I've recently became interested in vending machines and maybe going into the vending business myself. On the surface it looked like a way to make good money without working too much so i decided to dig deeper. I ended up performing comprehensive research and here i'm sharing what i've learned so you don't have to figure all this out on your own.
It's not "passive income"
And i also never expected it to be. But people on social media, youtube, tik tok etc. often make it look like it was. As i mentioned earlier the time:profit ratio is pretty good but it's not passive because these machines need to be stocked and maintained (they can break down with angry customers calling) as well as once you have a certain amount of machines it becomes a fulltime job and/or you need employees.
Still if you have like (as an example) 16 machines placed at 8 decent locations (1 soda & 1 snack machine per location) using the 30-30 rule (explained below) they should generate a nice income while still being manageable on your own in 2-3 days/week.
But wait there's more...
While maybe not right away after a certain number of machines you need a warehouse and vehicle(s) to transport your machines as well as the products sold in them. Don't forget employees. Of course you do not necessarily have to grow your business as big that you need all this stuff. Especially in the beginning you can hire a mover to transport your machines (costs usually ~ 100$/machine) and use (or rent) a garage or spare room in your home to store products.
What are good vending machine locations?
Good locations are those with high foot traffic / employees (aka the amount of people walking by your machine everyday). More people walking by your machine meaning more possible buyers and ultimatively transactions. You ideally want at least 100 better 200+ people/employees walking by your machine everyday.
It's also dependent on the demographic. From my research (general rules of thumb) machines placed in poor neighborhoods make more (but also suffer more from vandalism) while rich neighborhoods hardly make any money. Blue collar workers eat from vending machines and busy people who are not going to go out to eat for lunch. 24/7 businesses like manufacturing are the best. Offices are less likely, manufacturing and bus drivers are more.
I also recommend using the 30-30 rule. Only place your machines in locations within a 30 min or 30 mile drive. Reason being is you do not want to spend to much time and gas on refilling and maintaining your machines. The closer all your machines are to each other, the better.
With all that being said, here are some examples for good locations:
- 24/7 Industrial (Manufacturing, Warehouses etc.)
- Airports
- Train Stations
- Subway Stations
- Large Hotels
- Busy Streets (Outdoor)
- Schools
Again basically every location with 100 better 200+ people/employees walking by your machines everyday.
How to find / get these locations?
In my opinion the best way to get started would be buying an existing route. That means buying machines that are already on location. You can buy one or multiple locations. You can find these on routesforsale.com, bizbuysell.com, facebook marketplace or craigslist.org.
When buying an existing route you need to make sure that:
- The locations make enough in sales and the seller is able to proof that (Take commissions into account if applicable)
- Also what is the daily foot traffic / how many employees does each location have?
- The locations are outfitted with quality machines that at least support MDB (ideally also DEX) *
- IMHO the machines should have at least a coin changer AND bill acceptor already installed
- When buying you need a written contract with the seller
- When buying you also need a written contract with each location that the machines are allowed to stay there.
- Make sure the locations (companies) aren't getting sold anytime soon
- After purchasing it would be a good idea to swap out the locks on all vending machines
If you can't afford buying an existing route then your only option would be trying to find locations on your own. You can do this by cold calling, emails, getting a website and advertising but what probably works best is driving to locations and asking in person. Having a business card and brochure would help. If necessary tell them that vending machines do not consum more electricity than a fridge.
* If you don't know anything about vending machines make sure to keep on reading. I will tell you everything you need to know in some of the following chapters below. Knowing which machines to buy, those to stay away from as well as what to look for when buying used will help you avoid costly mistakes.
Do you have to pay the locations a commission?
Well, it depends!
Some locations let you place machines without paying a commission. Others may ask 10% of net profit while the upper end seems to be 25% of gross sales and everything in between. You ideally want to pay nothing at all or a fixed monthly fee so they can't reverse engineer your revenue then decide to kick you out and install their own machines. But sometimes on really good accounts paying 25% of gross revenue is still a good deal.
