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.
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 Canadian vending machine market was valued at $289.3 million in 2023 and billions of items are dispensed from vending machines every year.
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:
Yes, they are. After buying the equipment, the typical vending machine will deliver a 20% to 25% net profit margin and generate over $300 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 $3,000 to $6,000 net profit per month, or $36,000 to $72,000 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.
Costs to operate a vending machine business fall into two categories:
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.
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.
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:
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.
With soda and cold drinks alone making up almost 40% of vending machine sales, the snacks, food and beverage vending sector is by far the biggest in Canada. 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.
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.
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:
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, while arenas and stadiums are good spots for machines selling fan gear, souvenirs, seat cushions, ponchos and rainwear.
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.
Coffee on the go is a huge industry in Canada 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.
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?
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.
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:
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.
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.
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.
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 today.
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.
Some questions apply to new and used vending machines:
And some questions are for used vending machines only:
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:
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.
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.
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, 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.
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.
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.
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.
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:
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.
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.
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:
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.
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.
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:
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.
Finance to cover equipment costs, location fees, inventory, servicing, marketing and more.
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.
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.
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.
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:
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.
Got a question about starting or running your vending machine business?
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.
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.
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.
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.
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.
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.
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 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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