How to Start a Vending Machine Business

The vending machine industry has evolved and grown over the past decade. As consumers' lives get busier and people value convenience and time-saving options while on the go, opportunities are opening up for vending machine operators.

According to Research and Markets, the global vending machine market size is estimated at US$21.3 billion in 2020, and is expected to reach US$31 billion by 2027. This corresponds to a growth rate of 5.5%. The US vending machine market is valued at $5.8 billion and is growing at 8.9%. These numbers are impressive and fuel the desire of Americans to start a vending machine business.

Have you ever wondered how to start a vending machine business? This article covers some of the key areas to get started.

Advantages of operating a vending machine

Is starting a vending machine business right for you? Some of the characteristics that make entrepreneurs attractive to this type of business include:

• Low cost of acquisition – Vending machines are typically fundable. You probably don't need any other equipment other than a computer, a printer, a phone to manage your business, and a vehicle to keep you on track. Flexibility to set your
• Own schedule – You can usually restock your machine and collect your money whenever it's convenient for you.
• Ability to easily change product selection – For example, say you have a vending apps but a particular Doritos flavor isn't selling. You can immediately decide to replace the product with another flavor or a completely different snack.
• Growth Control - Decide how fast you want your company to grow. Some business owners are gradually expanding their vending business while continuing with their main business. Time and finances allow, you can add more machines to your route when you're ready to expand.
• Simplicity – Running a vending machine business isn't too complicated once you outsource your office and set up your machines. You have to maintain the machine to keep it in good condition, restock the machine when necessary and collect money from the machine. Of course, we also provide management services such as: B. Record financial transactions, report and pay taxes, and handle customer-related concerns.

Three Startup Options

Whichever method you choose, you should discuss legal issues with an attorney and financial and tax issues with an accountant or tax professional. Costs vary widely when starting a vending machine business. How you entered the industry, the type (and number) of vending machines you use, and the products you plan to sell will affect your initial and ongoing costs.

1. Acquire an existing vending machine business

Acquiring an existing vending machine business or distributor is an easy way to enter the industry. We provide budding Smart Vending Machine Software entrepreneurs with instant customer accounts and secure revenue streams. It is important to do thorough research before tackling such an opportunity. Find out why the current owner wants to sell and explore all aspects of the business to uncover non-business issues. For example, you can ensure that your machinery is working properly, review existing contracts with customers and suppliers, and review financial reports.

2. Buy a vending machine franchise

Franchising opportunities provide an established business model for a successful vending business. Purchasing a vending machine franchise allows entrepreneurs to start their business with much of the administrative and operational infrastructure in place.

Top vending machine franchise opportunities include:

• Clothing Bin
• Fresh Healthy Vending
• Healthy Cravings
• IceBorn
• Naturals2Go
• Pharmabox
• Power Drop Shop
• Reis & Irvy’s
• Xpresso Delight

Keep in mind that franchise costs and levels of support vary by provider. Generally, a franchise fee is paid up front to participate in the opportunity and the franchisor either receives a portion of the franchisee's profits or charges the franchisee a monthly fee. Read your franchise agreement carefully to determine if there are any unreasonable restrictions (such as where to source machinery or products). Also, make sure you understand your responsibilities for operating a franchised entity under the franchisor's rules (eg, a franchisor requires you to set up a legal entity such as an LLC or corporation).

3. start your own slot machine business

Of course, this option requires the most effort. However, it also gives you maximum freedom to build a vending machine business that fits your vision. Starting from scratch means procuring the machine and where to put it yourself. Option 3 requires the most effort and thought, so let's look at the general steps to successfully implement it.

14 steps to starting a new business

1. decide what you want to sell

Before embarking on running a slot machine business, you need to make sure there is a chance of success. We conduct extensive market and industry research to assess the possibilities and decide what to sell in your vending machine.

Some products are popular almost everywhere, while others appeal to people with specific interests and preferences. For example, coffee, water, soda, and snacks sell well almost everywhere. Salads, sandwiches, and microwaveable meals may be the most appealing to office and college folks. Please note that food and beverages have expiration dates. Also, if you sell perishables, you have to be extra careful to match the quantity you order with the quantity you can sell.

