How to Start a Vending Machine Business
Welcome! If you're looking for credible and easy-to-follow information on how to start a vending machine business, you're in the right place. In this article, we'll cover everything you need to know to start your own profitable vending business.
Let's start off by introducing the 5 key steps...
- Brainstorm product & location ideas
- Order your vending machine
- Select your location and sign an agreement with the property owner
- Obtain required business accounts & permits
- Operate and make money
Now let's take a closer look at each step.
Step 1: Brainstorm Product & Location Ideas
PRODUCTS. When you think of vending machines, you probably think of soda pop and/or snacks, right?
Ten or twenty years ago, the vast majority of vending machines did indeed sell either soda pop, snacks and candy, or both. But times have changed. While cold-beverage vending is still #1 (making up 23% of vending sales), vending machine revenue is pretty diversified after that. Just check out this chart that breaks down vending machine sales by product type...
Pop machines are great (and you can make a lot of money selling soda pop), but there are literally hundreds of other small items you can sell in a vending machine. Notice that "other products" (including non-edible products) are now the #2 best-selling product category.
Here are a couple dozen ideas just to get your creative juices flowing...
- Masks, hand sanitizer, Clorox wipes, etc.
- Energy drinks
- T-shirts, socks, ties, etc.
- Chapstick & lip gloss
- Ibuprofen, Tums & other medicine
- Ice cream & other frozen treats
- Fruit (apples, oranges, etc.)
- Crossword puzzles & Sudoku
- Books (new or used) & magazines
- Earbuds, car chargers, etc.
- Tampons & hygiene products
- Laundry supplies
- Dog treats
- Legos, yo-yos & other toys
- Playing cards
- Skin & hair care products
- Flip flops
- Sunscreen, aloe, lotion, etc.
- Diapers, wipes & other baby essentials
- Souvenirs, keychains, etc.
- Pens & office supplies
- Beef jerky
- Healthy food items
- Coffee, tea & other hot drinks
- Mints & gum
- Batteries & chargers
- Temporary tattoos
- Tissue & Kleenex packs
- Trading cards
- Travel-size hygiene products
- Cheap sunglasses
- Whatever else you can think of!
The nice thing about modern-day vending machines is that you can usually offer a variety of different product types. You don't have to go "all in" on a single product type; you can "mix and match" similarly-sized products and sell a variety of different products.
For example, you may decide to purchase a snack vending machine and primarily sell snacks and candy bars... but also sell playing cards, chapstick, Ibuprofen, and masks. Offering a bit of a variety of different types of products 1) helps you appeal to more customers, and 2) oftentimes leads to multiple-product orders (i.e. the same customer buys a snack and some playing cards).
Ultimately, what you decide to sell in your vending machine should be driven by where you place your vending machine. A vending machine in the waiting area of a doctor's office should probably have a different assortment of products than a vending machine at a gym or in a laundromat or in an apartment building clubhouse.
LOCATION. The "Big 3" factors to consider for locating your vending machine are:
- Daily foot traffic
- Likelihood to buy
Daily foot traffic is the most obvious of the "Big 3" factors. You want your vending machine to be located in an area where there are a lot of people seeing it on a daily basis. Being successful with a vending machine is largely a numbers game. All else being equal, a vending machine seen by 500 people a day is going to make 10x more money than one seen by only 50 people a day.
But are those 500 (or 1,000, or 2,000) people going to actually buy something? That brings us to the 2nd of the "Big 3" factors: likelihood to buy.
Likelihood to buy deals with various factors that play into how likely the average person standing in front of your vending machine is to actually make a purchase. Some of these factors include:
- Are people waiting around or in a hurry?
- Are people likely to be hungry, thirsty or in need of the products you sell?
- Are there other options nearby that are more affordable and/or preferable?
- Are the type/age of people in this location likely to make an "impulse" purchase?
