Since the market implosion in the Fall of 2008, watching the news will scare the pants off of you. No, literally. I was walking by a department store that had the evening news displaying a graph of the market and my pants literally detached themselves from my legs. Now I am sitting here staring at a $500 citation for indecent exposure, just what I needed in this down-and-out economy! Seriously, though, the collapse of our financial markets scared many investors into not taking risks. Starting any business, including a vending machine business, at face value seems risky right now. But like anything, you have to look at the facts.
Be fearful when others are greedy and greedy only when others are fearful. – Warren Buffett
I JUST DROPPED A WARREN BUFFETT QUOTE ON YOU. That means things are about to get heavy. If you are looking into starting up your own business or buying into a franchise model, the choices are endless. The demands for initial investment vary from a few thousand dollars to millions. The time, expertise, and knowledge capital requirements vary equally as much. An often overlooked option is a vending machine business.
PROS: Vending operators who are successful often revel in how sweet of a set-up this business is for a variety of reasons:
- Low Cost of Labor: The machines do all the work. No clerk is required to execute each transaction. Filling the machines and handling maintenance are the main human-required components once the machine is placed. This is a business you can do in your spare time which keeping the stable income of your day job.
- Customer Accessibility: Your business is open for as long as people have access to the machine. In many locations, such as hospitals, this can be 24 hours a day.
- Mobility: Location starts to get low traffic? Sales are suffering? Pop that baby on a dolly and wheel it on across the street to a better one!
- Relatively low initial investment: Compared to other franchises, these machines are a minimal investment. $10k for a premium high-tech vending machine, and a little as $2k for a plain ugly brown box traditional vending machine.
CONS: If something sounds too good to be true, it usually is. I’m sure this is no surprise to you. Just like any business, there are risks involved:
- Location, location, location. Location is obviously important in ANY business. With vending machines it is THE most important factor (assuming your machines work and have product in them). Just buying a machine and trying to find a location on your own is difficult. Turnkey-model vending businesses exist that will help you acquire premium locations, though, but you must be sure to use an established and reputable one.
- The traditional vending industry is in a decline. The industry that everyone knows best, traditional junk food and soda vending, has become stagnant. Sales have flat-lined for soda, candy, and chips. However: Certain niches within the vending industry are exploding. Healthy vending is poised to become a long lasting trend with legislation emerging from the Obama administration demanding healthier food and snack options in schools. Wellness programs at office buildings and hospitals are also becoming increasingly interested in provided premium amenities for their employees and customers rather than the typical junk.
- You could be contributing to the declining health of Americans. If you are interested in being as socially responsible as you are financially successful, then you need to consider the real effects that investing in a traditional vending machine company will have. Over 33% of Americans are now obese, and obesity costs our country $150 billion per year in health care costs. Childhood obesity is on the rise at an alarming pace as well. You should consider how your business will fit in to this mess. Will it make the problem worse by providing junk food and soda to people? Or will it provide healthier choices for people?
So do your homework. Warren Buffett would agree, and I’ll verify this with him if he ever returns my phone calls. The Oracle of Omaha says DON’T BE SCARED of taking a risk…but do your homework first.