11 Steps on How to Start a Vending Machine Business

Vending Machine are ubiquitous across the United States and even internationally. If you have never considered starting a vending machine business, we show you that it is a surprisingly promising industry. Take, for example, the fact that there are literally millions of vending machines located in the US alone. According to Allied Research Market, the vending industry produces an estimated $25 billion annually from 2019 to 2027. Many savvy entrepreneurs, already aware of this data, have taken the leap into owning a vending machine company, and they are not alone.

A vending machine business can be a side business or become a full-time career. However, if you think that the process consists of simply buying machines and placing them on college campuses or in malls, you are mistaken. There is a wide range of steps for entrepreneurs to take before starting a business of this kind, and just as much work to be done as the company gathers steam. Here, we will take a brief but in-depth look into the vending machine industry to see what it takes to get involved. We will cover everything from finding the best spot to stocking your machines to financing and investments. After you read this article, you can get learn how to get help starting a business. We also have provide starting a business checklist.

Starting A Vending Machine Business

Vending machines have a total sense of appeal and therefore produce a targeted demand. The convenience of quickly picking up a beverage, snack, toy, or hygiene product cannot be underestimated since it appeals to our basic human needs.

There is also usually a profit markup to take advantage of within the vending machine market. For example, sodas and snacks can provide roughly $1 or more of profit per sale. While this isn’t a rapid income stream, skilled business owners should be able to scale the business and slowly make more and more money, depending on their goals and desire for a full-time or part-time venture.

Entrepreneurs who welcome flexibility may be the most excited about the idea of a vending machine business. They are able to set their own flexible hours and be their own bosses. While this is a significant advantage for many, a few more advantages and disadvantages come along with owning a vending machine business, which may help business owners decide if this is the right next step in their careers.

Vending Machine Business Advantages:

Variety of Products to Sell: It isn’t all candy bars anymore. These days, as people become more health conscious, machines can be set up to sell gourmet foods, healthy options, and even toys and games that are inedible. In this manner, you may be able to link what you sell to your own interests and even passions.
Easy to scale: As we’ve said, scaling your vending machine business is easy. You can start off with a few thousand dollars to invest and a car and go from there. Once you have a few vending machines in place, you can expand while making a profit.
Minimal overhead costs: Since you will probably start out running the business on your own, your overhead will be low. Think about it: no office space or employees are needed, and if it is just you to start, there is also no payroll, benefit options, or even rent costs.

Vending Machine Business Disadvantages:

Vandalism: Vending machines have always been an easy target for thieves and those looking to vandalize. One way business owners can offset this trend is by placing machines in safe areas and checking up on them often.
Working Hours: Operating a vending machine business can be challenging and rewarding, but entrepreneurs will need to spend time and energy servicing the machines and stocking them with new products, and collecting the cash.

How To Own a Vending Machine: Initial Costs

Clearly, most of the expenses you will need to be concerned with at first are based on the cost of the machines and the items inside of them. Most individuals find that a base sum of $2,000 will buy one large, traditional vending machine with smaller devices where you find gumballs and candy costing in the range of $150-$450. Overall, vending machines will run you somewhere between three thousand and ten thousand dollars, depending on features, size, and the location where you buy them.

As a buyer and new business owner, you also may have some requests. If you would like machines that accept debit/credit cards, for example, this will raise the cost. On the other hand, machines that sell soda and snacks exclusively range from $1500 to $8500.

If these costs sound a bit prohibitive or overwhelming, there are options. You might be interested in purchasing refurbished or used machines for $1200-$3000. If you are someone you know is able to repair the machines, then warranties will also not be as much of a concern. One last option would be to contract with suppliers, therefore gaining a machine for a lower cost or even for free. This may come with a contract for supplies or a monthly charge.

