Vending machines

[fredo]

As a low enrty investment I purchased 3 small vending drink machines 1800 each I have them located in low risk areas within the building
I get 12% after tax return for a straight out purchase

Fredo:)

[bundy1964]

How much time do you have to put into refilling the machines a week?

[Lissy]

Whereabouts do you find vending machines advertised for sale?

[Ruby]

There were a couple of places at the Investment Expo selling them on the weekend.

But check out The Age, under businesses for sale......there are usually a couple in there. Or I suppose other "businesses for sale" publications.

You can also do a search on the Rich Dad Forum.....they have a bit of discussion on vending machines over there.

Ruby :)

[fredo]

The vending machines are small and hold 3 varieties totalling 99 cans
I spend no time filling them, I am guaranteed 20% gross return on my investment The way it works is Vendinvest selects suitable sites eg panel beaters, joinery shops etc and locates a machine on the premises. Cans sell for $1.00 so the y walk out the door
He is able to buy Coke 30 pack for $14.65
That equates to approx 50 cents profit from each can he gets 30c and I get 20 cents per can

I have 3 machuines and get $93,0 per mth
If he sells 30 cans or 3000 I get the same amount
I can provide details of the vendor if you are interested He is in Mt Waverley Melb
Regards Fredo

[Kevmeister]

I have 3 machuines and get $93,0 per mth
If he sells 30 cans or 3000 I get the same amount

Are you saying you get the same $93 per month regardless of how many cans the machine sells, or that you get the same amount per can regardless of how much the machine sells?

[fredo]

I get $93 per month regardless of how many cans the machine sells. It is in his interest to site the machines for max use

Fredo

1 can sold per mth = $93
500 cans per mth = $93

Regards Fredo

[watto]

Gday Lissy,

Hope this helps you, i picked up a brouchure at the recent expo.

They were selling packages of machines as follows...

Special 1:

Drink Machines

10 x AVI 120M $26K
10 x AVI 120E $38K


Special 2:

Bulk Candy Machines

30 x U-Turns $29,990


Special 3:

Snack and Drink Machines

5 x FAS $44,950
10 x M-Combo $79,500

They also have some hot drink machines but no prices in the brouchure.

The guy on the stand said the best machines for Melb tended to be the combo machines as cold drinks tail off a fair bit in the winter months.

These guys run some sort of program for 16 weeks where they support you and if the location turns out to be a dud they relocate it for free from memory, you might want to confirm that.

You have too service the machines yourself they estimate 20 machines can take as little as one day.

You collect your profits within 2-4 weeks, they have a professional location service to find suitable sites. They had about 20 sites listed on saturday afternoon that wanted various types of machines, which they would match to buyer.

They have a website.... www.austway.com or by phone on 1300 76 99 67.

As always you need to do the due dilligence, let us know how you go.........


Cheers
watto

[Lissy]

Thanks for the info Watto! I've got this stored away in my alternative sources of passive income file for future reference. I'm busy enough with wrapping at the moment!

[bundy1964]

Originally posted by fredo
I can provide details of the vendor if you are interested He is in Mt Waverley Melb
Regards Fredo

Fredo I am interested

[Kevmeister]

I just revisited this thread as I was thinking about it lately.

Fredo states he gets a 20% gross return per annum.

What is the typical lifetime of such a vending machine?

If based on the lifetime of the vending machine we factor in depreciation then what is the return then?

We shouldn't forget that despite getting a 20% gross return the plant itself is depreciating to zero value.

And (just to maintain a connection to Real Estate), if the machines were purchased with 80% OPM (other people's money), what would the returns be like then?

[bundy1964]

Originally posted by Kevmeister
I just revisited this thread as I was thinking about it lately.

Fredo states he gets a 20% gross return per annum.

What is the typical lifetime of such a vending machine?

If based on the lifetime of the vending machine we factor in depreciation then what is the return then?

We shouldn't forget that despite getting a 20% gross return the plant itself is depreciating to zero value.

And (just to maintain a connection to Real Estate), if the machines were purchased with 80% OPM (other people's money), what would the returns be like then?

My guess you could get 20% depreciation a year over 5 years?

I gueess you could get a 100% loan ( personal loan ) and depreciate the loan costs over 5 years or the life of the loan and claim the interest :D

After 5 years you would get a taxable 20% return unles there is cpi rises built into the lease which would be a nice thing.

Just waiting to collect some cash I am owed before I contact the guy who runs them.

[Kevmeister]

If these machines had a useful life of only 5 years, thereby providing for a 20% straight-line depreciation, then my numbers suggest that this is a pointless investment.

The return you are receiving from the machines is only enough to cover the "capital erosion" resulting from the depreciation.

In order words, three machines for $5400 returns $1080 "income". After 1 year, the machines are now worth (on paper) $5400 - 20% = $4320. You earned $1080 of income only to have your machines now worth $1080 less.

This suggests to me that these machines must have more like a 10-15 year lifespan, if not longer, in order to make the deal worthwhile.

Kevin.

[Lotana]

Kev,

The machines would serve longer than 5 years, but ATO gives effective life of 5 years allowing 20% straight-line depreciation.

