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How to Start a Vending Machine Business
We see them everywhere, but have you ever considered what owning a business of vending machines would be like? Vending machines help people in a pinch, providing tasty treats and refreshing beverages at school, the office, and in public places of all kinds.
There are millions of vending machines out there in the world. Starting your own vending machine business is an opportunity to get in on the action. They can be a lucrative source of passive income and, depending on how many you are willing to operate, may not require a ton of upkeep for you as an entrepreneur.
But as with any business, getting started and making good money takes hard work. The best way to ensure success is moving patiently through the business development and launch process, as detailed in this step-by-step guide.
Time to build
Step 1: Decide if the Business Is Right for You
Pros and Cons
Every business has its advantages and disadvantages, which you should weigh to decide if starting a vending machine business is your best choice.
- Low startup costs – Main costs are the vending machines, which can be financed, and a large vehicle and related equipment.
- Flexible schedule – Collect money and restock the machines when you want.
- Grow at your own pace – You decide when to add more machines, and how many.
- Simple business model – Secure contracts with the businesses that host your machines, maintain and keep records — that’s about it.
- Need to scale up – Each machine’s profits can be small; making good money will likely require scaling the business with additional capital.
- Competition for prime locations – There’ll be fierce competition for high-traffic spots; you’ll need to be savvy to get your machines in prime territory.
- Added expenses – Getting top spots may require an additional payment, such as a rent, while new laws may tax sale of sugary snacks and drinks.
Market researcher IBISWorld values the U.S. vending machine industry at $8.6 billion and estimates 5.4% growth in 2021.https://www.ibisworld.com/industry-statistics/market-size/vending-machine-operators-united-states/ Prior to 2020, when the industry shrunk due to pandemic-driven lockdowns, the US vending machine market expanded by 22% over five years, from $7.6 billion in 2014 to $9.25 billion in 2019. Market analyst Grand View Research expects the global vending machine market to grow at an annual rate of 6.7% over the next five years.https://www.alliedmarketresearch.com/vending-machine-market-A09486
Key trends in the vending machine market include:
- Internet of things functionality – Manufacturers are now developing vending machines that can utilize the internet of things (IoT) to gather real-time data on consumer demand and improve the machine’s offerings.https://en.wikipedia.org/wiki/Internet_of_things
- Junk food regulations – New laws aim to curb the sale of unhealthy, high sugar products. Many places now use taxes or bans to curb the sale of such “junk” foods, especially in schools.
- Specialty machines – Many retail outlets now offer specialty vending machines selling electronics, clothes, or accessories.
- Pandemic supply chain issues – The pandemic hurt logistics for many industries and could lead to continued shortages and other supply chain issues.
How much does it cost to start a vending machine business?
The startup costs for a vending machine business can range from around $1,400 to $4,000, according to Step By Step Research. The biggest expense is of course your vending machine, or machines. The cost varies, depending on whether you purchase used or refurbished, or lease your machines on a monthly basis.
The other main startup costs include the required licenses and permits, as well as insurance, rent, and taxes. These costs vary widely based on your state and the business owners with whom you work.
Keep in mind that additional costs, such as for a truck, drivers, and moving equipment, will arise as you expand your business.
|Startup Costs||Ballpark Range||Average|
|Used/refurbished vending machine||$1,000-$3,000||$2,000|
|(Option) New vending machine||$3,000-$10,000||$6,500|
|(Option) Lease vending machine||$50-$150 per month||$100|
|Inventory restock||$30-$50 per machine||$40|
|Rent (% of sales to property)||$15-$80 per machine||$48|
|Taxes (% of sales based on state)||$12-$20 per machine||$16|
How much can you earn from a vending machine business?
For your vending machine business, profitability depends on location and scale. How many vending machines are you operating, and where they are located?
The average monthly revenue for a vending machine is $300 to $400, and with profit margins ranging from 16-25%, you’ll net about $50 to $100 from each machine every month. According to a survey by the entrepreneurial news site The Hustle, US vending machine operators oversee 13 machines on average and gross $309 per machine each month, bringing in $48,000 in annual revenue and $10,000 in profit (20.5% margin).
