In this article, we discuss:
A vending machine business is a way to generate passive income and predictable cash flow. With so many options to choose from, entrepreneurs can get creative with the types of food or beverages they sell, vending machine locations, and the size of their business. However, there are regulations, logistics, operations, and nuances to think about before jumping in. We provide all the information you need on how to start a vending machine business.
laws and regulations
There are both state and federal regulations on selling food and/or beverages from vending machines.
Federal: The United States Food and Drug Administration (FDA) requires vending machine labeling, known as vending machine final rule, The final rule applies to vending machine operators who own or operate 20 or more vending machines. The regulation requires calorie declarations for vending machine foods for which the Nutrition Facts label cannot be checked prior to purchase or if nutrition information is not provided at the point of purchase. The FDA has prepared a guidance document to help vending machine operators comply with the final rule. Section 4 in the FDA Calorie labeling of foods in vending machines: guidance for industry Here’s the full breakdown of everything you need to know. Vending machine operators with fewer than 20 vending machines may be subject to compliance with the final rule by voluntarily registering with the FDA FDA Form 3757,
machine” State: Each state has laws regarding vending businesses and most require that you obtain a business license or permit. States are flexible with your business structure because you can usually decide what type of business is best for you. You can operate as a limited liability company, sole proprietor or other business structures. Keep in mind that each state views the types of food and beverages you want to sell differently. For example, Connecticut’s vending machine rules for operators do not apply to operators of machines that sell beverages other than milk or milk products only in sealed cans or bottles.
Let’s take a look at how the state of Connecticut handles regulations for vending machine businesses to give you a general idea of what you may encounter when researching your state’s vending machine laws:
- A Google search for the term “vending machine laws Connecticut” reveals that both the Department of Public Health (DPH) and the Department of Consumer Protection (DCP) regulateVending Machine Laws in Connecticut,
- you have to fill a Application for obtaining Vending Machine License issued by DCP,
- There are fees based on the number of vending machines.
- There are requirements for operators to provide the Director of Health access to a vending machine for inspection. Violations of the Public Code are subject to a $100 fine, up to three months in prison, or both.
- There are requirements for vending machines such as they should be in a well-lit area and the space around and below the vending machine can be easily cleaned so that there is no room for insects and rodents.
- There are specific requirements surrounding the sale of milk.
The point here is that each state goes into different levels of depth on how you need to operate your own vending machine business. Before purchasing a vending machine, make sure you do your due diligence on your state’s regulations.
vending machines in schools
developed by the US Department of Agriculture A guide to smart snacks in schools Which provides guidelines for states to follow regarding the types of food and beverages sold at vending machines on school grounds. In addition to the standard state regulations that we touched on above, each state also has its own rules when it comes to vending machines in schools.
For example, the state of Connecticut requires that all food available for sale to students from vending machines on school premises must comply with Connecticut nutrition standards. All beverages available for sale to students from vending machines on school premises must comply State Beverage Laws, In addition, all beverages available for sale to students on school premises during the school day must comply with the USDA’s Smart Snacks nutrition standards.
Before considering a school for your vending machine location, be sure you do your due diligence on your state’s regulations.
vending machine cost
Like any business, vending machine business owners will incur costs to set up, maintain and operate their business. Let’s review the high-level costs:
Upfront Cost: Start-up costs include the initial cost of a new vending machine or a used vending machine and stocking the machine. The cost of a new vending machine varies widely from the $1,000 – $10,000 range depending on the type of machine. Typically the most cost-effective vending machines are those that dispense both food and drink from a single machine.
Finding a vending machine distributor to buy a machine from is as easy as doing a Google search for “buy a vending machine”. A list of companies will appear where you can buy your vending machine.
Financing Options: While some vending machine options have relatively low startup costs, some machines can run you upwards of $10,000. If you want more than one vending machine, your start-up costs may start to add up now and you may need financing. In a related article, we cover What you need to know to apply for your first business loan, which guides businesses looking to obtain their first business loan. If you are an individual and do not plan when you need small business financingSome vending machine vendors have financing options available to individuals.
