How to start and finance your vending machine business

Vending machines are the stores that never close. Open 24/7 for the sale of food, drinks, candy, toys, and more, they’re a fast and convenient way to buy the things we need. They’re also profitable, low maintenance and suitable for investors seeking passive income or a part-time or full-time business venture.

But if you’re new to the world of vending machines, how do you start your own vending machine business? What kind of equipment do you need, what do you sell, where do you sell, and what does it all cost? Read on to discover all you need to know about starting your vending machine business and where to get the funds to get it off the ground.

What is a vending machine business?

Vending machines are standalone cash or card-operated devices that sell a wide range of products to consumers. A vending machine business is an organisation that manages one or more of these machines – usually as the equipment owner, but sometimes as a franchisee.

Vending machines can be found in many different locations, from airports and strip malls to colleges and theme parks. Dispensing candy, sodas, snacks, healthy foods, tech equipment, beauty products and more, these machines can provide a low-cost entry point to a lucrative business opportunity. The Australian vending machine market generates $64 million a year in profit.

Vending machine operators are responsible for purchasing or renting the machines, finding the best locations to place the devices, keeping them stocked with fast-selling products and collecting the cash they generate. Depending on the number of machines you run, a vending machine business can be operated as a part-time or full-time operation.

Best-selling vending machine products in 2022:

Sodas and cold drinks – they make up almost 37% of all Australian vending sales
Snacks and candy – the Snickers bar is the number one treat sold by vending machine
Hot drinks and specialty beverages – the drinks sector is rapidly expanding beyond the soda can
Fresh foods, sandwiches and fruits – health-conscious consumers are driving new demand
Tech and gadgets – hugely popular in airports, train stations and bus stations

Are vending machine businesses profitable?

Yes, they are. After buying the equipment, the typical vending machine will deliver a 20% to 25% net profit margin and generate $400-$500 profit per month depending on location and the type of products it sells. If that doesn’t sound like much, multiply by x 10 machines and you could be collecting $4,000 to $5,000 net profit per month, or $48,000 to $60,000 per year. Additionally, keep in mind that you may not need an office or even a storage space for inventory to run a vending machine business, and if you’re prepared to keep your machines full of products and collect the cash yourself, you will also have zero employee costs eating into income.

What are the costs for a vending machine business?

Costs to operate a vending machine business fall into two categories:

Capital costs

This is the cost of the machine and any financing charges you may incur if you buy the equipment with a loan. Even old vending machines can have good re-sale values, so this cost is classed as an investment, and the machine is a depreciating business asset.

Operating costs

This is what it costs to keep the machine working and selling products. Operating costs include:

Rent to the location owner – for example, a convenience store. This may be a flat fee per month, or a share of your sales.

Electricity costs if your machine is not purely mechanical – some location owners may bundle this into the rent.

Stock – this is wholesale price of the products you sell and any shipping charges and taxes you may need to pay.

Servicing – if you’re not good at mechanics, you will probably need to pay a service agent or repairman from time to time to keep your equipment operating at 100%.

Insurance – you’ll need equipment insurance to protect against theft, vandalism and other unpredictable events. You will also need public liability cover to protect you from lawsuits that customers may bring if they claim your machine or the products it sells has harmed them or their property.

Upgrades – the way we buy things is changing rapidly. Older, cash-only vending machines are being phased out by devices that take payment from cards and smartphones. Even coins and dollar bills are periodically updated. Depending on the age of the equipment you buy, you may need to upgrade your machines to accept new ways for customers to pay.

Permits and licenses – some cities may require you to buy a permit or license to operate each machine.

Taxes – you may have to collect and pay city taxes on your sales. This cost will vary according to the location of your machines.

Management costs – this is things like the gasoline and other travel costs you incur to keep your machines stocked and collect the cash they make, plus control costs, such as vending machine software to maintain your inventory.

What are the types of vending machine businesses?