Also, as I understand, the business is more profitable than 20%. I have done a bit of research but was not able to find any credible statistics. I was told that BIS Shrapnel produced a report on vending in Australia, which they sell for $15,000. In vending business (like in RE) the most critical aspect is location. Large players such as Coke take the best sites.

Say cheese :p

Lotana

[Sunstone]

Dear guys,

The Entrepreneur Business Centre has some interesting reports. You can get sample of the report which has three worthwhile and factual pages for free about the Vending Machine Business.

File is too big to attach and it unfortunately doesn't allow a direct link to the file however it you are interested it is on the www.ebc.com.au website under the business guides section.

One excerpt:

High Net Profit Before Taxes $55,320
Average Net Profit Before Taxes $37,800
Mininum Startup Investment $47,000
Average Startup Investment $82,000
Stability Good
Risk Factor Low
Industry Growth Prospects Good
Absentee Ownership Potential Yes

Only catch is that they are proactive in following up inquiries. Be warned that if you give your name and telephone number you may get a followup phonecall them.

Cheers,

Sunstone.

[Lotana]

Sunstone,

Thank you for the link. I just downloaded the guide and must say that it does not contain any valuable information - just describes the content of the document you can buy. For example, the Market Research chapter of the free doc simply says:

"This chapter investigates how to identify your market and how to cater for that market needs. It also looks at the methods used to do this and the reasons why market research and planning is so important, especially in the start-up phase."

That's it and off to the next chapter. I think this is a bit too generic and can be applied to any other type of business. Well, you get what you pay for.

Say cheese :p

Lotana

[Sunstone]

Lotana,

I agree most of the document is generic.

However the useful part is pages 15-17 of this document.

This part IS useful for free information on the vending machine business.

Cheers,

Sunstone.

[antloom]

I have a contact with someone in Sydney who is deploying 60-80 machines per month.

Remember the gst is claimable

20% income paid monthly.
From memory this includes insurance.

Depreciation is over 5 years.

Useful life is about 10 years or more.

Location done for you.

I am puting together a unit trust for vending machines at the moment.

I wont be gearing with the trust itself but if people are it works a bit better as the interest offsets other investment or PAYG income.

I have also found a couple of lendors that will do 100% lend on vending machines with no additional security up to 50K.

Although at the interest rate 8.2%. 40% LVR seemed to work best to maintain positive cashflow.

Anyone has any questions, let me know.

[mitchmakhan]

Hi people,

We run 10 Vending Machines in Industrial areas in Brisbane and also have an IP, I like the IP better as I dont have to go there every week, which I Have to do with the machines.

Maintainence is not too bad, parts are needed from time to time and if you cant get parts it can seriously limit your income.

However we net around $450 p/month from the machines which i guess is pretty good for a small invesment of 16k.

I am looking to sell though in the near future and I am considering purchasing a Laundromat instead.

We decided to get into it to learn about business from another quadrant other than the e side, I guess it's an s business but we wanted to learn with a relatively small investment risk.

I would recommend buying the machines in an existing run or buy the machines from a manufacturer and site yourself, as I think the package deals are loaded quite well.

Cheers
Mitchmakhan

[Matt Mc]

If anyone else is interested in vending machine investments i believe our company can help.

We currently have Drink Machines (Daquiris) returning guarenteed 22% Min Gross return PASSIVE.

Cost of machine is $5,700 + GST

If you are interested in more details please contact our Business Brokerage Division on (07) 3857 1336 or johni@johnmcandrew.com.au

SOrry for the advertising but it does seem relevant and informative in this thread.

[Sunstone]

Dear guys,

A vending machine I haven't seen before:

http://www.franchisebusiness.co.uk/hotbites/index.htm

Cheers,

Sunstone.

[XBenX]

Originally posted by Matt Mc
If anyone else is interested in vending machine investments i believe our company can help.

We currently have Drink Machines (Daquiris) returning guarenteed 22% Min Gross return PASSIVE.

Cost of machine is $5,700 + GST

If you are interested in more details please contact our Business Brokerage Division on (07) 3857 1336 or johni@johnmcandrew.com.au

SOrry for the advertising but it does seem relevant and informative in this thread.

we have a few of these in the club - they sure didnt cost $6K but they arent managed either....

[Tony]

Hey XBenX,
So come on spit it out, how much did it your machine cost & is it the same as in the previous add? Also do you make similar returns as listed & how much work is required by you to maintain the machines?

Interested in seeing your reply.

Regards Tony. ;)

[XBenX]

Same machines $800 upfront + sign maintainence/supply contract

Returns arent seperate from the rest of the business so I have no idea

Requires no maintainence... the staff onsite fill it up and I havent had one break (we have 4).

As mentioned the reason these are different from the ones above is they are part of an existing business and not managed.

no advice here just experiences :)

sorry if it sounded like i was baiting for selling something (I understand how it could be taken that way)

[Tony]

Hi XBenX,
Didn't think you were baiting, but i did want more info.

