What is Blue Sky Vending?
What Is Bulk Vending?
Where Should I Put My Vending Machines?
Should I Work Full-Time or Part-Time?
Can I Calculate Potential Revenue?
What Should I Know About Licensing Laws?
Will I Need Liability Insurance?
How Can I Be A Prudent Investor?
What is Blue Sky Vending?
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A great majority of manufacturers and distributors of bulk vending machines and products are honorable and reputable business people. Over the years, however, a small fringe of aggressive promoters have tried to induce unwary investors into purchasing machines, locations and even entire routes at inflated prices based on false promises of huge profits with little or no work.
Quite often these promoters will put packages of machines together that can range anywhere from $5,000 to $75,000 or more. They will tell you that they will offer you training in person or through a special designed handbook and that they will give you support so that you can run your new business successfully. When the new business investor does call in, they discover that there is no help or guidance available on the promoters help line. Quite often when they make their initial pitch, they will assure you that they have locators that can locate your equipment for a reasonable price and in quick time with good locations. Again, the inexperienced investor usually finds that the locators either do not exist, or they charge more than anticipated and the locations selected were second rate many months later. All too often we hear the end results that have left the inexperienced investor with a garage full of machines and their life saving gone.
Be informed. Look at the packages closely and see how much equipment your money can buy. Then compare the prices with equipment that you can purchase directly from one of the reputable NBVA member manufacturers or distributors. You will probably discover that the equipment from the promoters is inflated 4 to 5 times the cost for which you could buy direct. As far as learning the business goes, that is one of the major benefits of joining the NBVA. Check out the “Show” icon on the home page for more information on our educational seminars.
The purpose of this Introduction to Bulk Vending is to give you an idea of some of the facts, figures and background of bulk vending so that you can make an intelligent business decision.
What Is Bulk Vending?
The vending industry is a huge multi-billion dollar per year industry. Bulk vending represents less than 1% of the total vending industry and is distinct and unique from the other electrically operated vending machines.
Bulk vending refers to the sale of unsorted confections, nuts, gumballs, toys and novelties (in capsules) selected at random by the customer and dispensed generally through non-electrically operated vending machines. Some bulk vendors operate electrically operated machines which consist of animated novelty and toy vending machines that dispense capsules containing the small toys and novelties and kinetic gumball machines.
Among the distinguishing features of bulk vending, therefore, is that our machines tend to be smaller, less expensive and our products generally are non-perishable. Health and safety concerns are minimal, compared to electrically operated vending machines which may dispense perishable food products. Our machines also tend to vend products for 50¢ or less.
A number of our operators also engage in other types of vending which may include kiddie rides, video games, condom machines, stickers, etc.
The vending business is a difficult business in which hard working men and women are able to make a decent living. Some of our larger operators are quite successful.
This is not a “get rich quick” industry, nor is profitability assured. Competition is intense among the operators, distributors and manufacturers. Our members work hard, long hours. This is a business for “hands on” people – not passive investors.
Operation of vending machines is a business. You should keep sale records to determine if your locations are profitable. If they are not, be prepared to move and lose the location. There is constant turnover of locations. Stores close, store managers decide to do business with another operator, machines are stolen or destroyed, etc.
If you are an independent small businessman, the start up of a small business is almost always a risky venture. If part of the business is not working out, change it before you go through all your capital and savings. If you overpay for your machines, products and location, your chances of success are minimal. Be skeptical of promises of promoters and do not be impressed by beautiful brochures and glossy pictures. Investigate. Check references carefully. Blue Sky promoters give the names of accomplices as “references” so try to verify independently the distributor and the operators. If they are in your area, go to their offices and try to view their machines on location.
Where Should I Put My Vending Machines?
There is an old saying in the real estate business that the three most important rules for successful real estate are location, location and location. The same thing is true in the vending business. In the right location, practically any vending machine can generate good revenue. The trick is to get enough of your machines in the right locations and then to service those machines with the right sort of merchandising.
This is easier said than done. There are only a finite number of good locations and the competition for these locations is intense. Existing operators are experienced, frequently well financed and aggressive in seeking new locations. As a new operator, you may be able to find some good locations, but you will have to work harder and be better than your competition. If you rely on a professional locator, remember that the locator wants to get paid a long time before you know whether or not the location is good. All locations are not created equal. Try to pay the locator only a little up front and pay the balance after you can verify the location is successful. Ask the locator to find another location if the one selected does not work well. You should know within 30-60 days if a site is good.
