How to Start a Vending Machine Business | Expert Guide

Author: John Alson
Updated on November 19, 2020

Since the first modern vending machines were developed in England in early 1880 to hand out postcards, vending machines become a part of our lives. Nowadays people have less time and vending machines provide quick and convenient service to the consumers. Also due to recent epidemics like the coronavirus pandemic, the vending machine business becomes much more popular.

The market size, measured by revenue, of the Vending Machine Operators industry is $7.4bn in 2020. Also The Vending Machine Operators industry in the US is the 51st ranked Retail Trade industry by market size and the 544th largest in the US.

Vending machine businesses can be a good choice not only its popularity but also the starting cost. In general the cost of registering a company in USA ranges from $600 to $1400 depending on the location than we need to add vending machine's price plus the items that we are going to placed in it. A reliable vending machine cost at least 1500 and above. Overall you need between $2100 to $2900 to start your own vending machine business.

If you are interested in starting your own vending machine business, this article will help you to one step ahead of the other entrepreneurs.

how-to-start-vending-machine-business

12 steps to start your own vending machine business

  1. Decide the method of getting into the industry
  2. Find a good location
  3. Decide what you want to sell
  4. Find your vending machine
  5. Decide your business name
  6. Explore your business financing options
  7. Decide on your business type
  8. Register your business
  9. Get the necessary licenses and permits
  10. Stock your vending machines
  11. Insurance
  12. Vending Machine Maintenance

How to decide which method is better to get into the vending machine business?

There are a few ways to get vending machines to start your business.

  1. Start your own vending machine business
  2. Buy an existing business
  3. Buying a franchise

Each method mentioned above has some pros and cons which I will explain to you in detail.

Opening your own vending machine business

Opening your own business can be challenging if you haven't prepared for it, below you can find the pros and cons of opening your own vending machine business.

Benefits
  • No expensive initial investment for a big-name franchise
  • You are your own boss which means you don't need to follow someone else's guide.
  • Having the ability to choose the location, equipment, and goods to sell.
Drawback
  • Every responsibility, including finance, operations, marketing, sales, customer relationships, etc. is on you
  • Lack of experience in the industry
  • Higher chance of business failure

Buying an existing vending machine business

It is essential to be aware of potential risks when you are taking over an existing vending machine business. Below you can find the pros and cons of buying an existing vending machine business.

Benefits
  • The setting up of the business has already been done.
  • Easier to get finance
  • The need for the product or service has already been established
Drawbacks
  • The business might need major improvements to old vending machines.
  • You often need to invest a large amount upfront, and will also have to budget for professional fees for solicitors and accountants.
  • Vending machines may be badly located and maintained.
  • The business could declare false profit to sell the company above its actual value.

Buying a franchise

For some people, it's better to partner with a franchiser to avoid potential losses due to a lack of experience in the industry. Below you can find the pros and cons of buying a franchise.

Benefits
  • Franchises offer the independence of small business ownership supported by the benefits of a big business network.
  • You don't necessarily need business experience to run a franchise.
  • Franchises have a higher rate of success than brand new businesses.
  • Franchisors offer established deep-rooted relationships with suppliers.
Drawbacks
  • Franchise agreements dictate how you run the business, so you can not do anything without the Franchisor's approval.
  • There are usually restrictions on where you operate, the products you sell, and the suppliers you use.
  • The initial investment can be quite high.
  • Depends on the agreement type you may need to share your profit with the Franchisor.

Tips to find a good location

Location is the most important factor that can affect your business success. It's crucial to place the vending machine that lots of people pass through every day. Typically these high traffic locations already have a vending machine, and so it’s important to remember that if you want to break through and place your machine, you have to have the top of the line vending machine and service.

As my personal recommendation, you should hit up your friends and family whether if they own their own business or if they work somewhere that you think you might be able to place your machine in because they're gonna be one of the easiest ones.

The second easy way to find a location for your vending machine is calling up local businesses and giving them your vending pitch. However in-person visits would be more effective to convince local business owners.

The last one is to placing vending machines in public spaces by getting permits from the local authorities.