Another idea that can help to lower overall costs is to buy vending machine supplies wholesale. From toys to gumballs to snacks and sodas, the price of all of your stock will be more manageable when you buy in bulk. Now, you will also have to pay a fee to register your business with the state, depending on your location. Details pertaining to this can be found on your state government’s website. It also may be a good idea to contact an attorney at this point for information on state fees, licensing, and registration.

How Much is a Vending Machine Permit?

A vending machine permit can cost between $50 to $300 per year depending on the location of the vending machine. The larger cities charge for money for a vending machine permit. The permit of a vending machine may have a very wide cost range, depending on the type of the vending machine, products being sold, and the location of the machine. Each jurisdiction develops its own rules and fee schedule for vending operations, so the permit cost can vary significantly from one city or county to another, and especially from one state or country to another.

In certain locations, the cost of a vending machine permit may be a set annual fee, while in others it may be based on the number of machines that the business operates. For instance, some cities may charge a small fee of $50 to $100 per machine per year, while others may charge higher fees, especially for machines that sell possibly regulated items such as tobacco or alcohol, which could require additional permits and have higher costs.

In addition, the total operation cost of a vending machine business is not just the permit fee. Operators may also have to take into account business licensing fees, sales tax permits, health department permits for food and beverage machines, and a percentage of earnings as part of a revenue sharing agreement if the machines are placed in privately owned spaces.

Because of the variability in costs related to geographic location and other factors, it is important for people considering vending machine operation to research and contact local regulatory bodies, such as the city clerk’s office, county business licensing office, or state department of revenue, to obtain accurate and current information regarding permit requirements and fees for their unique situation. This due diligence is needed to know the whole range of legal and financial obligations related to setting up and running a vending machine business.

Loans and Financing for Vending Machines

While starting a vending machine company is relatively low on startup costs, you will still need $2000 or more to begin, and since business costs seem to always pop up and surprise us, you might want a little more. The amount of capital needed is still less than many other businesses, but it makes sense to look into loan and financing options.

Short-term loans

Finding and securing a short-term loan might be a solid bet for your new venture, especially if you have already proven yourself as a business owner and have a clear and strong financial history. If you quality, a short-term lender will deposit the agreed-upon sum into your account via direct deposit. In turn, you will have a set length of time over which to repay the loan.

Repayment options for short-term loans are shorter than long-term loans, with the period generally being less than 18 months. However, interest rates will usually be higher, so it will be easier to qualify for a short-term loan as opposed to something more long-term.

You can plan on prospective short-term lenders asking to see your company’s financial records and expectations before committing to the loan agreement. They will also probably want to look at the history of your other businesses and your personal credit.

We’ve focused on short-term loans here because we think they will best fit this particular field, but this does not mean that a long-term loan could not also work. Long-term loans will be a little more challenging to acquire but not impossible and will offer more manageable interest rates and longer life of the loan agreement.

Consider Financing the Machines

An equipment financing loan is a good option if individuals find they need a little financial boost. These loans are contingent on the value of the equipment you purchase. Vending machines usually can survive a good ten years before running into mechanical troubles if they are cared for properly, and this fact may be helpful to share with prospective lenders. In order to apply for vending machine financing, you will need:

Equipment quotes for the vending machines
Your financial information
Your business plan

Starting a Vending Machine Business

Now that we have been over some essential financial information, let’s get down to brass tacks. It is time to launch your vending machine business.

What Type of Vending Machines Do You Prefer? Remember when vending machines were antique relics that stole your candy more times than they sold it? Those days are luckily dead and gone. Today, a new set of diverse options presents itself to the interested individual.

Vending in Bulk

Everyone is familiar with the small machines in grocery stores and pizza places containing toys, rubber balls, and gum. These products are beloved and cheap to buy—especially wholesale—and since they are not electric, you won’t be dealing with much overhead. However, finding the right environment for a few of these bulk machines can create month after month promising passive income.

