There is a lot of money to be made through vending machines, which are used every day across the world. We discuss the most important things to know about starting a vending machine company, including opportunities, costs, and essential steps.
Right now, there are more than 7 million vending machines in the United States alone. On an average weekday, approximately 100 million people will use a vending machine. Vending machines can be found in offices, schools, malls, and other public places.
In fact, the vending machine industry brings in more than $1 billion in transactions every week. Today’s top vending machine operators typically own several thousand machines, often scattered all throughout the country.
But don’t let that turn you off. Lots of people start their vending machine business by buying a single machine and add more as they go along. In some cases, the machine might be owned by the owner of the building and is simply a nice convenience to offer guests. In others, the vending machine might be a part of a much vaster, profitable vending machine empire.
In this guide, we will discuss everything you need to know about starting your own vending machine company. Whether you want to purchase one machine, one thousand machines, or more, you’ll want to keep these useful tips in mind.
The Benefits of Starting a Vending Machine Business
The current estimated number of vending machines in the United States is about 7 million. For reference, there are currently only about 14,000 McDonald’s and about 24,000 Subway Restaurants in the United States. While owning a vending machine is not the same as owning a franchise restaurant, it is clear that the vending machines outnumber the nation’s largest restaurant chains at a rate of about 500 to 1 and 300 to 1, respectively.
So why would someone want to consider starting their own vending machine business?
Here are just a few of the most common reasons why:
Low-Start Up Cost
In theory, a person can start their own vending machine business with just a few thousand dollars. Over time, as their initial machine(s) begins yielding a profit, money can be quickly reinvested, and the business expanded. In other words, the barrier to entry in this industry is relatively limited.
Loyal Customer Base
If you can find the right place to begin your vending machine business, you can begin building a loyal, reliable customer base right away. If the vending machine is placed in a busy office, for example, there will likely be a group of people that use the vending machine at least 3-5 times per week. Vending machines that can adjust to the customer base’s specific preferences can begin generating profit even sooner.
The usage of vending machines is relatively recession-resistant—people will always need to eat lunch, quench their thirst, and have snacks throughout the day. The small cost of using a vending machine is often one of the last expenses people will cut out from their life.
The marginal cost of adding one more vending machine to your empire is relatively low. When compared to a restaurant or other food source, the marginal cost of adding one more vending machine is almost nothing. As you continue increasing the number of vending machines your business operates, you can reduce operating costs by making purchases in bulk.
Broad Target Market
Vending machines are used by people of all classes, races, genders, and lifestyles. Though the profit being generated from each customer will be somewhat small, about one million people will use a vending machine each day—there are very few other businesses that can make the same claim.
to the industry-specific benefits mentioned above, by becoming a vending machine business owner, you can also reap the joys of having started your own business.
How Much Does it Cost to Start a Vending Machine Business?
The cost of starting a vending machine business will depend on the number of machines you want to buy, where the machines will be located, the contracts your business will need, and the items you want each machine to provide. The average cost of purchasing a single vending machine will be anywhere from $1,200 to $10,000.
Typically, a used machine will cost about $1,200 to $3,000, while a brand new vending machine will cost about $3,000 to $10,000. Buying in bulk can reduce how much you are paying on a “per machine” basis.
Other costs you’ll want to consider include the labor costs (who will be stocking the vending machines?), material costs (what are you stocking the machines with?), usage costs (do you need to pay to keep your machine in a specific place?), and other overhead expenses.
How Much Can You Make from a Vending Machine Business?
Running a vending machine business can be very profitable. A well-located and well-stocked vending machine will typically yield about $100 per week, or about $5,000 per year. So, in theory, with just ten strategically located vending machines, you can generate revenues of $50,000 per year.
A vending machine business with 200 machines could potentially produce $1,000,000 per year in revenue. You will also need to account for your expenses, but it’s clear that the machines themselves can be very profitable.
Where Can You Place Vending Machines?
One of the keys to running a successful vending machine company is deciding where, exactly, you want the machines to be located. As you’d probably expect, some locations will be much more productive than others, regardless of what the machines happen to be stocked with.