It is also important to observe the selected location for a week. To double-check you should definitely check the following topics;

  • Whether or not vending machines are allowed to operate on 7/24
  • The time interval to refill the vending machines in the same area

Decide what you want to sell

The type of goods inside the vending machines depends on the place they are. For example in some states, it is not allowed to sell snacks inside the schools. Therefore it’s better to double-check the regulations related to placing the vending machines.

If you decided to place your vending machine at the gym it’s a better idea to fill the vending machine with healthy foods and high protein snacks.

Nowadays in public places, you can fill your vending machines with masks and hand disinfectants due to the coronavirus pandemic.

common-type-of-vending-machines

Find your vending machine

There are different types of vending machines that you can find in the market, which depends on your location and the type of goods you are going to sell. Mainly there are two types of vending machines which are mechanical and electronic.

You can go for buying a used vending machine, a brand new one, or you can rent it. Most new vending machines are electronic and allow you to accept card payments.

When it comes to buying second hand vending machine, the best place to look for it Facebook and second-hand sites.

Brand new or refurbished vending machines can be found via the producer’s online/offline shops.

Also, there are lots of companies that offer to lease their vending machines, you may prefer to lease instead of buy based on your location, good you want to sell, and the budget you have.

Also, it’s important that some electronic vending machines don’t have the card reader option therefore it’s better to check this before buying it.

Decide your business name

The business name should be basic. Don't choose a name that is too long or complicated. Remember that your business name needs to be appealing to your customers. It should sound pleasant, familiar, and conjure up positive emotions.

Next check whether the names you have chosen for your company are already taken or not.

There are lots of online services you can use for this.

After choosing your business name you can check your domain name availability. There are lots of ere are lots of online services you can use to check your domain availability.

Explore your business financing options

Financing your vending machine business divide into two categories: debt and equity. Financing through debt is a business loan. Loans are secured by assets, this means a lender can take vending machines away if you don’t repay the loan.

Below you can find the most popular financing options for your vending machines

  • Traditional bank loans
  • The Small Business Administration loans
  • Business line of credit
  • Business credit cards
  • Vendor credit
  • Microloans
  • Family and friends

Register your business

Usually, LLCs and corporations register their business names. However, if you’re starting a sole proprietorship or a partnership operating under a name that isn’t your own, you can file a DBA (doing business as).

As a vending machine owner, it’s simpler to set up as a sole trader, but you’re personally responsible for your business’s debts. You also have some accounting responsibilities.

For more detailed information please contact your local authorities.

Get the necessary licenses and permits

There are a few must-have licenses to operate a vending machine business, including a machine license and a sales tax receipt certificate.

There isn't just one set of rules for obtaining these licenses. The requirements vary from one municipality to another. Therefore it’s better to work with an experienced company or you can contact your local authorities.

Stock your vending machines

Depends on the type of food or good you are selling and the traffic around the vending machine, you need to fill up your vending machine regularly.

If you are selling non-edible items in your vending depends on the popularity of the vending machine you need to refill your vending machines.

On the other hand, if there are edible items in the vending machine, you need to check the expiration dates and item conditions regularly.

Insurance

Vending machines can be costly, and you want to make sure that they are suitably insured against vandalism and other perils.

Also, keep in mind that people may hurt because of the goods you sell in your vending machines. Make sure that your insurance covers in the case of third-party accidents such as bodily harm if a vending machine falls on someone or if a consumer sues for improper labeling

Vending Machine Maintenance

Besides refilling the vending machine regularly, you need to collect coins and check the conditions of the items.

Also depends on the vending machine type, you need to do scheduled maintenances.

For example, if you have frozen foods in your vending you need to do more frequent maintenance comparing to non-frozen foods.

To sum up you need to make sure that your vending machine service ensures your vending machines are clean, full, and working as expected.

References:

https://www.business.qld.gov.au/starting-business

https://www.ibisworld.com/industry-statistics/market-size/vending-machine-operators-united-states/

How to Start a Vending Machine Business | Expert Guide reviews: 4 out of 2
John Alson

About the Author: John Alson

John Alson is an experienced business consultant and a contributing editor at Bakersfieldbusinessguide.com. He has extensive experience in business strategy and planning, sales management, marketing, business development, and corporate communications. He has been involved in a variety of public and private sector roles including management consultant, project management and marketing manager, and is now focusing on sharing his knowledge and experience with the community through the bakersfiledbusinessguide.com.