The first thing people say to me when they find out that I own a bulk candy vending business is, “have you looked into snack and soda machines? I know a guy who’s making a ton of money off those things.”
I just humor the person with a smile and a nod, knowing that they would never understand why I’d never touch one of those machines.
The Passive Income Mindset
In my way of thinking, the problem with large vending machines that sell packaged products is that they require too much maintenance. They might make four times as much per month, but they require about a hundred times more maintenance.
Just think of the time you would have to spend every day loading heavy crates of soda cans at Sam’s Club, hauling them to locations, and fending off onlooking customers who want the dollar back that the machine ate yesterday.
There’s nothing wrong with working for your money, I’ve done it all my life. There’s an endless supply of people who are willing to do the work for the right price. I’ve just reached a point in my life where I value time over money. I now seek businesses that don’t require my presence to operate.
Is Vending Passive or Not?
A lot of people try to argue with that vending isn’t passive. To them, I say, it is what you make it. It can be an extremely labor-intensive venture, or it can be something that you do once a month. If you wanted to work even less, you could hire someone to make it even more passive.
If you do it my way, you only work one or two days a month. You use it as an excuse to travel, to get out of the house, to explore the neighborhood, to eat a business lunch at one of your locations, or to listen to a book on tape.
Here are a few ways to make vending as passive as possible. Even if you aren’t in the vending business, you might be able to take away something about reducing maintenance in any kind of business.
Use Triple-Vend Machines
I choose to only work with triple-vend bulk candy machines like the one in the photo at the top of this post. For me, these machines offer the right mix of affordability, volume, and capacity.
You can find a single triple-vend machine at Sam’s Club for less than $200, or get a block of 10 on eBay for around $120 a piece. If you’re a bargain hunter, you can always find used machines from ex-vendors who bit off more than they could chew.
A triple-vend machine has three choices and therefore covers a wider market. The machines aren’t so big that they’re intrusive on a store owner’s space, but they out-sell single head machines all day. Plus, they’re small enough to fit in the trunk of your car.
Triple-head machines carry 15-20 pounds of candy, enough to yield $150-$200 in revenue. In order to make your business as passive as possible, you need to minimize the number of service visits and maximize your yield per visit.
Choose the Right Triple-Vend
Make sure you choose a machine that is all-metal. I’ve used machines by Amerivend and Seaga, both have worked well for me. I know people who have been happy with XYZ Vending also. Don’t succumb to the temptation to buy a plastic machines. They look cheap and are more likely to break down, requiring more of your time.
Think of these machines as assets. It’s better to pay a little more for an asset that will stick around for awhile and make you money. Plus, you can sell it when you’re ready to retire and get at least half of your money back.
Control The Size of a Single Vend
You can adjust the size of a single vend on all the machines I just described. It’s important to put some thought into your portion strategy to maximize your return and minimize maintenance. You don’t want to give out so much candy that you run out every week, but at the same time, you don’t want to leave you customers feeling cheated.
When I bought the vending route that I described as The Best Deal I’ve Made Yet, the previous owner had set all of his machines to give out the maximum allowable proportion for each vend. Maybe he thought he was being generous, or maybe he didn’t realize that the machines were adjustable.
I quickly realized that he had done this when I was having to return to some locations very often and I wasn’t making the margin that I was used to. Profit margins on a bulk machines should be about 75% or more. This guy’s machines were closer to 50%.
It may seem like a selfish thing to do until you realize that there is a point of diminishing returns with generosity. People have a set expectation of what they can buy for 25 cents. If they get less than they expect, they will definitely notice (and tell you if you’re present!) On the other hand, if they get more than they expect for 25 cents, they probably won’t notice; or worse yet, they might even be annoyed!
“What am I going to do with all this candy!” “Are they trying to get me fat?”
The type of clientele also makes a difference. I have machines placed in employee break rooms with college-aged workers who expect a lot of candy for their quarter. I also have some machines in family restaurants where most of the customers are below the age of 8! These kids don’t miss the extra candy and their parents are happy to limit their sugar intake.
Experiment a little, but commit to a strategy. It is a pain to adjust the size of the vend once the machine is placed and full. It usually requires a trip back to your shop.
Find a vend size that is big enough to keep customers coming back, but small enough to make it worth your while.
Time Your Service Schedule For Maximum Yield
When I make a vending stop, I want to take home at least $50 in cash, preferably $100. If I’m going to service 20 machines in a day, I’d much rather make $100 per machine than $10.
Some people think that they need to service their machines often, even if they don’t it. Try to get away from an arbitrary service schedule and move to a smart strategy that treats each location based on it’s volume.
The ideal time to service a machine is when it’s about 1/4 full. Think of it like a gas tank. If you always filled up when the tank dropped to 3/4, you’d be filling up all the time.
Don’t ever let any one compartment on your triple-vend go completely empty. It looks tacky and it’s not making you any money. Try to time it out so you hit it before that.
If one candy is selling like hot-cakes while another is barely moving, maybe it’s time to replace the slow-mover with another candy. You might even consider doubling up on a hot candy, just so you won’t have to come back so often.
Most of my locations can go 2-3 months without service. I have a few hot-spots that need it every month, but most can wait. I don’t like to let a location go more than 4 months, because I like to know that it’s still in working condition.
Fill Your Machines to the Top
When the previous owner of one of my vending routes handed me the keys, he told me that he never filled the machines over 1/3 full. He said it was because he heard a rumor that too much candy could jam the gears.
I was shocked when he told me this. Why would a vending machine manufacturer make a machine that couldn’t handle it’s own load? He was letting superstition create a ton of extra work for him. No wonder he was selling.
I fill my machines to the top. Mainly so I don’t have to return as often, but also because it makes it easier to know how much I sold since the last time I visited. I keep careful records of how much each machine sells, and compare it to the income so I know my margins.
My Best Location
My best location is in a high-volume family restaurant. I had no idea that it was going to be such a great location until I showed up the first month after 4 weeks to find it bone dry! I was both excited and terrified, mainly because I was moving to Los Angeles and wasn’t planning on coming back to Austin but once every two months.
My initial solution was to install another machine. I convinced the store owner that demand was such that we needed to offer another option. I walked away satisfied, and returned a month later. To my surprise, four of the six compartments were… bone dry again!
What a nice problem to have, huh! I knew I was going to have to get clever. I noticed that the gumball compartments on both machines were dry. I replaced one of the slow movers with a 3rd gumball compartment, replaced peanut M&M’s (which run out faster because they’re bigger) with regular M&M’s, and adjusted all the serving sizes down (the clientele was mainly kids).
Now, when I go back there every two months and open the money hatch, quarters spill out like a slot machine.