If it will fit in the machine and you can find a market for it, vending machines can sell almost anything. The four main types of vending machine business sectors are:

Food and drinks
Bulk vending
Specialty vending
Franchised vending

It is important to do your research before opting for a specific sector and buying a machine. Different products may require utilities and features such as electricity, water, refrigeration or Wi-Fi to operate successfully. Also check out what is selling in the area where you intend to place the equipment – for example, an office block or hospital is a good spot for hot drinks, snacks and sandwiches – and take the time to discover what the foot traffic is like – the best machine locations sell to people all day long, not just during lunchtime or rush hour.

Once you’ve spotted some likely machine locations and judged the foot traffic, it’s best to select one product sector and stick to it. That way you can restrict the types of machines you need and you’ll learn more about your customers, the sales cycle, what products are top sellers, etc. Only when you’ve established your business should you think about expanding – for example placing a soda machine next to your snacks machine to satisfy both food and drinks customers.

Snacks, food, and beverage vending

With soda and cold drinks alone making up almost 37% of vending machine sales, the snacks, food and beverage vending sector is by far the biggest in Australia. For entrepreneurs looking to enter the vending machine industry, sticking with these tried and trusted products can reduce your business risk.

However, it’s not all about the soda can. You can buy machines that offer drinks, snacks, or a combination of both, (the top five selling vending machine items in 2023 are candy bars, chocolate bars, chips, pretzels and gum), but even here there’s room for innovation. You could move away from selling pop, candy bars and chips to provide different forms of drinks, treats and snacks. Modern consumers are increasingly buying flavored waters, cold caffeine-based drinks and variations of milk, high-energy, and diet-based options. You could also consider a product line that targets health-conscious consumers, offering products as varied as fresh fruit, granola bars, salads, yoghourts and vegetarian wraps.

Most importantly you should target your food and drinks range to the locations where you operate. For instance, a gym may be a great place to sell energy bars and electrolytes drinks, but in a business park you may do better selling coffee, sandwiches and proven, lunchtime favorites.

Bulk vending

Vending machines that sell bubblegum, toys, balls and kids’ stickers are known as bulk vending. These machines are typically low-maintenance, all-mechanical devices, selling their products for modest prices usually paid in cash. With long-life products and no need for electricity or batteries, bulk vending machines are ideal for business owners seeking an opportunity that requires minimal time or cash investment and that generates good, passive income. Used bulk vending equipment can be purchased for as low as $50 per unit and if placed in the right location – such as near a school or in an amusement park – and selling the right product, they can drive income of up to $30 per month.

Top tip: Used bulk vending machines can often be old and worn, so check them over thoroughly before purchasing and factor in a budget for repair or upgrade costs.

Specialty vending

Everybody has to eat and drink, but specialty vending machines can cater to many other markets. Depending on your machine location, you could consider selling products as varied as:

Retail

Tech gadgets and accessories, such as cables, chargers and ear plugs are big sellers in airports, bus and train stations, as are machines that dispense books, magazines and newspapers. Some shopping malls and department stores also provide machines that sell high-end products, such as beauty products, sunglasses and jewelry, whilst arenas and stadiums are good spots for machines selling fan gear, souvenirs, seat cushions, ponchos and rainwear.

Laundry products

Laundromats, apartment blocks, dorms, motels and hotels are ideal locations for selling detergents, dyes, dryer sheets and other laundry essentials. You could also expand this basic range by providing emergency sewing kits, dyes and packs of buttons.

Hot drinks

Coffee on the go is a huge industry in Australia and it’s not only coffee shops getting in on the action. Sophisticated coffee vending machines, often selling a range of products from filter to cappuccino, plus teas and hot chocolate, are taking a growing share of revenues. Top locations for these type of machines are office blocks and business parks, but hospitals, bus stations, the DMV and car washes are also strong contenders.

What’s the difference between a vending machine and an automated retail machine?

Automated retail machines are new entrants to the vending machine market. Often located in up-scale locations and delivering a luxury sales experience, they are changing the way we buy products without human intervention. But how are they different from the humble vending machine?

Vending machines have remained largely unchanged for decades and they sell many types of product with pure focus on the sale. ARMs are state-of-the-art devices that usually showcase a range of products from one manufacturer, aiming to generate brand awareness as much as sales.
The typical vending machine sale is less than $10. A typical ARM sale is $20 – $200.
Vending machines rely on electronics and old-school mechanicals. ARMs work using robotics, electronics and more often, intuitive AI.
It’s common for vending machines to jam when dispensing products or lose the customer’s money. ARMs use laser guided systems to dispense products and card or smartphone technology for payments. ARMs almost never jam or lose the customer’s money.

