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Why Start A Vending Machine Business?
Vending machines can be low maintenance, high profit ventures. There is no consensus on how much vending machines make on average but it can bring in some side income.
In the 2018/2019 financial year, the vending machine industry had its most profitable year ever. Like many businesses during the COVID-19 pandemic, vending machine businesses have also suffered. However, previous trends suggest that they will likely return to their former glory as we continue to move away from lockdowns.
This article will cover what you need to get started including start up options, legal requirements and risks. It will also outline some useful tips and tricks to make your vending machine business the best.
What Do I Need To Know Before I Start?
Different Ways To Start
There are multiple ways in which you can start a vending machine business. Each method has its own advantages and disadvantages.
1. Buy A Pre-Existing Vending Machine Business
This involves establishing a relationship with the current owner of a vending machine business and asking to buy it off them. You will be buying not only the vending machines but also their locations. This is extremely valuable.
Advantages
- Simpler and easier to take over a business than starting from scratch
- Immediate source of income.
- No need to compete for locations or infiltrate an area as you already have the locations
- Regular customers
- More predictable profit
- Knowledge of what stock does well in particular locations.
Disadvantages
- May be buying a failing business
- May be buying faulty vending machines
- Big down payment. If you’re buying a pre-existing business that is successful it could require some upfront cash!
If you have the capital, the disadvantages that may arise in this option can be avoided by doing your due diligence! If an opportunity comes up to buy a pre-existing vending machine business it may be the best option.
2. Buy Into A Vending Machine Franchise
A vending machine franchise essentially offers you their machines, business infrastructure and supplies for a low start-up cost and a share of the profits. There are many vending machine franchises out there.
Franchisors may be appearing to offer the world with low startup cost, flexible budgets and other attractive perks. Being aware of the advantages and the disadvantages will help you to make an informed decision that is best for you.
Advantages
- Operate with low/no staff with the help of your franchisor
- Low start-up cost. Franchisors cover the cost of administration of the business and other business infrastructure in exchange for a share of the profits. This means you can get started without a big down payment.
- Trusted and working machines bought off the franchisor.
- Access to the franchisors stock list and supply lines.
Disadvantages
- Have to share your profits with the franchisor
- Potentially limit your machine and supply options to the franchisors options
The franchise option is great if you’re low on cash and want to get started right away. If you’re happy sharing profit with the franchisor and using their products then this may be your best option!
3. Start Your Own Vending Machine Business
Starting your own vending machine business gives you maximum autonomy over your entire business. However, it does require the most leg work. You have to buy the machines, find the locations, stock and maintain your machines.
Advantages
- Be your own boss
- Get creative and carry out your vision for the business
- No need to share or split profits
Disadvantages
- Take on all the risk
- Time intensive to establish
- You are competing against some well established bigger businesses
- Slow initial cash flow
If you’re keen on doing things your way and happy to take on some extra risk, this option is for you!
Legals To Consider For A Vending Machine Business
Like any business you must tangle with the law when establishing a vending machine business. Aside from the usual law associated with business, that you can read about here, there are legal avenues specific to vending machine businesses. This section will cover contracts and food safety specific to vending machine businesses.
Vending machines are all about location. You need your machine to be in a high traffic area near a demographic that is willing to spend and enjoys the product you are selling. Often this will mean signing a contract with the owner of a building, office or other public space.
Once you find the perfect location, you need to make sure that you have exclusive rights to provide vending machine services to this space. This contract will require a bit of quid pro quo. The owners of the space usually demand a cut of your gross sales. It’s always a good idea to get your contracts tailored to your needs or reviewed, if drafted by the other party!
You also need to be aware of the laws surrounding the sale of the product inside your vending machines. The most common product is food. Each Australian State has different laws surrounding food safety and some specifically mention the sale of food in vending machines. You need to make sure you are compliant with these laws to ensure your business is safe and protected. If you need help, you can always get a food and beverage lawyer to help you out.
Risks Of A Vending Machine Business
There are two major risks to a vending machine business. These are common among all the vending machine business options. This section will cover the risks of vandalism and the risks of stagnant sales and stale products.
Vending machines are highly vulnerable to vandalism. Indeed, the success of vending machines in Japan (the country with the highest amount of vending machines per capita) is partly due to the low crime rate in Japan. Losing products to theft or losing a machine can be damaging to your business, but there are two ways that you can protect yourself.
First, before investing in a location, research the crime statistics in the area, this will give you an indication of the likelihood of vandalism.
Second, invest in insurance for your business. There are a range of insurance options available, ensure you find one which suits your business.
The second major risk is product sales stagnating and your product going stale. This means you have to replace the product without selling it. There are many ways you can try to mitigate this risk, outlined below.
Tips and Tricks For A Successful Vending Machine Business
To ensure your vending machine business is as profitable as possible follow these tips.
- If stocking food, ensure to stock a balance of sugary snacks/beverages as well as healthy snacks. Vending machine companies report that the most common purchase is an after lunch sweet. But health snacks are trending upwards, with consumers increasingly turning towards healthy options.
- Ensure to enable your machines with all payment methods. Vending machines have increased their profits dramatically since introducing tap and pay.
- Research your demographic. For example, vending machines tend to do well in some industrial areas such as mines or factories, where other food might not be as readily available!
Need Help?
If you need help starting a vending machine business, the lawyers at Sprintlaw can help. Get in touch with us at team@sprintlaw.com.au or on 1800 730 617 for a free, no-obligations chat.
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