With a vending machine business, your annual revenue and profit will depend on the scale of your operation. The more machines, the more money you’ll make. To leverage economies of scale in key overhead costs — purchase/lease, installation, and maintenance — an entrepreneur would need to oversee 30-40 vending machines to make a livable salary of $30,000 to $40,000.
What barriers to entry are there?
- Restrictions – Food and drink vending machines are regulated and taxed, depending on the products offered. They may also be constrained by property owners, who could require a certain # of users or profit.
- Time commitment – You’ll need to make the rounds of your vending machine locations to stock, service, and collect money.
- Determining prices and payment options – Many potential customers claim vending machines are too expensive. Some older vending machines do not accept credit cards.
- Few healthy options – People today want healthier food and drinks, but many of the available vending machine choices are less than healthy.
- Securing prime locations – Finding and securing space at the highest-traffic locations can be a challenge.
Step 2: Hone Your Idea
Why? Identify an opportunity
Assuming you’re new to the vending machine industry, the first thing you should do is research. Find the most popular locations for machines in your city or town. Look into the types of vending machines – Drinks? Chips? Candy? – that are most profitable in your area and across the industry. Check nearby offices, hotels, hospitals and other public spaces to see which items sell best — if it’s often out of stock, it must be in high demand!
Research the prices for local vending machines for sale, new or used, and check in on the leasing rates for machines available for lease. As this is the primary startup cost to getting going in this business, it is best to spend considerable time finding the right choices for the beginning of your vending machine empire.
What? Determine your products or services
When it comes to product choice, the possibilities are broader than you might think.
Vending machines can offer food or drink, or both. They can feature tobacco products, which require a special license, or medical products, such as tests for pregnancy or COVID-19. Non-food vending machines sell items as wide-ranging as laundry detergent, iPhone accessories, and makeup. A new vending machine in Rome pumps out piping hot pizzas! Depending on the demand in your area, you might consider healthy vending machine options, which have gained popularity in recent years.
Payment options and food selection technology vary based on the machine. Some older models accept only cash and coin, while many newer vending machines only provide electronic payment and card options. The latest smart vending machines go even further, offering touchscreens as well as touch-free transactions via mobile payment.
Depending on your level of financing and personal preferences, it’s a good idea to examine all of your options.
How much should you charge for vending machine products?
The average food or drink item in a vending machine typically costs $0.50 to $2.00. But this will of course be higher if you decide to offer premium products. Either way, your prices should be competitive with machines offering similar products in your market.
A good approach is to initially offer all items in a specific category, such as candy bars or sodas, at the same price. From there, you see how sales go and experiment to find the right pricing for your location and product offerings.
Prices are of course based on the cost of the item, plus your target profit margin of around 20%.
Who? Identify your target market
The key market segments for vending machines include corporate offices, industrial workplaces, hotels, restaurants, schools, hospitals, and public spaces.
Manufacturing centers such as factories are often prime locations, mainly because blue-collar workers buy twice as many vending machine products as other groups.
You will want to position your vending machines in locations with a lot of foot traffic, preferably by people who are regularly gripped by pangs of hunger or thirst!
Where? Choose your business premises
One of the best things about running a vending machine business is that you can operate out of your home. Your main job will be scouting out locations and then maintaining, restocking, and retrieving your money from the machines over time. Depending on the size of your operation, you may even be able to use your personal vehicle for these tasks.
As your business grows and operations intensify, you may need to hire workers for various job roles. You may also need to lease or buy a truck to better service your machines. If you do end up needing an office, you can find commercial space to rent in your area on Loopnet, Instant Offices, and Square Foot.
When choosing an office space, you may want to follow these four rules of thumb:
- Central location easily accessible via public transport
- Ventilated, with natural light
- Flexible lease that can be extended as your business grows
- Ready-to-use space with no major renovations or repairs needed
Step 3: Brainstorm a Business Name
Your business name is your business identity, so choose one that encapsulates your objectives, services, and mission in just a few words.