Problem: You're unsure if you can justify the commission an account is asking but you really want the account.
Solution 1: Offer them a trail period of like 2 months or so. If it's working out: Great, pay the commission moving forward. Otherwise just move your machines back out. This way you can't get stuck with a contract loosing or barely making you money.
Solution 2: Include a "revenue minimum" in the commission agreement. In other words, you're only paying the agreed commission in case your revenue is above amount X in a given month.
How much money can you make?
Once again, it depends! And on a lot of things...
The biggest factor is the quality of your locations followed by how many machines you have, markup on products (usually 50% / purchase price x2) your operating costs, comissions paid to locations and so on and so forth... So it can vary greatly from case to case. But i can give you an idea using industry averages.
While its possible to generate gross sales from 0-4500$ per machine/month, you should be making at least 700$/month/machine with a good location. Factoring in the 50-30-20 Rule, meaning 50% is product costs, 30% net profit and 20% other operating costs like warehouse rent, insurance, gas, comissions and employees those 700$/month/machine in gross sales would translate to 210$ net profit. (Gross sales minus all costs)
So lets assume you make 200$/machine/month net profit (some more, some less - average amongst all your machines). That means if you had 16 machines you would make 3200$/month in net profit (which you can use as your salary or to reinvest in the business/expansion). Those 16 machines could for example be 8 soda and 8 snack machines placed at 8 different locations using the 30-30 rule mentioned earlier. A route like that could be easily maintained by just 1 person in about 2-3/days a week and using a garage or spare room at your home such as a suitable vehicle for transporting your products. And if you have really great locations you can even make a lot more with these 16 machines. Double (6400$), triple (9600$) and beyond.
Here's some further information regarding the correlation of foot traffic and sales volume:
- Foot Traffic 200+/People Day = 2000$+ Monthly Sales (High Zone)
- Foot Traffic 100-200/People Day = 1000-2000$ Monthly Sales (Medium Zone)
- Foot Traffic 50-100/People Day = 300-1000$ Monthly Sales (Low Zone)
- Foot Traffic 0-50/People Day = 0-300$ Monthly Sales (Danger Zone)
Source: https://www.youtube.com/watch?v=-s_Y-O1nosw
Again these are theoretical assumptions based on industry averages, rules of thumb and experience. Worst case scenareo, you could also end up loosing money.
What you need to know about vending machines
One of the first steps when starting a vending business is buying machines or an existing route (with machines already placed). But you shouldn't be buying just any machines. Buying the wrong machines can be a costly mistake or even make your business fail altogether. So here's what you need to know before buying machines...
New vs. used machines
New machines come with a warranty and should work fine for several years without any major problems. However quality new machines are very expensive and from what i've researched also not aswell built as the old ones. A nice new machine can run up to 5 figures. That's a lot of candy bars. But you also do not want to cheap out and buy an ancient machine that does not support the MDB standard and also can't be upgraded to do so. But i would still recommend buying these before buying anything from china.
In my opinion, buying used machines that support MDB and ideally also DEX is the best choice in most cases. Ideally buy them refurbished from a reputable dealer and also consider machines that have been upgraded with new MDB and DEX capable electronics or buy them cheap and then upgrade them yourself (if you can).
Good machine brands
In the US, i recommend brands like Automatic Products, Dixie Narco, Vendo, AMS, Wittern/USI, Industrial or Crane/National/GPL. New, used or refurbished. If you're in germany, checkout Sielaff. (Vendo is also pretty big there). An alternative would be wurlitzer machines if you can still find someone able to supply you with parts and service since the brand no longer exists.
What is MDB and DEX and why do you need it?
MDB
MDB stands for "Multi-Drop Bus" and is a standardized protocol used by vending machines that first appeared in the 1980s. Your vending machine as well as installed modules like your bill acceptor, coin changer and credit card reader all use the standard. This makes MDB modules (like coin changers and bill acceptors) interchangeable between different MDB capable machines * but more important, credit card readers like nayax are only available for machines that support the MDB standard. That means that if your machine does not support MDB, you can't install a credit card reader. Some non MDB machines can be upgraded to support it, others don't. All new machines support it.