Franchise opportunities

Buying into a vending machine franchise can give you entry to an established network, corporate backing for products, extensive training, and services and support to secure suitable machine locations. It can also give you options on how many machines you wish to operate and sometimes, financing to buy or lease them. However, keep in mind that as well as the upfront joining fee, franchisors will often dictate what you can and cannot sell, may restrict where you buy your inventory and will take a share of your profits in exchange for your license.

Vending machine business ideas

As vending machines and consumer tastes evolve, there is scope to provide many different products and services. Some machine vendors are already thinking outside the vending box with ideas such as these:

Burgers, pizza and fries – fast food without the food truck or restaurant
Pet foods, snacks, toys and medicines
Hams and cured meats – everything from bacon to salami and steaks
Sushi – popular in Japan for ages, now expanding across Australia
Hair products – everything to keep male and female hair looking great
Fresh vegetables – brings the produce aisle to your street corner
Nutrients and proteins – muscling in on the fitness sector to keep athletes in top form
Fresh flowers – no more shopping at the gas station on Mothers’ Day

How much do vending machines cost?

Depending on the type of machine you buy, and if it is new or used, vending machines can cost from $50 for a used and basic gumball dispenser all the way up to $15,000 for an all bells and whistles brand new automated retail machine. Most experts suggest buying used machines to start with, typically spending $1,200 to $3,000 depending on device sophistication. On top of this you will have to pay rent for your location, buy stock and pay for services such as insurance, repairs and maintenance. With a low-cost location and a machine with few sophisticated features and selling simple products such as candy, sodas and snacks, it may be possible to get a vending machine business up and running for as little as $2,000.

Can you get a small business loan to buy a vending machine?

Yes. Small business loans, asset financing and equipment loans can all be used to buy one or more vending machines. You may also be able to lease the machines with an option to buy at the end of the contract. Purchase your vending machines over 1,2, 3 or more years.

Can you get a loan to start a vending machine business?

Yes. As well as covering the cost of your vending machines, a small business loan, start-up loan, franchise financing or business acquisition loan can get your new vending machine business truly off the ground. Use the funds to pay location costs and cover inventory, licenses and permits, repairs and upgrades, marketing and more.

Is a vending machine business plan to essential get funding?

Not always. However, having a comprehensive business plan will certainly improve your chances of success and speed up the loan process. Most lenders will ask to see financial records if your business is already trading, as well as a list of personal assets and any existing debts you may have. Your credit report and score will also factor into the decision making, so be sure to check this information before you apply to ensure it is up to date and accurate.

If you are unsure about the best way to fund your vending machine purchases, don’t be afraid to seek expert advice. You can start that process here.

Things to consider when buying vending machines

Type of machine – Different products require different types of vending machines – for example, a hot drinks machine will need power, water and waste connections. Some machines may also need wi-fi to make payments with cards or phones. Choose the right machine to sell your product range without paying for expensive features you may never use.
Location – This is as important as the type of machine you buy. Find a location that will suit your product range – for example, an airport to sell tech gadgets – and measure the space your machine will occupy and what connections it may need – such as electricity. If you can only secure space for a countertop machine, there’s no point in buying a free-standing unit. Always remember: Location first, machine type second.
Costs – If you’re starting out, you should keep to a strict budget. Used and refurbished machines may be the more cost-effective way to go, even if they need some cleaning up and repairs.
Easy to use – Vending machines that are effortless to use will generate more sales than complicated devices that take an age to understand. Keep it simple, so even kids can use your machine.
Safety – Injuries caused by vending machines are quite rare, but if they happen, they can result in large compensation claims that may not be covered by your insurance. Make sure your machines have no obvious safety hazards and that they can be secured to the wall, floor or countertop to prevent them toppling over.

Should I buy new or used vending machines?