You can also consider non-food items such as over-the-counter pain relievers that may attract customers in restrooms in office buildings, shopping malls, shopping malls, transportation hubs, etc.

Below is a list of other non-food items sold in vending machines. As you can see, the possibilities are endless.

• Laundry supplies (detergent, fabric softener, dryer sheets)
• Electronic accessories (phone chargers, earbuds, headphones)
• Skincare products
• Hair products (shampoo, conditioner, styling products)
• Toiletries and hygiene products (toothbrushes, toothpaste, soap, feminine hygiene products)
• T-shirts
• CBD products (oils and lotions)
• Fitness merchandise (supplements, towels, gloves, hair ties, earbuds)
• Dog treats
• Beach supplies (sunscreen, goggles, toys)
• Nail polish
• Pens and pencils

When looking for a reliable source of product, consider the price per unit of the items you plan to stock on your machine. Depending on the inventory you want to keep, you may be able to negotiate significant quantity discounts.

As you analyze your options, keep in mind that the higher priced items sold don't always yield the best returns. Indirect costs tend to be high (cost per unit, zero for machines with more advanced features, etc.). If you do not consider the cheap ones of the basic vending machine, you may be careless. For example, a refurbished $75 bulk vending machine that sells stickers for 50 cents in a crowded grocery store may generate better profits than a computerized vending machine selling big-ticket items. . Sure, a sticker machine won't make everyone rich overnight, but it can prove to be a viable way to generate a reliable passive income.

2. Determine the machine capabilities you need.

Once you've decided what you want to sell, decide what features you want your vending machine to have. Here are the special features and features available:

• Functionality to accept credit and debit card payments
• Interactive touch or voice-activated screens
• LED lighting
• Graphic and branded wraps that go around the machine to make it more visually interesting and attractive
• Combination food and drink dispensing
• Software for remotely monitoring stock levels in the machine

3. Determine from where you’ll buy or lease your vending machines

Some sources of vending machines include:

• Manufacturers
• Wholesalers
• Specialty retailers and online sellers
• Craigslist
• Amazon
• eBay

To reduce your capital investment costs, you might consider buying used vending machines or leasing machines.

4. Determine locations for your machines

As with any retail business, vending machine location affects sales success. High-traffic areas offer the best opportunities. And of course, the location should be aligned with the type of product the machine sells.

Places where vending machines often do well include:

• Airports
• Apartment complexes
• Bus stations
• Car dealerships
• Grocery stores
• Gyms
• Hospitals
• Hotels and motels
• Laundromats
• Malls
• Manufacturing facilities
• Nursing homes
• Office buildings
• Schools
• Shopping centers
• Train stations
• Universities

Please note that ADA compliance standards may be required to install vending machines in certain locations. Also consider machine and product safety. In sites prone to theft and vandalism, the need to repair or replace machines is time consuming and costly.

5. Select your company name

Think carefully about what you name your business. Your company name will be one of the brand assets that distinguishes your company from your competitors.

Once you've decided on a company name to use, run a company name search to see if another machine company (or similar company) in that state has adopted that name.

6. Determine the nature of the business unit

The corporate structure you choose for your business has legal and tax implications. Your decisions also affect the time and money required to keep your company compliant and in good standing with the government.

Popular small business structures include:

• Sole Proprietorship
• Partnership
• Limited Liability Company (LLC)
• S Corporation
• C Corporation

I think it's important to note that for sole proprietorships and partnerships, the company and its owner are considered the same taxpayer and legal entity. Therefore, if the business is sued or goes into financial trouble, the business owner is personally liable. This means that the entrepreneur's personal assets may be used to settle the company's legal claims and liabilities.

However, in other structures, the business owner and company are considered separate entities and some degree of personal liability protection is allowed.

Entrepreneurs are advised to consult a lawyer, accountant, or tax advisor to find out which form of business is most advantageous for their situation.