When deciding where to put a vending machine, ask yourself the following questions:
How much daily foot traffic will there be?
The more people that pass your vending machine, the more sales you will be able to make.
Who will be passing this machine?
Students and office workers are among the most common users of vending machines. These people are often looking for a fast, affordable, and tasty snack. Placing a vending machine near a lobby, common area, or parking area can help you attract new customers.
What other food options will be available?
When people are deciding whether they want something from the vending machine, one of the first things they’ll consider is the other options available. If the machine is located where other sources of food are not nearby, such as a bus station, people will be more likely to use the machine.
Is the machine located in a safe place?
Vending machines that are located in highly public, well-lit, and secure (cameras, workers, etc.) areas are less likely to be vandalized or stolen from.
What are the expenses of keeping a machine in this location?
Energy use, stocking costs, rental costs, and other costs will all need to be considered.
Once you place a machine in a specific location, it may take a few weeks for people to work the machine into regular use. Track weekly sales to see whether a machine has been able to “catch on” in a specific location.
The 8 Steps to Start a Vending Machine Business
Now that you know a little bit about how to start a vending machine business, let’s take a closer look at the specific steps you’ll need to take to get started.
1. Formalize Your Business
By formalizing your business, you can reduce your exposure to liability, reduce your personal tax obligations, access additional capital, and grow at a faster pace. An LLC, a partnership, or a corporation (S corporation or C corporation) might make sense for a vending machine business. Even if the business itself seems relatively simple and low-risk, formalizing the business will still be an important step.
2. Open a Business Bank Account
A business bank account will make it much easier to separate your personal and business-related finances. As you make more money the need to separate accounts will increase even further.
Partnering with a business-friendly institution, like NorthOne, can help you access the supporting resources you need to grow your business further. The cash deposit feature is perfect for business owners because it gives them thousands of locations where they can load cash into their accounts.
3. Choose the Type of Vending Machine(s) You Want to Use
There are many different kinds of vending machines to choose from—the type that makes the most sense for you will depend on what you’re hoping to sell. When people think of vending machines, they typically picture machines that sell drinks or snacks.
But combo-machines (machines that let your purchase a drink and snack together), machines selling supplies (such as office supplies), and other types of vending machines can also be very profitable.
4. Choose the Features You Want the Machines to Have
As time has gone on, vending machines have become significantly more sophisticated. Adding assistance features, such as braille numbering or voice assist, can help you make your vending machine accessible to more people.
Other features you might want to consider can include a credit and debit card reader, combination features (allowing you to purchase multiple items at once), automatic inventory features, added security, and more. This is why there is a fairly wide range regarding how much a new vending machine might cost.
5. Find Places to Put Your Vending Machines
Placing vending machines in a wider variety of locations can help you diversify your empire and increase your number of daily users. There are almost countless locations that could benefit from adding a vending machine. Schools, offices, parks, transportation hubs, stadiums, courthouses, are just a few examples of locations that could be profitable.
6. Find Distribution and Stocking Partners
Once you have a large number of vending machines under your management, you are not going to want to track and stock every machine yourself. Instead, you’ll need to find distribution and stocking partners. By building a team of reliable, reasonably priced partners, expanding your machine count will be much easier.
7. Identify Key Performance Indicators (KPI)
When running a business—of any kind, but especially vending machines—you’ll need to consider how you plan to measure your performance over time. There are many key performance indicators a vending machine business owner might consider using. These can include,average profit per item, average profit per vending machine, total revenue, total profit margin, EBITDA, and more. Looking at a variety of KPIs will help you gain deeper insights into how your vending machine business is currently performing.
8. Create a Plan for Future Growth
Many of the most successful vending machine business owners began with a single machine. Over time, these businesses added new machines, found locations, and likely adjusted their current “menu.” Planning for the future will help your vending machine business evolve. Continuing to revisit this plan will help make sure you are on the right course.
Starting your own vending machine business can provide a sustained, continuous profit. With the right business banking partner and plan in place, you can become a successful owner of your own enterprise.