coin-mech, bill validator, refrigeration etc. Check out this video from Hill Vending to understand how vending machines work.
Meets your business requirements - At Super Vending Bros., we need to know that the vending machine location we are going to buy meets our requirements. We have a short list of requirements that we validate for each new location to decide if it’s a good buy or not. This includes things like foot traffic, commission, location, price etc. For each deal - we review the ‘opportunity’ and then make a decision.
Payback period - One thing you can calculate is your payback period. If you have a monthly sales estimate, you can calculate a rough payback period on the machine. Let’s say the machine makes $300 per month in revenue. Roughly, you will take home about $150 in net profit. If you bought the location for $1,500, it will take you about 1 year to pay yourself back for the initial investment.
Commision + Contract - The last thing to look out for when buying a new location is understanding if the current owner pays the location a commission and if there is a contract in place. Ideally, you want to pay $0 commission since you are providing a service, but a high revenue location may warrant some commission. Additionally, existing contracts are important to understand so you know what you are getting yourself into.
Good luck on your vending business journey. We will be posting more content like this to help you get started on the path to becoming a owner.
Are you looking to get a free vending machine for your Chicago or Chicagoland business? Contact Us