Beverage and Food Vending

The majority of the machines we see deal in food and beverages, for example, sodas and chips or peanuts. So, if you have two devices, try placing them in unique locations and filling them with different items. Part of the strategy here is to study and be familiar with the environment. Why? If your machine is near a school and a lot of children pass it each day, then candy might be king. But if your vending machine is in the building owned by a tech startup, healthy drinks and snacks might be just what your new customers ordered.

Specialty Vending

What is specialty vending? Specialty vending machines embody the new age of vending, offering atypical, premium products. For example, some machines deal in electronics; others feature hot beverages or even ice cream products. These machines can be challenging to keep full because of the higher costs of the products, but if people frequent them, your revenue stream will offset a lot of that. Two important things to remember here are: take care in setting your prices, do not be afraid to reset and recalibrate based on area and clientele, and also constantly tailor your offerings to your target vending machine audience.

Specialty vending develops more each day, and here are a few more categories:

Retail Items: Much-needed travel items such as chargers, neck pillows, and headphones can become profitable vending products because of the constant demand. Finding the right train station or airport is vital here.
Tobacco: Did you know that the selling of cigarettes in vending machines is now legal in most states, and can be highly profitable depending on state taxes? Even vending machines for marijuana products are on the rise, but you will need to pay attention to local and national laws.
Laundry products: Small bottles of detergent, fabric softeners, and even dryer sheets make great vending products if you identify the right market, such as laundromat and college/university dormitories.

Name Your Vending Machine Company

What’s in a name? Your vending company’s title is proven to be one of the essential aspects of your brand. Think about it: business names are the way in which customers identify companies and brands and distinguish them from the rest of the market. While entrepreneurs use various techniques to come up with catchy names, to play on their own surnames, to conceptual wordplay, here are a few tips:

A good business name should be:

Memorable and simple
Creative and catchy
Fitting with the subject, in this case vending machines, so think snacks, convenience, and hunger, for example
Original, unique, and interesting

Once you have a name that you think will work, make sure to search for similar names with the US Patent and Trademark Office. Making sure that your new name has not already been taken is essential, so we recommend keeping a list of a few options. Learn more on how to come up with a business name.

Finalize the Structure of Your Vending Machine Business

The structure you choose for your vending machine business brings with it tax implications and other legal ramifications, just like any other business. The structure of the company will also have an impact on the costs involved and the time needed to make sure that your business is compliant and in good standing with the state.

Individuals can choose from registering their businesses as one of these legal structures:

Corporation
Sole Proprietorship
LLC (Limited liability company)
General Partnership

The choice to do your business in an LLC, S Corp, or C corp will probably come with the requirement to appoint a registered agent. This is just an individual who assumes the role of the company’s “contact person” for many official matters. Since deciding on a structure and registering your new business with the state is important and complex, we recommend consulting with a business lawyer.

Be sure to remember that registering with your state is mandatory in order to create an LLC or incorporate a vending company. The only difference between the two is that LLCs need to file for Articles of Incorporation while corporations must file Articles of Organization.

It’s also important to note that generally, the states do not require partnerships and to submit formation paperwork. However, if you use a name other than one that includes your first and last name, (which is fairly uncommon for a proprietorship), you’ll have to file a DBA (Doing Business As). A DBA is a fictitious business name for your company.

Making sure that you procure the proper business licenses and permits for your new business is integral. Consider contacting an attorney to make sure you are making all the right moves and not jeopardizing your new company. After all, the goal is to start vending as soon as possible, correct? Learn more on how to incorporate your business or how to file a California DBA. If you need assistance on starting an Inc. or corporation in California, please contact our corporate attorneys for a free consultation.

Develop a Business Plan

All companies start off with a top-notch business plan, even vending machine businesses. This formal document is not only useful for establishing goals but also can be used when applying for loans and looking into other financing options.

In short, a business plan is a set outline of stated intentions regarding how you will conduct business. It should include:

A model of operations
Identification of employees and staff
The services/products you intend to sell
An overview of what your business is and what it does
The ways in which your business will create revenue

Learn more on how to write a business plan or use our free business plan template. If you need assistance with a business plan, please contact our small business attorneys for a free consultation.

