The ads are alluring: “Make $500 an Hour in the Vending Business!” “Earn Money While You Sleep in a Vending Machine Business!” But they sound way too good to be true. Can vending machines really be a viable way to earn cash?
The National Automatic Merchandising Association reports that 18 percent of vending-machine operators make between $1 million and $5 million a year. But proceed with caution: The Better Business Bureau warns of scams, and a search of “vending machines” on the Federal Trade Commission’s website unearths dozens of fines and lawsuits.
Here are a half dozen tips for getting into the vending-machine business safely and profitably.
- Decide on the vending machine type. Many vending machines are filled with a selection of drinks and snack foods. Others focus more narrowly on a particular category, such as ice cream, popcorn, cigarettes, videos (think Redbox), or personal hygiene. Some machines dispense individual units; others offer items in bulk, such as hard candy and gumballs.
- Get the proper licenses. In some states you’ll need a seller’s permit to operate vending machines, and many states require you to charge sales tax on the items in the machines. The tax varies by state, as does the minimum price that launches the requirement to collect the tax. Be sure to check with your local licensing office to find about the requirements in your area.
- Buy the machines. Decide whether you want to buy new or used machines. Prices can vary wildly: A new machine often runs a few thousand dollars, while used ones go for a few hundred or less on Craigslist, eBay, or Amazon. Keep in mind that all machines eventually break down, so you’ll need to either hire someone to repair them or learn to do so yourself. (Tip: You can buy parts from a manufacturer such as Vendors Exchange International.)
- Buy or lease a truck. Depending on how large your operation is, you’ll need a van — or, perhaps, a specialized beverage truck — to carry products from machine to machine. A used truck starts at about $5,500 at places like Specialty Trux, or you can lease a basic truck for about $500 a month.
- Find a supplier. You can buy products in bulk at a local big-box store or go online. Check out sites like Candymachines.com for bulk candy, or SmartVending for a full line of supplies. Markups will vary, depending on the product. Bulk items, such as candy and gumballs can be marked up 200 to 300 percent, while single items can typically be marked up between 60 and 100 percent. Of course, the more products you buy, the better price you’ll get, so you may have to settle for lower markups when just starting out in order to be competitive, and then increase them as you add machines.
- Secure a location or two. Where you place your vending machines will determine how successful you are. Check out each site before you approach its owner. Look for a place that gets a lot of foot traffic, such as an airport, a parking lot, a shopping mall, a large office building, or a busy waiting room. Once you select a location, approach the owner and work out a deal. Some vending machine operators offer the owner a small percentage of their profits; others donate a portion of sales to charity. NAMA, in its publication Vending 101 [PDF], suggests that you sign a written contract whenever you place a machine.
- Service your machines. Once your machines are placed, it will be up to you to keep them clean, well-stocked, and in working order. You may be able to do this by visiting once a week, but if the machine is popular, you may need to turn up more often.
Of course, all of this isn’t quite as easy as earning money while you sleep. But with careful planning, hard work, and a little luck, you can run a successful vending-machine business.