- Other factors that affect the average person's likelihood to buy something
To a certain extent, all of this is just common sense. Just put yourself in the customer's shoes. If you just finished swimming at a public swimming pool, would you be likely to buy something from a vending machine in the entry area? Would you likely be waiting around or in a hurry? Would you be hungry, thirsty or in need of other products? Are there better options nearby that would make you unlikely to buy something from a vending machine? Just consider all of these options and decide whether the public swimming pool entry area would be a good place for a vending machine (hint: it absolutely would be).
Competition is the 3rd of the "Big 3" factors. We've already considered whether there are other options nearby that are more affordable and/or preferable. Here, we're talking about nearby vending competitors (or "micro-markets" like you see in many hotel lobbies). Is there already another vending machine nearby? If so, does it sell (and is it capable of selling) the same products you're thinking of selling? Just because there's another vending machine in the area doesn't mean you can't be successful with your own vending machine.
The following chart shows a breakdown of where vending machines in the United States were placed by location type in 2020...
While the above chart is helpful, the categories are quite broad and generic. Here's a comprehensive list of all the different types of locations you should consider...
- Amusement parks & activity centers
- Apartment complexes & clubhouses
- Assisted living centers
- Automobile dealerships
- Auto repair shops
- Banks & credit unions
- Bingo halls
- Bowling alleys
- Bus stations
- Business office buildings
- Car washes
- Community centers
- Dental offices
- Department stores
- Distribution facilities
- Doctors offices
- Dry cleaners
- Entertainment (mini golf, laser tag, ball pits, etc.)
- Fire stations
- Fraternities & sororities
- Furniture stores
- Gift shops
- Golf course lounges
- Government office buildings (i.e. DMV)
- Grocery stores
- Gymnastics centers
- Gyms & fitness centers
- Health clubs
- Health service providers
- Hotels & motels (i.e. near ice machines on upper floors)
- Industrial parks
- Malls (indoor & outdoor)
- Manufacturing facilities
- Medical buildings
- Meeting halls
- Military reserve/guard centers
- Night clubs
- Nursing homes & retirement homes
- Oil & lube centers
- Police stations
- Private schools
- Recreation centers
- Retail stores
- Schools, colleges & universities
- Senior centers
- Shopping centers (indoor & outdoor)
- Skating rinks (including ice skating)
- Ski lodges
- Sport facilities
- Subway stations
- Swimming pools
- Tire stores
- Tourist attractions
- Train stations
- Truck stops & rest stops
- Veterinary offices
- Waiting rooms (of any kind)
- YMCA buildings
- Youth centers
As you can see, there are literally dozens and dozens of different types of locations you can place vending machines. In step 3, we'll discuss how to go about actually placing your machine in your chosen location.
Step 2: Order Your Vending Machine
Now that you've decided what type(s) of product(s) you're going to sell and have a good idea of what type of location you're planning to place your vending machine, it's time to purchase it.
After carefully analyzing and comparing all of the top brands of vending machines, we can say with absolute confidence that Seaga Vending Machines are the clear-cut favorite. Seaga has been in business for over 30 years and offers all types of vending machines (as listed below), in both countertop and floor models. Seaga vending machines meet all of today's consumer demands and are capable of accepting coins, bills, credit cards and even touchless payment methods. They're widely known for their quality and long-term reliability, and all of their machines are protected by a 1-year manufacturer's warranty.
Click one of the links below to see our selection of Seaga vending machines:
- Snack vending machines
- Soda vending machines
- Combo vending machines (snack + soda)
- Food vending machines
- Cigarette vending machines
- PPE vending machines (personal protection equipment)
- Bill changer machines
As you browse our selection of Seaga vending machines, you'll notice we offer 5 important things here at Allied Vending that other vending machine retailers don't...
- We offer 24- to 36-month financing on all vending machines, allowing you to start a vending machine business with zero money down and pay for your machine out of your monthly profits.
- We compare our prices to other retailers on a daily basis and always offer the guaranteed lowest price online (if you do find a lower price, we'll match it).
- You can add a 2- or 4-year protection plan to any vending machine purchase, which not only extends the warranty but also provides fast, on-site repairs and several other benefits.