You probably want a name that is short and easy to remember, since much of your business, and your initial business in particular, will come from word-of-mouth referrals.
Here are some suggestions for brainstorming your restaurant’s name:
- Short, unique, and catchy names tend to stand out
- Names that are easy to say and spell tend to do better
- The name should be relevant to your product or service offerings
- Ask around — family, friends, colleagues, social media — for name suggestions
- Including keywords in the name, such as “vending” or “food”, boosts SEO
- Choose a name that allows for expansion: “Jim’s Bakery” rather than “Jim’s Cookies”
- Avoid location-based names, as they may hinder future expansion
- Use online tools like the Step by Step business name generator
Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names at a web cataloging site such as NameChk. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these.
Finally, make your choice among the names that pass this screening and go ahead with domain registration and social media account creation. And if you’ve exhausted all your creative juices but still don’t have a business name, don’t stress! Instead, check out our business name generator. Just type in a few keywords and hit “generate” and you’ll have dozens of suggestions at your fingertips.
Step 4: Create a Business Plan
Every business needs a plan, a rough outline that helps guide a startup through the launch process while maintaining focus on key goals. A business plan is also crucial for helping potential partners and investors understand your company and vision:
- Executive Summary: Brief overview of the entire business plan; should be written after the plan is complete.
- Business Overview: Overview of the company, vision, mission, ownership, and corporate goals.
- Product and Services: Describe your catering company’s services in detail.
- Market Analysis: Assess market trends such as variations in demand and prospects for growth, and do a SWOT analysis.
- Competitive Analysis: Analyze main competitors, assessing their strengths and weaknesses, and create a list of the advantages of your services.
- Sales and Marketing: Examine your companies’ unique selling propositions (USPs) and develop sales, marketing, and promotional strategies.
- Management Team: Overview of management team, detailing their roles and professional background, along with a corporate hierarchy.
- Operations Plan: Your company’s operational plan includes procurement, office location, key assets and equipment, and other logistical details.
- Financial Plan: Three years of financial planning, including startup costs, break-even analysis, profit and loss estimates, cash flow, and balance sheet.
If you’ve never created a business plan yourself before, it can be an intimidating task. Consider hiring an experienced business plan writer on Fiverr to create a professional business plan for you.
Step 5: Register Your Business
Registering your business is an absolutely crucial step — a prerequisite to paying taxes, raising capital, opening a business bank account, and other guideposts on the road to getting a business up and running.
Registration is exciting because it makes the entire process official! Once it’s done, you have your own business.
Choose where to register your company
Selecting your business location is an important decision because it can affect your taxes, legal requirements, and revenue. Most people will register a business in the state where they live, but if you are planning to expand, you might consider looking around to see if other cities or states offer greater opportunities in the vending machine market.
If you’re willing to move, you could really maximize your business!
Choose your business structure
Businesses come in several varieties, each with its pros and cons. The legal structure you choose for your business shapes your taxes, personal liability, and business registration requirements, so it’s important to choose wisely.
Here are the four main options:
- Sole proprietorship – The most common structure for small businesses makes no legal distinction between company and owner: you get to keep all the profits, but you’re personally liable for all debts.
- Partnership – Similar to a sole proprietorship, but for two or more people. Again, owners keep the profits and are liable for losses.
- Corporation – Under this structure, the business is a distinct legal entity and the owner or owners are not personally liable for its debts. Owners take profits through shareholder dividends, rather than directly.
- Limited Liability Company (LLC) – Combines the characteristics of corporations with those of sole proprietorships or partnerships. Again, the owners are not personally liable for debts.
We recommend that most new business owners form an LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can quickly and cheaply form an LLC using ZenBusiness’s online LLC formation service (it can take as little as 5 minutes). They will check that your business name is available before filing, submit your Articles of Organization and be on hand to answer any questions you have about the company formation process.