Franchising

Some entrepreneurs clearly see the promise in a vending machine business, but they are not sure they want to build the business up from square one. Maybe they are already invested in other companies that they are running or are preparing for retirement. In any case, another option that will get you into this exciting industry is to buy a vending machine franchise. This provides the chance to work within an established company framework as you receive support and training—it also lessens some of the pressure and responsibility, not to mention time requirements. However, you will need to pay a set amount of your profits per pay period back to the main franchisor, so that will cut into revenue.

Best Vending Machines Location

If you have not yet noticed, location can drastically impact the revenue and profits that vending machines create. When you notice that a vending machine is not being frequented, it often comes down to what you have stocked it with and where it is. Likewise, when you notice that a machine is emptying out quickly, then that means you have placed the right products in the ideal location—and you should make a note of it!

Strategically placing your machines in the right places is paramount to vending machine success, so now is the time to do some research about your target market. Employ your critical thinking skills when asking questions such as: what do my clients want at one time of day, and will they want to return? Also, what type of demographic frequently spends time in the vicinity of one of my machines?

For example, a vending machine in an airport would probably fare well with healthy snacks, pillows, headphones, and even toys, magazines, games, and other things to help travelers pass the time. But for a machine next to a health club, it would be wise to feature healthy drinks, protein shakes, granola bars, and even fruit for the athletic types.

The list of potential locations for vending machines is long and varied, but here are some ideas to get your mind going:

Bus stations
Manufacturing facilities
Apartment complexes
Hotels and motels
Grocery stores
Malls and shopping centers
Primary schools
Train stations
Colleges and Universities
Airports
Hospitals and health centers
Laundromats

It is important to note that some legwork will need to be completed before you install any of your machines. Even the most determined and excited individuals cannot just install a vending machine somewhere without speaking with the property owner or manager. Unfortunately, you will probably be rejected for one reason or another in some instances. The main reason for this is usually that the manager or owner does not want any direct competition with their own machines.

Once you have found some ideal spots and received the encouragement and support you need from the property owners, you will be in business. This process may take some time, so begin finding locations and making calls early on in the process. Even one dynamic, successful location can tip your profits into high gear.

There will also be a commission to pay on the property use, and you will need to negotiate that with the manager or owner. Typically this runs close to anywhere from 10% to 25% of your total revenue, but contacting a business attorney at this juncture might make sense, especially if you are not accustomed to negotiating. Once you find an attorney you enjoy working with, we’d suggest keeping them around for setting up your vending machine business.

Sign Contracts with Property Owners

As we have said, property owners will require you to compensate them in exchange for the prime location you have chosen. A fraction of the total revenue you earn will need to be paid as their commission, so be sure to fill out and sign a formal agreement that both parties agree upon. The key here is balance: you will want to ensure that your business has a profit margin that ensures growth and prosperity while keeping the landowner satisfied. Agreements and contracts like this benefit from the help of a business attorney, and we recommend having a licensed lawyer clarify and oversee the terms.

Your contracts may include, but are not limited to:

Here are some Tips:

Allotted Payments / Compensation
Vending Machine Locations
A Clause for Possible Termination
The Length of the Agreement
Duties Related to Machine Damage, Service, and Overall Maintenance
Notifications Regarding Machine Damage/Failure
Full Names of Involved Parties
Types of Vending Machins
Stock To Be Sold

Before you sign a contract, please contact our business attorneys for a free consultation.

Enhance Company Performance

Now that your vending machine business has begun operations, it is time to check and record profits. However, you should resist the temptation to sit back and relax. Instead, make a list of how you can enhance your revenue stream in the future. The active business person, the individual who is always thinking of how to improve performance, is usually the industry leader. What can you do to improve performance?