It depends on your budget. Experts recommend starting out with used machines to keep capital costs down, then upgrading to newer machines as your business grows.

The best questions to ask before buying a vending machine

Some questions apply to new and used vending machines:

Is this machine credit card compatible?
Does the Bill Acceptor take 1s, 5s, 10s?
What is the capacity of the machine – for example, how many drinks/snacks will it carry?
What utilities does it require – power, water, waste, wi-fi?
What special features does the machine have?
How long is the guarantee – and does it include labor and parts?

And some questions are for used vending machines only:

Why are you selling the machine?
How old is the machine?
Have there been any repairs to the machine?
Do you have the manual for the machine?

Where to find vending machines for sale:

If you’re going to launch a vending machine business, you’re going to need a machine or two. Luckily, there are many ways to find vending machines for sale:

Online retailers

Consumer platforms like Ebay, Craigslist, even Amazon, have thousands of vending machines for sale. These sites may be the best place for first-time buyers to select their machine, as it will give you the broadest equipment selection and the widest range of prices. Remember that vending machines are often large and heavy, so keep your search local to minimise the shipping or pick-up costs.

Classified ads

Some of the vending machine industry publications carry small ads with machines and accessories for sale. These ads tend to be from operators and machine dealers, so the machines they sell may be a little more expensive than you’ll find on Ebay, but they may come with a warranty and the seller may be more helpful and provide more detail about the machines than your typical online vendor.

Auctions & liquidations

The same publications listed above, plus your own online search will reveal upcoming auctions and liquidations of vending businesses and equipment. Although you can sometimes snap up a bargain here, keep in mind that you will be bidding against seasoned pros who know what the machines are worth. Additionally, auction sites sell under a ‘buyer beware’ disclaimer, meaning it’s up to you to check the machines before buying. You can’t claim for problems you discover after purchase unless the auction listing was deliberately misleading. Don’t forget to factor in added auction fees and taxes.

Social media and word of mouth

Social media, message boards and even business sites like Linked In can be useful places to dig up machines for sale that are not listed elsewhere. If you can, place your own ad stating what you need, or simply put out a request to your network.

Local suppliers

Most towns and cities will have local suppliers to the vending machine industry. Typically, they will sell machines, accessories, parts and supplies. Your equipment options may be more limited here, but you will usually have the chance to check the machines out in person and discover their history. Some local suppliers also work as agents for the big distributors, so they may be able to recommend machines to fit your specific needs.

Repair shops

Vending machines break down like every other device. When they do, they usually need a specialist to fix what’s gone wrong. As above, most towns and cities will have at least one vending machine repair shop and they’re a good place to learn more about the types of machines you need and get the skinny on machines they know are for sale, or operators and dealers you should talk to.

Top tip: Check out the vending machines selling near you. Often, they will have a sticker on the side that reveals the name and number of the service agent or repair shop that takes care of the device. Failing that there will usually be a sticker or plate that provides the details of the machine operator. You may be able to call them and ask where the best used or new machines can be purchased in your local area.

Vending machine distributers

These are the major suppliers of new and used machines. They will have the widest selection of vending machines for sale, the newest technology, and the most end-to-end services for delivery, repairs, and training. However, this is also the most expensive option, and equipment purchased through vending franchises might require a minimum order of multiple machines and/or other fees that go toward machine servicing and entrepreneur development programs.

Pros and cons of owning a vending business

If you’ve got the determination, a vehicle and a few thousand dollars, you’re all set to start your own vending business. But before you jump in, what are advantages and disadvantages of this sort of venture?

Advantages:

Cheap to run

Vending machine businesses have few overheads apart from paying location rent. You usually don’t need an office or a warehouse. Also, if you’re stocking the machine and collecting the cash yourself, you have no need for employees, which means no payroll or benefits expenses.

Many product choices

Vending machines can sell almost anything that fits inside the box. You can operate multiple machines selling different types of product. This gives you a buffer against changing consumer tastes as well as the opportunity to quickly pivot to new products if they suddenly start to trend.

Easy to scale

You don’t have to go ‘all-in’ at the start. You can launch with just one machine and then add more as your sales grow and you gain market experience.