Step 6: Register for Taxes
Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate on a calendar year (January–December), or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.The IRS website also offers a tax-payers checklist, and taxes can be filed online. It is important to consult an accountant or other professional to help you with your taxes to ensure you are completing them correctly.
Step 7: Fund your Business
Securing financing is your next step and there are plenty of ways to raise capital:
- Bank loans: This is the most common method, but getting approved requires a rock-solid business plan and strong credit history.
- SBA-guaranteed loans: The Small Business Administration can act as guarantor, helping gain that elusive bank approval via an SBA-guaranteed loan.
- Government grants: A handful of financial assistance programs help fund entrepreneurs. Visit Grants.gov to learn which might work for you.
- Venture capital: Offer potential investors an ownership stake in exchange for funds, keeping in mind that you would be sacrificing some control over your business.
- Crowdfunding: Websites like Kickstarter and Indiegogo offer an increasingly popular low-risk option, in which donors fund an entrepreneur’s vision.
- Personal: Self-fund your business via your savings, the sale of property or other assets, and support from family and friends.
Step 8: Apply for Licenses/Permits
Starting a catering business requires obtaining a number of licenses and permits from local, state, and federal governments.
Federal regulations, licenses and permits associated with starting a vending machine business may include doing business as (DBA), health license and permit from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents and other intellectual properties, as well as industry-specific licenses and permits.
Any vending machine that takes money in exchange for products requires its operator to get a state-based business license. You may also need a business license and local county or city-based health and food-handling licenses and permits. Additional beverage or food licenses may be required based on what your vending machines carry. If you plan to offer tobacco products or alcohol, you will need to additional licenses. Additionally, your vending machines may need to be inspected to complete the application process, according to business launch adviser Corpnet.
Further permits may be required by your state, such as a general business permit or license. The license requirements and how to obtain them vary from state to state, so check your state government’s website or contact the appropriate person to inquire about licenses and permits needed to run a catering business. You could also use the SBA’s guide to identify the required licenses and permits for your industry and your state. Your city, town, or county may also have additional requirements, such as signage and zoning permits. Speak to representatives of your local governments about licensing requirements.
This is not a step to be taken lightly, as failing to comply with legal requirements can result in hefty penalties. If you feel overwhelmed by this step or don’t know how to begin, it might be a good idea to hire a professional to help you check all the legal boxes.
For peace of mind and to save time, we recommend using MyCorporation’s Business License Compliance Package. They will research the exact forms you need for your business and state, and provide them to you to make sure you’re fully compliant.
Step 9: Open a Business Bank Account
In order to start vending you will need to have somewhere to keep the money you make, and that requires opening a bank account.
Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you run your business as a sole proprietorship. Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer business account options, just inquire at your preferred bank to learn about rates and features.
But it is a good idea to look at a few options, as banks vary in terms of offerings, and you want to find the plan that works best for you. Once you choose your bank, you just need to bring your EIN (or Social Security Number if you decide on a sole proprietorship) and your articles of incorporation or other legal documentation that proves your business is registered.
Step 10: Get Business Insurance
Business insurance is an area that often gets overlooked but is vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your life and business.
Here are some of the different types of insurance to consider:
- General liability: The most comprehensive type of insurance, acting as a catch-all for many business elements that require coverage. If you get just one kind of insurance, this is it. It even protects against bodily injury and property damage.
- Business Property: Provides coverage for your equipment and supplies.
- Equipment Breakdown Insurance: Covers the cost of replacing or repairing equipment that has broken due to mechanical issues.
- Worker’s compensation: Provides compensation to employees injured on the job.
- Property: Covers your physical space, whether it is a cart, storefront, or office.
- Commercial auto: Protection for your company-owned vehicle.
- Professional liability: Protects against claims from a client who says they suffered a loss due to an error or omission in your work.
- Business owner’s policy (BOP): This is an insurance plan that acts as an all-in-one insurance policy, a combination of any of the above insurance types.
Step 11: Prepare to Launch
As opening day nears, prepare for launch by reviewing and improving some key elements of your business.