- When you purchase a vending machine from us, you can add a pre-paid gift card to a bulk product supplier to your purchase. Why does this matter? If you choose to finance your purchase, you'll also get to spread out your initial inventory purchase over 24-36 months (meaning you won't have to pay a single penny out-of-pocket to stock your vending machine up front).
- We provide franchise-level education, resources and information to our customers at zero cost. Just head over to our Business Hub to see all the training and knowledge we provide for free.
We highly recommend that you pay a little extra to add a credit card reader to your vending machine. An October 2020 study showed that only 16% of consumers "always" carry cash (and only 27% more say they carry cash "most of the time"). A whopping 58% of respondents in the study said that they planned to stop using cash altogether. In today's world, credit card readers are really a must-have!
Step 3: Select Your Location and Sign an Agreement with the Property Owner
The next step is to select your location and sign a simple "rental agreement" with the property owner.
SELECT YOUR LOCATION. Back in Step 1, you brainstormed ideas of where you could place your vending machine. Now it's time to jump in your car (or pick up the phone) and nail down a location!
Start off with business or property owners (or even managers or "higher-ups") who you know personally. You can often get your first vending machine placed in the building of someone you know, rather than "hitting the pavement."
That said, there's absolutely nothing wrong with hitting the pavement. In a single day of work, you should easily find a business/property owner who would be happy to let you place a vending machine in their building. After all, it doesn't cost them a penny (they'll actually make a little bit of money completely passively - more on that below), and it provides a convenience and benefit to their employees and customers. Business and property owners who don't already have a vending machine in their building (and sometimes even those who do) should be more than happy to let you place your machine.
SIGN A SIMPLE RENTAL AGREEMENT. The vast majority of business/property owners (even those you know personally) will expect to get some kind of monetary compensation for allowing you to place your vending machine on their property, and rightly so. Even though you are providing a convenience/benefit to their staff and customers, you are essentially renting space from them (and using their electricity to run your machine).
While some property owners may ask for a fixed monthly fee (i.e. $50-75/month), it's pretty standard in the industry for the rent you pay to be a set percentage of your vending machine's monthly revenue. That percentage is usually in the 5-10% range for low-electricity machines (no fridge or freezer) or in the 15-20% range for high-electricity machines (those that require refrigeration).
Click here to download a sample vending machine contract. We're happy to let you use this agreement free of charge.
Step 4: Obtain Required Business Accounts & Permits
BUSINESS ENTITY. You don't have to set up a formal business entity when you start a vending machine business (you can operate as a sole proprietor without a business entity), but it certainly doesn't hurt to do so. A business entity like a Limited Liability Company (LLC) can add a layer of legal liability protection to your personal assets (your home, investments, automobiles, personal savings, etc.). While most people would consider a vending machine business quite low risk, there is always the potential for lawsuits in this day and age.
If you do decide to set up an LLC or some other type of business entity (rather than operating your vending machine business as a sole proprietor), you will need to: 1) register your business entity with your state's "Secretary of State" office (just do a Google search for "[state] Secretary of State" and then file the required business registration forms); and 2) obtain a federal Employer Identification Number (EIN) from the IRS website. An EIN is your business' tax ID for filing federal tax forms.
SALES TAX PERMIT. Regardless of whether you set up a business entity (i.e. an LLC) or operate as a sole proprietor, you will need to apply for a sales tax permit with your state. Search Google for "[state] department of revenue" and then search the state's website for "sales and use tax." Then register for a sales tax account (sometimes called a "sales tax certificate" or "seller's permit").
You may be thinking, "I've never had to pay sales tax when I buy something from a vending machine. Are you sure I have to collect sales tax on purchases?"
Yes, we're sure. Most vending machine operators choose to bury the sales tax in the product's price (rather than charge sales tax on top of the product's price), but sales tax is being collected nonetheless. If you buy a bag of chips from a vending machine in a state that has a 7.0% sales tax rate, you are actually buying the bag of chips for $0.93 and paying $0.07 of sales tax. The owner of the vending machine has to "remit" (or pay) that $0.07 of sales tax to their state's Department of Revenue at the end of the quarter (or month). You will need to do the same.