Disadvantages:

Theft and vandalism

Many vending machines are vulnerable to attack by street thieves and mischief makers. Theft and vandalism are common events. Always insure your machines against these types of crime and of you can, place them in locations where they are secure or under 24/7 surveillance.

Time commitment

You’ll need to commit time to selecting your machines, securing locations, replenishing the products and gathering the cash you earn. The more machines you have, the more time this will take.

What is the best way to fund a vending machine business?

Unless you’re buying a used gumball machine, you can expect to pay $1,200 to $3,000 for your first machine and then pay for location costs and inventory. If you don’t have the cash to do this, you can fund your vending machine business by other means:

Equipment loans and leasing

Loans to buy or lease vending machines can cover the major equipment cost and sometimes pay for servicing. Loans usually pay back over 1 to 3 years. Lease finance contracts may give you the option to buy the equipment for as little as $1 at the end of the contract.

Small business loans and start-up loans

Finance to cover equipment costs, location fees, inventory, servicing, marketing and more.

Franchising

Gives you the support of a bigger franchise partner and may provide a protected territory to operate in. Franchising usually requires a large payment upfront (the joining fee) and then you pay a flat fee or a share of turnover on a weekly or monthly basis after that. Franchise financing can help to cover the joining fee and other start-up costs.

Bring in an investor/partner

If you don’t have a friend, relative or colleague who can join you in the venture you can find investors looking for investment opportunities on various angel investor websites. Always do your due diligence on any investor or partner that you do not know personally, and never pay for introductions or the chance to pitch your proposal.

Crowd funding

Online sites can connect you and your business proposal to hundreds or even thousands of private donors who may provide small amounts of cash to help you succeed. You will need a compelling story to make this option work, but if it does, you do not have to repay the cash as long as you spend it where you said you would. It’s basically free money.

Top tip: Always check the small print on any loan note or contract. Ideally, run it by a lawyer before you sign on the dotted line.

How to take over an existing vending machine business

If you don’t want to start a new vending machine business, you could buy an existing operation. This would provide you with an instant network and save you from sourcing machines and negotiating locations. Simply follow these steps to buy an existing vending machine business:

Research the market – learn about the demand for vending machines in your target area. What products are popular, where are the machines sited, what kind of equipment is being used?
Set a budget – not just for the initial purchase, but to cover stock, servicing and location costs.
Find a business for sale – online sites and vending machine publications are a good place to find a vending machine business that matches your needs.
Do your due diligence – ask the seller about the business, scrutinise their records, search for any pending lawsuits, check permits and taxes are up to date.
Agree a price – don’t pay more than you are comfortable with, there will always be other opportunities.
Get funding – if you need finance, search for the best business acquisition loans. Compare rates, terms and conditions before signing.
Close the deal – finalise the purchase, exchange contracts, transfer ownership. This may require you to transfer permits and licenses and record the business in your name with local authorities.
Transition – work with the seller during the agreed transition period. Learn about the machines, the local market, your location owners etc.
Scale the business – depending on the size and type of vending machine business you buy you may be able to expand the operation with more machines and different products.

Where should I put my vending machine business?

Location, location, location. After the machine itself, the location where you put it is most important to budding vending machine business owners. Placing your machines in locations where your products are in demand is vital. You want a consumer audience that buys from your machine all day long, ideally with the equipment secure from theft or vandalism.

Common locations:

Airports – great for selling tech, gadgets, chargers, cables and ear plugs
Amusement Parks – ideal for selling candy, toys, gum, drinks and snacks
Apartment blocks – best for laundry products, popular household items, drinks and milk
Business offices and parks – drinks, snacks, sandwiches and lunchtime favorites
Bus stations – perfect for magazines, newspapers, drinks and snacks
Bookstores – coffee, snacks, gadgets, fresh fruit and healthy foods
Factory break rooms – coffee, drinks, snacks, sandwiches
Fire stations – drinks, snacks, energy bars and beverages
Gas stations – cigarettes, drinks, snacks, candy, gum, kids toys and books
Gyms – electrolyte drinks, protein bars, energy and diet supplements
Hospitals – coffee, drinks, snacks, magazines and newspapers

Uncommon locations

24-hour pharmacies – ideal for selling healthy snacks, energy drinks, vitamins
Banks – best for drinks and snacks
Hair salons – coffee, snacks, magazines, newspapers
Health food stores – for vitamins, diet products and supplements
Hotels – drinks, snacks, hygiene products, magazines, newspapers
Museums – guide books, drinks, snacks, batteries, postcards and souvenirs
Nursing homes – drinks, snacks, sandwiches, fresh fruit

Common vending machine FAQs

Got a question about starting or running your vending machine business?