Develop your website
Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism.
You can create your own website using services like WordPress or Squarespace. This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech-savvy, you can hire a web developer to create a custom website for your business.
Essential software and tools
Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, a number of excellent software programs and digital tools can help you with many business tasks. We have broken them down into different categories below.
Vending management system (VMS)
It may be worth investing in a vending management system (VMS) to help manage your vending machines, with prices ranging from about $20 per month to $100 per month. But depending on the level of technology in your chosen machines, they may come pre-programmed with software that tracks inventory and revenue.
Some popular VMS websites:
- Parlevel Systems Vending Management System (VMS)
- Vend Trak
- OTI Global
- Vending Purchase Group
Much of your business will be walk-by customers, but you should still spend time marketing yourself! Especially as a new business, it’s important to get the word out so customers are aware of you.
Social media is a particularly good way of promoting your business because you can create engaging posts that advertise your products:
- Facebook: Great platform for paid advertising, allows you to target specific demographics, like men over age 50 in the Cleveland area.
- Instagram: Same benefits as Facebook but with different target audiences.
- Website: Search engine optimization (SEO) will help your website appear closer to the top in relevant search results, a crucial element for increasing sales.
- Popular web-based accounting programs for smaller businesses include Quickbooks, Freshbooks, and Xero.
- If you are unfamiliar with basic accounting, you may want to hire a professional, especially as you begin. The consequences for filing incorrect tax documents can be harsh, so accuracy is crucial.
You really only need one item to launch a vending machine business, but you might consider some additional equipment to help you get off the ground. Here’s a brief list:
- Vending machines
- Truck (optional)
- Moving equipment (optional)
Step 12: Build Your Team
You may not need to hire any employees if you are starting as a small business run out of your home. But as your business grows, you will likely need full-time employees to fill various job roles, such as:
- Truck driver
- Installation lead
- Maintenance supervisor
- Inventory manager
Your business may at some point need to hire all of these positions, or just one or two of them, depending on size and need. You might also hire multiple workers for a single role, or a single worker for multiple roles, again depending on your needs.
Free-of-charge methods to recruit employees include publishing a job post on platforms such as LinkedIn or Facebook, or using free classified sites like Jobs and AngelList. You might also use a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Finally, you could hire a recruitment agency to help you find talent.
Step 13: Start Making Money!
Focus on USPs
Unique selling propositions, or USPs, are the unique characteristics of a product or service that sets it apart from the competition. Customers are inundated with buying options and need to be able to quickly grasp what’s novel about your vending machines and how they fulfill their wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire.
You can differentiate your vending machine business via the following USPs:
- Make products easily accessible using selection and payment options
- Keep machines clean and well serviced
- Secure prime locations
- Embrace appealing branding design
- Offer unique products, such as electronics or health-related items
- Website and SEO – Create a website and optimize it for search engines.
- Social media marketing – Create a strong social media presence, especially on Facebook, Twitter and Instagram, by posting regularly.
- Competitions and giveaways – Via email or social media, generate interest by offering prizes to people who buy a certain product or from a specific machine.
- Signage – Use eye-catching designs and signage on your machines.
- Promotional Materials – Distribute flyers around your machine locations and at industry events and tradeshows.
Vending Machine Business FAQs
Vending machines can be quite profitable. Any given machine’s profitability will depend upon its location and overall pricing. Different food, drink, and product options have their own margins based, and a savvy owner will leverage the best ones. A well-placed and well-serviced vending machine can earn up to $400 in monthly revenue and $100 in profit.
Yes, vending machine owners generally pay 5-20% of sales revenue to the owners of the building or business where their machines have been installed.
Yes, vending machines are charged sales tax on the revenue they generate, which varies based on state.
The vast majority of vending machines are in commercial spaces such as offices, hotels, factories, entertainment spaces, and so on. You will likely need to sign a contract with the owner before installing your machines. For public places, you will need to reach out to the local government to find out what you need to do.