Overhead Expenses: These costs are required to run the business and include fees associated with licenses, permits, IRS taxes, insurance, and more. Yes, you should get insurance for your vending machine. What are the scenarios that may arise such as a customer getting injured due to your machines, vandalism or theft, property damage due to your vending machine short-circuiting and catching fire, mechanical breakdown etc.
Operating Cost: If you have a network of distributed vending machines that need to be re-stocked, re-stock costs, commission and/or rent to the owner of the property where your vending machine sits, repair costs and employee costs .
vending machine business model
There are a myriad of options in the vending machine industry when it comes to types of vending machines, locations, and operating models. When deciding how to structure your vending machine business, consider the following:
What would you share?: Your vending machine small business can dispense food such as candy bars, healthy snacks, sandwiches, and more. There are special vending machines that can dispense items such as laundry supplies, cell phone accessories, stickers, and convert a dollar into quarters. There are beverage vending machines that dispense hot beverages such as coffee. There are bulk vending machines that dispense items such as gumballs. There are many vending machine options to choose from.
Market research to find the right niche: It would be a mistake to buy a vending machine without doing due diligence on the market you intend to install the machine in. Research potential locations to understand the amount of foot traffic, when the location sees foot traffic, etc. A successful vending machine business takes advantage of high-traffic locations with relevant types of products. For example, a vending machine that sells healthy snacks would work better at a gym than at a grocery store. Other possible locations for vending machine business could be office buildings, office space inside train stations. laundromatmotels, trade-show complexes, airports, and more.
One way to secure a location for your vending machine is to contact the property manager of the building you are interested in and request permission to place your machine on their property. Another option is that some vending machine companies have location services that can help you find a location for your vending machine.
In addition to a high foot-traffic area, your location will also need power, security, ample space, and the ability to connect to Wi-Fi for modern machines.
Payment functionality: Vending machines can accept cash, credit cards and debit cards. Having your vending machine accept multiple forms of payment is likely the best option as it gives your customers a choice of how to pay. For information on how to save money with credit card processing, please visit our article titled How To Minimize Credit Card Machine Fees For Your Small Business,
business plan: writing a business plan This may be required if you plan to obtain a loan for your start-up costs.
Vending Machine Company: As noted above, the FDA’s final rule applies to vending machine companies with 20 or more machines. This begs the question, do you want lots of vending machines or just one or a handful? This will help inform how you approach your business structure, whether you’ll need full-time employees supporting your network of machines, how much funding you’ll need, if you need a business bank account. Will be, etc.
vending machine profit
The vending machine profit formula is relatively simple but you may still need the help of specialized vending machine business software. Your administrative burden will increase as you scale, especially if you have a lot of different products in your vending machines.
To calculate your monthly profit, you need to know how many items you sell per day, how much profit you make per sale, and your monthly expenses. You then multiply the items sold per day by the profit per month sold and then subtract the expenses.
For example: (10 items sold per day x .25 percent profit per item x 30 days per month) – $25 = $50 in expenses.
Unfortunately, there are no standard guidelines on what profits to expect due to the wide variation in the type of vending machine, its products, and its location. However, with enough research, you can potentially make an estimate based on foot traffic volume, the products you sell, and the likelihood of purchases.
See step-by-step how to start a vending machine business
Let’s summarize what we have covered so far and what could be the possible route to start your vending machine business:
- First, you need to know if you want to go big or small. It’s okay not to know, you can always start small with one vending machine, see how it goes, and evaluate. But, as a first step it will be helpful to clarify your vision.
- Decide on your business structure and any associated state and/or federal filings. You can operate a vending machine as an individual or as a business.
- Review state and FDA regulations.
- Decide what type of vending machine you want: food, beverage, combination, etc.
- Choose a location by contacting property managers or working with a vending machine company that provides location services.
- Buy vending machine.
- Secure insurance, initial stock, and coordinate with asset location on delivery dates, times, and logistics.
- Ongoing operations like re-stocking, repairs, finance etc.