How to secure stock and replenish inventory

Smaller vending machine operators usually buy their stock at large consumer outlets, while larger vending machine businesses may strike deals with major wholesalers, distributors or even manufacturers like Coca Cola or PepsiCo.

How do I ensure tax compliance?

Most vending machine operators are required to charge and collect sales tax on the products they sell. There may also be city sales tax to pay. You will need to contact and register your business with these authorities before you begin trading.

What tax and accounting software would be useful?

As well as keeping track of your income, expenses and taxes with a suitable accounting software such as Xero or Quickbooks, you may find specialist vending machine management software (VMMS) useful to help you manage inventory, location fees, service schedules and more – especially if you have more than one or two machines.

How should I structure my business?

A limited liability company or LLC is usually the best option for a vending machine business. It is informal, flexible, scalable and provides sufficient legal and tax protection for the owner, partners and employees.

How should I take payments

The way we buy things is changing. More purchases are now made with cards and smartphones. This is not only convenient for the consumer it also saves the vending machine operator from collecting and banking bulky cash. However, you will still need to sell to people who only use coins and notes. Therefore, if you can, buy a machine that will take all forms of payment.

How do I optimise my profit?

Choose the most profitable vending machine locations.
Offer products that have high demand and generate high revenues.
Set prices for maximum profit margins.
Use a variety of marketing techniques to attract more customers.
Minimise machine downtimes – keep them serviced and well stocked.

What insurance can I use to protect my vending machines?

You’ll need equipment insurance to protect against fire, theft, flood and vandalism, as well as public liability cover to protect you from third-party claims for personal injury or property damage caused by your machines or the products they sell.

Get started with Swoop

Vending machine businesses can be lucrative and provide long-term revenue streams, but to get them off the ground or expand your current operation you will probably need financing to succeed. Don’t waste time or miss out on profitable opportunities. Register with Swoop today to compare top-quality vending machine business loans, leases and business acquisition finance and to discuss all your business needs.

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Written by

Chris Godfrey

Chris is a freelance copywriter and content creator. He has been active in the marketing, advertising, and publishing industries for more than twenty-five years. Writing for Barclays Bank, Metro Bank, Wells Fargo, ABN Amro, Quidco, Legal and General, Inshur Zego, AIG, Met Life, State Farm, Direct Line, insurers and pension funds, his words have appeared online and in print to inform, entertain and explain the complex world of consumer and business finance and insurance.

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US vending machine market: https://www.grandviewresearch.com/industry-analysis/north-america-retail-vending-machine-market-report

100 million buyers per day: https://www.linkedin.com/pulse/vending-machine-statistics-2023-linkitsoft-it-solutions/

Profits per machine: https://alliedvending.com/pages/how-much-do-vending-machines-make

Sodas and cold drinks market share: https://cdn.baseplatform.io/files/base/cygnus/vmw/document/2023/06/2022_SOI_Report.6488b959744be.pdf

Small business loans: https://swoopfunding.com/us/business-loans/small-business-loans/

Quick business loans: https://swoopfunding.com/us/business-loans/quick-business-loans/

Asset financing: https://swoopfunding.com/us/business-loans/asset-finance/asset-based-lending/

Equipment financing: https://swoopfunding.com/us/business-loans/asset-finance/equipment-financing/

Equipment leasing: https://swoopfunding.com/us/business-loans/asset-finance/equipment-leasing/

Start-ups: https://us.swoopfunding.ca/get-started

Franchise financing: https://swoopfunding.com/us/business-loans/franchise-finance/

Business acquisition loan: https://swoopfunding.com/us/acquire-a-business/