BUSINESS BANK ACCOUNT & CREDIT CARD. Do yourself a favor by setting up a separate (business) bank account and getting a business credit card for your vending machine business. Keeping your personal dealings separate from your business dealings will make accounting, taxes and life easier and will also help you build business credit (which is separate from your personal credit history).
LICENSES & PERMITS. Depending on what you plan to sell and what state (and county) you're located in, you may be required to obtain certain licenses and/or permits to operate your vending machine business legally. Visit this page for more information and for handy links for all 50 states.
INSURANCE. Every business should have general liability insurance. It usually doesn't cost much, and it will help you sleep better at night. Depending on what you plan to sell, consult with a local insurance provider or search online for "business liability insurance."
Step 5: Operate and Make Money
You've done all the legwork... now it's time to make some money!
In this section, we'll go over several best practices for running your vending machine business in the most efficient and profitable way possible.
VENDING SOFTWARE. Vending machine software (such as VendSoft) will automatically track your sales on a product-by-product basis and alert you when an item is about to run out. Vending software allows you to manage your vending machine business remotely with minimal visits to check on and re-stock your machine. Note: All of our Seaga Vending Machines are compatible with all of the top vending software packages, including VendSoft.
TRUST THE NUMBERS. Many new vending machine owners make the mistake of stocking their machines with snacks, candy, drinks and other products that they like personally. As "normal" of tastes as you think you may have, you'll be much better off trusting two things:
- Vending industry data about the best-selling snacks, drinks and other products
- What your vending machine software tells you is selling well
It will become increasingly clear over time which products are selling well (and needing to be restocked constantly) and which aren't (which you should consider replacing).
STOCKING YOUR VENDING MACHINE. If you're smart enough to invest in vending machine software (as discussed above), your software will alert you when you need to visit and re-stock your machine.
If you find yourself having to visit your machine often just to re-stock the same couple/few products, you may want to consider using 2-3 slots for the same product. This way, you can stock 2x or 3x as many units of that product.
Visit this page for our suggestions on where to purchase beverages, snacks, candy and other products to stock your vending machine.
SETTING PRICING. You probably have a pretty good idea how much other vending machines in your area are charging for various products. If you don't, just start paying attention.
You'll probably want to start out with similar pricing (or possibly a little lower). But this isn't necessarily where you'll want to keep your prices permanently. Small price changes can make a significant difference in the percentage of people who decide to buy. You'll want to try out other price points over time to see how it impacts your total revenue and, more importantly, your bottom line (after subtracting your costs).
One common mistake new vending machine owners make is charging a unique amount for virtually every product (i.e. $0.70 for one product, $0.75 for another product, $0.85 for another product, and so on). They typically do this because of the fact that they pay different amounts for each product (i.e. $0.24 per unit for one product, $0.27 per unit for another, $0.31 for another, and so on). The problem with this approach is that it tends to "paralyze" customers when they go to make a purchase. You're already presenting them with a few dozen food/drink options; there's no need to complicate things by adding 5- and 10-cent price differences to the equation.
A better approach is to just pick 2-4 price points and assign each product one of those 2-4 prices. For example, your lowest-cost products (i.e. the ones that cost you less than $0.30 per unit) could be priced at $0.75, medium-cost products (i.e. those that cost you $0.30 to $0.50) could be priced at $1.00, and high-cost products (i.e. those that cost you more than $0.50) could be priced at $1.30. Furthermore, it's a good idea to group products with the same price together. This simplifies things for the customer and makes their decision easier (and therefore more likely to happen).
EXPAND. As we mentioned above, being successful with a vending machine business is largely a numbers game. If you're making $600 a month with one vending machine, you should be able to make $1,200/month with two machines... $1,800/month with three... and so on. While many of our customers just have a machine or two as a profitable little "side hustle," some of our customers have 10, 15, 20 or more machines and operate vending machines as their full-time job. Why not you?