7. Appoint a registered agent

A company operating as an LLC, S Corporation, or C Corporation must appoint a registered agent in the state of incorporation. A registered agent is a party authorized to receive "services" (legal and regulatory notices) on behalf of a company.

To be a registered agent, an individual or legal entity must be domiciled in the state where the machine company is registered. For your convenience, Linkitsoft offers registered agent services in all of her 50 states.

8. Register your new ATM business with the state

In order to form an LLC or establish a vending machine business, registration papers must be filed with the state. LLCs must file articles of incorporation and corporations must file articles of incorporation. There may also be other applications (such as the election of S Corporation).

States generally do not require incorporation documents for sole proprietorships and partnerships. However, if the vending machine company uses a company name that is different from the company name that includes the owner's legal first and last name, then a DBA (Doing Business As) must be applied for. You may have heard that DBA is a "fictitious name." A DBA's purpose is to inform the public about who runs the business.

The cost of registering a business varies by state. Details can be found on state government websites, and forms are available online in most states. To avoid processing delays, it is important to complete the company formation documents correctly. Consider requesting Linkitsoft's assistance in preparing and filing company registration, S Corp, and DBA documents. Our application experts have the expertise to process company incorporation forms in all 50 states.

9. Obtain an EIN

Businesses that employ employees in the United States or US territories, or that are registered as LLCs or corporations, must obtain an Employer Identification Number (EIN). You may hear your EIN (also known as your federal tax identification number). The IRS will issue her EIN free of charge to any business representative with a valid taxpayer identification number (SSN, ITIN, EIN). To ensure that the application form is accurate and processed quickly, ask Linkitsoft to prepare her EIN paperwork.

10.Open a commercial bank account

Having a bank account dedicated to business activities not only facilitates accounting and taxation, but is also important in maintaining a "corporate veil" between entrepreneurs and their businesses. As previously stated, LLCs and corporations are considered legal entities separate from their owners. But when business and personal finances get mixed up, courts may find the corporate veil broken. In this case, the entrepreneur may lose liability protection and put personal assets at risk. There are other valid reasons for setting up your own business account.

11. Obtain all necessary business licenses and permits

It's important to research all federal, state, and local laws and regulations that your vending business must comply with. Business owners are advised to consult an attorney. In addition, Linkitsoft's Business Licensing Service can also determine all applicable requirements and prepare and submit the forms necessary to obtain vending machine licenses and permits.

12. Enter into a contract with the owner and manager of the business or property at the point of sale.

Businesses and property owners may expect you to be able to install vending machines on their premises and to be compensated for the electricity used by the vending machines. Compensation is usually paid in the form of a commission. The commission is a percentage of the total machine sales. It is important to set the commission rate, terms and conditions in the contract.

What is a reasonable commission rate? Some vending industry experts say 7% is the norm, while others say 25% is reasonable. Ultimately, the commission rate should satisfy the location provider while still offering an acceptable profit margin. So please do the math before closing the trade.

Some of the points that most vending machine agreements cover include:

• The parties entering into the agreement
• The length of the agreement
• The type of machine(s) and products sold
• Location(s) of the machine(s)
• Compensation
• Responsibilities of parties related to machine damage, maintenance, and service
• Notification about machine failure
• Exclusivity provision (if applicable)
• Rights to add, remove, or replace machines
• A termination clause (for voiding the contract if there’s a breach of contract or the location proves to be unprofitable)

This is just a small part of what a machine contract entails. As with any legal document, it helps to have an attorney draft the contract, or at least review it, to ensure it is fair and meets your needs.

13. Get business insurance

Starting an ATM business also entails risks. From consumer equipment damage to food spoilage to vandalism, you want to make sure your equipment and your business are protected. Machine operators can choose from insurance policies such as general liability, commercial auto insurance, and workers' compensation.

14. Track business compliance responsibilities

Like any business, vending machine manufacturers need to know all their tax returns, reports, licenses, and other compliance requirements to maintain a good reputation with states, communities, and the IRS. there is. Failure to meet compliance obligations can lead to fines, penalties, loss of liability protection and even the dissolution of the company. Lawyers and tax experts can advise you on responsibilities and deadlines.