Check on Customer Service:

Offering comprehensive, excellent service to customers is paramount for companies in every sector and businesses of all brands and stripes. Building relationships with customers keeps them coming back, so if you get to meet any of your own vending machine regulars and they have requests for products, take those into account. Also, empty vending machines or those with products missing (usually the popular products, so take note) are detrimental to good customer service. Finally, your machines are the heart of your business, so make sure that they are stocked, working perfectly, and easy to use. This may mean saying goodbye to one of the machines that you bought used and replacing it when you have the capital.

Improve Management of Inventory:

Many vending machines have not reached the digital age yet, and therefore you will need to manually track your inventory. However, if your machines are all similar models, you may be able to find software for management of inventory that can help with the process. Keeping track of products sold is important, so whatever system you arrive at, stay consistent and keep careful records so after six months or a year you will know what is working well, and what aspects of your business can continue to be improved.

FAQ Answered

1) Are vending machines businesses taxed? Are the machines taxed?

Depending on the state where you establish your vending machine company, you will need to pay a percentage of sales tax on each machine. So, the answer is that vending machines are indeed charged sales tax based on the profits created. As with all state taxes, different states require different amounts, so check in on your location.

2) Do vend machine businesses earn regular profits?

Obviously, this depends on the company and the business owner, but these businesses can turn a tidy profit. On average, research tells us that a vending machine can earn around $35-40 dollars per week. However, some machines that are located in high-traffic spots and kept well stocked with well-selling products can earn $400 or more per month!

3) Do the owners of vending machines pay rental fees or need to negotiate with landowners?

Unless you own a property that is suitable for the placement of your own vending machines, you will need to negotiate with and pay the owners of the land or building. Normally, vending machine businesses negotiate and sign formal contracts with building owners. These contracts uphold how high the rate of commission is based on profits, and other terms. Generally you should expect to pay the property owner or manager a range of five to twenty percent of sales profits, but the specific terms are up to the parties and the attorneys who may be involved.

4) Should I start a vending machine business?

For experienced entrepreneurs who want to try something different, or perhaps older business owners who want to make some part-time capital, a vending machine business can be a great idea. However, just like any other business venture, running a company like this will require hard work and meticulous planning. If you want to take the plunge, we suggest taking the time to research the top vending machine businesses in your location, and perhaps even reach out to them for guidance. A business attorney can also help you with the required tasks that go along with starting any new business.

5) Where can vending machines be located?

Many unique commercial spaces are open to vending machines, so if you see what you think is a good fit or have an idea about an opportunity, make a note of it! The top vending machine owners have excellent vision and foresight for where vending demand may exist. Now, whether you choose an arcade, a pool hall, a swimming pool, a gym, or an office, you must contact the property owner first and make sure they will accept a new vending machine or series of machines. Ideally, they will welcome the addition to make their regular visitors/customers even happier and more satisfied.

Once the Business is Established

We hope our guide to all things vending machines has proven helpful. If you are debating what your first step should be, simply ask yourself a few questions:

What products do you want to sell?
Where do you want to sell them?
Where will you get your machines, will you buy or lease them, and will they be brand-new or used?

We also recommend contacting a law firm to speak with a business attorney. At Nakase Wade, we have helped numerous small and large businesses get their start, through overseeing and helping with contracts, articles of incorporation, questions on business structure, and more. We offer free consultations, so please contact us today with all your vending machine questions.

Many business owners sit on their laurels once the company is up and running, but we encourage you to continue strategizing and improving your business. If you do, you may be able to earn enough to make your vending machine business a full-time gig that produces a reliable annual revenue stream.

Good Luck with your Vending Machine Business

It is a little known fact that the vending machine industry creates billions of dollars each year across the world. Taking the leap into this burgeoning market is an exciting prospect for many, and with the help of strategic market research, excellent customer services, and a lot of hard work, individuals can find success in this unique field. We wish you the best of luck. Please contact the skilled business lawyers and corporate attorneys at Nakase Wade if you have any additional questions, or would like help starting your new vending machine business.

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