Should I Work Full-Time or Part-Time?
It is possible to operate small vending routes on a part-time basis. Obviously, you must find time during the normal work day to service your machines, hunt for new locations and purchase products. Inexperienced beginners should be prepared to invest considerable time to service and build their routes. People with “seasoned” routes may be able to spend less time. Generally speaking, most people who try to establish a vending route on a part-time basis end up losing their investment after becoming discouraged, especially if they overpaid for equipment, products and locations. Good routes are easy to sell, while new routes are not.
Can I Calculate Potential Revenue?
The key feature of unscrupulous promoters is the lure of making a lot of money in a short period of time. Generally, promises which are too good to be true are precisely that – too good to be true.
To make his sale, the unscrupulous vending machine promoter frequently uses a so-called “Profit Chart”. These charts are usually not a serious projection of profits, but are little more than multiplication tables. They are almost completely hypothetical in nature and are based upon the supposition of an imaginary volume of sales. As a result, these charts are a misleading device to entice an inexperienced investor.
Do not take seriously a promoter who says “If a vending machine does five vends a day, then 100 vending machines will do 500 vends per day.” The math is perfect, but the question is whether the particular vending machine can realistically do five vends per day, especially at the location you may be able to place the vending machine.
Listed below are some industry figures on average revenues per machine, but there is also another part of profitability beside revenue. Expenses are frequently ignored by the dishonest promoter. The “profit charts” of those promoters usually fail to take into account important expenses such as store commissions, car expenses, equipment depreciation, taxes, license fees, insurance, overhead, etc. Our Association does not publish “typical expense averages”, but we know the expense components that operators incur. Individual results vary greatly between members and, in part, depend upon the size of their company, the region they operate and the type of locations where their machines are located.
What Should I Know About Licensing Laws?
Virtually every state and many of the counties and cities license, regulate and/or tax vending machines. Some of the regulations are intended to protect the health, safety and welfare of the consumers, while others attempt to raise revenues to pay for the ever-increasing costs of government. We cannot generalize about these laws and licensing requirements. Some are very tough and some are very favorable. Our members have been extremely successful in convincing legislators that our portion of the vending is unique and is entitled to relief, but licensing fees in some parts of the country can wipe out all profits.
You need to determine the requirements in your geographical area. Our association reports annually on the most important federal and state laws affecting the bulk vending industry, but it is not possible to keep track of the applicable laws of each state, county and municipality. We also publish a List of Partial Relief which details favorable vending treatment.
Will I Need Liability Insurance?
Every prudent businessman considers the cost of insurance as part of his operating expense and the bulk vending business is no exception. We are fortunate that so few serious injuries have been sustained in our industry, but children sometimes do strange things that can result in machines falling over and injuring a child. Our operators frequently “package” their liability insurance with other insurance coverage on their motor vehicles and/or offices. The Association does not have an insurance product to offer or recommend.
How Can I Be A Prudent Investor?
Obviously you should check out as carefully as you can the information furnished from a promoter. Ask to speak to other operators. Both the honorable and the unscrupulous promoters will usually have selected names for reference purposes. The problem is that some of the unscrupulous promoters give names of people who will answer all of your questions exactly the way the promoter wants them answered, even if the answers are not true. Some of these “references” are not even in the business. Try to be a prudent investor and check out a variety of sources to get a perspective on the industry.
A number of our manufacturers, suppliers and distributors advertise regularly in Vending Times and Automatic Merchandiser, trade journals which service the entire vending industry. The phone number of Vending Times is (212) 302-4700 and the phone number of Automatic Merchandiser is (414) 563-1619. Our Association does not carry advertising from its members. We publish a directory of our members and distribute this list annually to members in good standing. The membership list is only sent to members.
In any event, do not allow yourself to be pressured by the salesmen who invariably push for an immediate decision which leaves you little or no opportunity to do your research.
INVESTIGATE BEFORE YOU INVEST!
If you already have lost money due to an unscrupulous promoter, we would like to know about it. In 1997, the NBVA approved an Amendment to its Constitution and By-Laws to ban promoters who disseminate false or misleading financial information. We cannot get your money back, but we may be able to protect others. Contact your Attorney General if you believe you are a fraud victim. Some Attorneys General actively pursue promoters to force them out of business.