* To my understanding (not 100% sure) that means you can install any MDB coin changer or bill acceptor module (regardless of the brand) in any MDB capable machine and it should work. If so the module housings are probably also standardized to fit in any MDB vending machine's enclosure plug and play. (Except if it has been upgraded and did not originally come with MDB from the factory)
Despite my research (10/2023) implying that coins and cash are still used for the majority of vending machine transactions i strongly advice against buying machines that do not support MDB and also can't be upgraded to do so.
Here's a list of MDB compatible machines: Compatibility List Mirror
InOne Technology as well as Vendors Exchange offer upgrade boards to make old machines MDB and DEX compatible. Check their websites to see which models are supported.
DEX
DEX stands for "data exchange" which is another standardized protocol used by vending machines. It is necessary if you want to use telemetry for tracking/monitoring sales remotely from home. Nayax card readers for example are also capable of telemetry (they report both card and cash sales) but only if your machine not only supports MDB but also DEX. Otherwise you can only use them to accept card payments. Using the upgrade boards mentioned above, some older machines that are not yet DEX compatible can be made compatible.
Do you need a credit card reader?
My research (10/2023) implies that coins and cash are still used for the majority of vending machine transactions. But that also depends on the region. Apart from a potential boost in sales, card readers like nayax also come with telemetry features for tracking/monitoring sales (reports both card and cash sales) remotely from home which is really nice to have.
At this point you might still be able to get away without a card reader but i would at least buy a machine that supports MDB so you're able to install one later on if necessary. Ideally buy one that also supports DEX so you can use the telemetry features aswell in that case. If you're on a tight budget try to buy a machine that can at least be upgraded to support MDB and DEX later on. (see above)
Combo Machines vs. Dedicated Machines
In general, i would stay away from combo machines because they do not hold enough product for good locations so you would have to come and refill them often. I would recommend buying 1 snack and 1 soda machine per location instead. But if there's only space for 1 machine and it's a profitable location you might have to use a combo machine anyway.
Advice for buying used or refurbished machines
I recommend buying only machines from quality brands that support MDB and ideally also DEX or those that can be upgraded to do so later on. I personally wouldn't buy machines that only have a coin changer installed. In addition to that, it should at least come with a bill acceptor aswell. (That is unless it's cheap and you want to install one yourself) You ideally want to buy refurbished machines from a reputable dealer that come with a warranty. If you buy refurbished from a local dealer you can also get service in case it breaks down. (Also after the warranty)
Doesn't matter if used or refurbished, you want to test the machine thoroughly! Test every feature and selection. See if it leaks anything as well as check for cosmetic damage. In case the machine is refrigerated (All soda machines and also many snack machines are), ask the seller to plug in the machine a couple hours before you arrive so you can verify it's getting cold. Repairs can get very costly. A guy on reddit had to pay $1362 (parts and labor) in order to get a broken compressor fixed on his soda machine. That's exactly why you want to buy quality machines, make sure they work and ideally refurbished with a warranty.
Where to buy vending machines
If you want to buy new machines, just find a local distributor/dealer that sells them and also provides parts and service. Usually they have a warehouse where you can inspect and test the machines prior to purchase. If you want to buy refurbished machines the same principal applies. If you want to buy used just check sites like craigslist, ebay or facebook marketplace. Some example dealers of refurbished and upgraded (MDB, DEX) machines are:
Conclusion
While not passive income, it's possible to make a good living with a vending machine business. Many successful vendors only work 2-3 days a week while earning above average salaries. But there's a lot you have to know and consider in order to be successful. Most of it has been mentioned in this article. Last piece of advice: If you're looking to play it safe, don't jump right in but ask an existing vendor if you can accompany him for a while so you can get some real world experience in the field. This way you can't get stuck with a bunch of equipment and contracts that are loosing you time and money.
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