Tips for Buying a Vending Machine Business

Thinking of buying a vending machine business? Here are 9 things you’ll want to consider first.

1. Where are the Machines Located?

As is the case for most businesses, location is everything for vending machines. Those in heavily trafficked areas like hospitals and schools may fare better than those at a rarely-used bus station.

If you’re buying a vending machine business with established routes, ask to see reports for each location (even if the precise location isn’t revealed). This will give you an understanding of the profit potential and where you might, as the new owner, want to remove a machine that isn’t generating adequate revenues.

2. What is the Profit Margin?

Vending machine businesses can be profitable, but several expenses will eat into that profit, including gas to run the route to service the machines, operating costs, and the cost of your inventory.

If you know the number of machines, the distance of the restock run, the frequency of restocks, and the average sale per day, you can use a calculator to determine profitability.

3. Why is the Owner Selling?

You can’t always get the real reason for a sale, but it still helps to ask. If the seller wants to leave the business because he’s moving to Florida, great. But if you sense it’s because the expenses outweigh the profits, and he’s struggling to pay the bills (looking at the financial documents can tell you this), it’s likely not a business you want to invest in.

4. What Do Financials Look Like?

It’s one thing for the business owner to tell you he rakes in ample profits each month. It’s another to see it on paper.

Ask for financial statements for the business, including profit and loss statements and past tax returns. You want to see what expenses the business has and what profit margins look like. If you see any red flags, you’ll want to dig deeper, because you’ll likely inherit any financial problems if you buy this business.

5. What Kind of Machines Are in Use?

The older the machine, the less profit it can generate, simply because older vending machines don’t accept credit and debit cards or tap-to-pay payments. The more options your customers have to pay, the more they’ll spend.

If possible, inspect at least a few of the machines to see what kind of condition they’re in. This will help you determine whether you’ll need to replace them or not. Keep in mind that while a newer, smart vending machine may cost significantly more, it will last longer and help you generate more profits over time.

6. What Products Are Sold?

These days, vending machines can sell just about anything. Snacks and beverages, sure, but also fresh sandwiches, pharmacy items like aspirin and tissues, coffee, beauty products, and more.

Consider your audience. A vending machine at a hospital would do best to offer snacks and drinks, while one at the airport might thrive if it offers cell phone chargers, neck pillows, and luggage tags.

7. How Long Have the Routes Been in Place?

Be wary of newer vending machine routes because they haven’t proven themselves. The longer a route has been in place, the longer the track record of sales that you can assess.

Also, if possible, speak with the contact for some of the properties where the machines are located to understand whether the relationship is a good one or if the property manager has complaints about the machines not working or not being stocked frequently so you know what issues you’re stepping into.

8. Do They Have Smart Vending Machines?

These days, technology not only allows customers to pay with their phones or credit cards at vending machines but also business owners can minimize their interactions with the machines.

Smart vending machines allow you to track inventory and consumer habits so you only run the route when you need to (rather than on a fixed schedule, when you may or may not need to restock). You can see the times when people are most likely to make purchases and what they buy.

These machines also connect to software that allows you to easily run reports on individual machines or the route as a whole to measure revenues and profit.

9. What’s the Chargeable Vend Price?

The chargeable vend price refers to the amount you can charge for a given product. This is based on what other vending machine operators nearby are charging for the product, as well as what customers are willing to pay.

For example, if you’re the only vendor selling water in the desert for 100 miles, you can charge top dollar, and people will likely pay it! But if there are five other vending machines within walking distance that charge less, you may struggle to charge significantly more with the competition.

Red Flags When Buying a Vending Machine Business

Beyond asking the right questions, here are a few mistakes to avoid when buying a business.

Underestimating the Time Involved

Maybe you envisioned the vending machine business being one you barely have to put energy into, but once you buy it, you find yourself driving all over town to restock the machines.

Get an understanding of how much time is involved. If there are more routes than you have time to manage, consider consolidating them or relocating some machines closer to others to shorten your route.

Not Budgeting Enough

You paid the investment to buy the vending machine business, but did you keep any cash in reserve for operations and unexpected expenses? Given the fact that your business relies on the vending machines themselves, you’ll need to ensure they’re constantly serviced and running smoothly, so have a nest egg you can tap into to cover these costs.

Not Doing Your Due Diligence

You took it at face value that this business was profitable, but now you’re finding all kinds of expenses the previous owner didn’t tell you about. 

Either that or you paid too much for the business.

Always, always do your homework. Dig into the business valuation to understand whether the asking price is fair, especially if you’ll need to replace machines.

Ask for financial statements. Inspect machines. Talk to vendors and property managers. Do as much as you can to really get to know this business, as well as its potential problems.

Not Reading Contracts

You may assume that if you buy the business, you buy the machines, but sometimes businesses lease the machines. In that case, you’ll take over the lease.

Also, make sure that the contracts with the properties where the machines are located will continue once the business is under your ownership.

Final Thought

Buying a vending machine business provides the opportunity to generate profits with minimal time investment (usually). Ask all the right questions to make sure the business is as good as it sounds, and decide if it’s the right move for you financially.