Regards Tony

[XBenX]

cool, I assume they essentially provide the machine at that price in order to create their sales (hence having to sign the supply contract)

just so its clear i dont own/operate the machines - i just manage the club

[Sunstone]

Dear guys,

A couple of useful local sites on vending machines.

http://www.ivmoa.asn.au/
http://www.ava.asn.au/

Cheers,

Sunstone.

[Thommo]

Do you have anything more than a passing interest in vending Sunstone?

T

[Sunstone]

Dear Thommo,

The answer you seek is not so black and white.

Coin-operated devices have many synergies with realestate. More to talk about when you are down in Brissy.

Cheers,

Sunstone.

[Mr Ed]

I have two clients who run vending machines and their advise has been, run the same machines don't mix your models, that way you only need to carry one set of spares, and the same type of stock.

Location is everything.

Finance can be a bit difficult but is obtainable.

Buy an existing run if you can as they are already placed. From my understanding pubs can be difficult to get into because the spaces are sold.

Mr Ed

[Thommo]

I have two clients who run vending machines and their advise has been, run the same machines don't mix your models, that way you only need to carry one set of spares, and the same type of stock.

Location is everything.

Finance can be a bit difficult but is obtainable.

Buy an existing run if you can as they are already placed. From my understanding pubs can be difficult to get into because the spaces are sold.

Mr Ed
Generally sound advice but you have no option to mix models, for many reasons. In my run I have six different manufacturers and often different models from each. Then you have a number of manufacturers of the coin acceptors who are constantly changing things. The last can vender I bought new had no user's manual for either the acceptor or the box. This is awkward and will usually cause a few "operator error" type faults until you get up to speed, but that's life.

I built my biz from scratch and trust me, it is very difficult and frustrating. Much better to buy an existing run and be willing to make fair offers for add-on runs to expand.

Just one more point: It is not for technophobes! If you do not routinely fix everything that breaks around the house, do something different. Better still if you can read a circuit diagram and use a multi-meter and soldering iron.

Thommo

[Mr Ed]

I agree with what you say. I supose the bit I left out was these guys do have different models the same as yourself. However they do try and buy secondhand ones that are the same as there current models. They've made mention more than once that they wished they could just have all their gear the same.

But not always possible.

And yes it's very "hands on" business.

Mr Ed

[dtraeger2k]

Hi Thommo,

Sounds like you've done fairly well there, well done. In my inexperienced opinion, I'd be assuming placement/location would be the toughest part of it? Managing stock levels and reading technical instructions arent very difficult.

Therefore, can u tell me a little about how you sourced locations? Was it mostly 'cold-visiting' local businesses and asking them if you can leave a machine there?

-Kind regards

Dave

[Thommo]

Hi Thommo,

Sounds like you've done fairly well there, well done. In my inexperienced opinion, I'd be assuming placement/location would be the toughest part of it? Managing stock levels and reading technical instructions arent very difficult.

Therefore, can u tell me a little about how you sourced locations? Was it mostly 'cold-visiting' local businesses and asking them if you can leave a machine there?

-Kind regards

Dave
Should've kept my mouth shut, or asked Acey to write my book.

I remember a review of the movie The Man From Snowey River which went something like "The best part of the movie was the horse chase. The worst part was the rest of it." The easy part of vending is looking at it.......

Lets start at the highest plane.... Nothing worthwhile is easy.
Let's then go to..... No profitable business is easy. (only unique skills can make an otherwise difficult buisness so)
The corollory.... If a buisness is easy everybody wants to do it so the entry price is high. eg Taxis. (apologies here to taxi drivers, I know it aint easy)
The conclusion...... Nine out of ten newbies will fail in a buisness which could be profitable, allowing the survivors to pick up the pieces and become more so.

Trust me! There is more to it than the ability to count money.

Nothing personal here Dave and I'll PM you one I wrote to another member.

Thommo

[skater]

Sorry, but I, too, would have thought placement was the hardest part. Am I missing something?

Cheers

[Thommo]

Sorry, but I, too, would have thought placement was the hardest part. Am I missing something?

CheersWell yes, it is. So hard in fact that 9 outa 10 will not find enough profitable sites, hence my previous comments that No profitable business is easy and that you should buy an existing run where the seller has already done all that work. And don't begrudge paying a little goodwill.

Once you've found a site you must have the right machine for it. Not all machines are equal and only experience will tell you whether it's worth spending money on at all. You've got to be competative, or you wont survive. You've got to be able to keep them working reliably or you wont keep the site. You've got to be a service minded person because it is a service industry. You've got to be organised as you need to be in any small buisness. You've got to be self reliant and happy working alone, not everyone is. You must have at least $100k available for start-up. You must have another source of income but you can't work full time.

Someone with positively geared property with a low LVR could raise a LOC and use his spare time productively. Once debt free vending can give a nice return for a short week but getting established is harder than you think. Most who look at it with the view that they will buy just a few venders and make $50-100/wk and slowly expand become frustrated and fall by the wayside.

Case Study 1. An "investor" bought four new can venders, on site, for about $30k. He wasn't a service type and they were often empty. I bought them for $17k nearly a year later. One didn't work and was in the garage. Two others I moved off site when I wanted the machines. Only one stayed where it was and it would have done little more than pay it's original lease. OK at the price I paid. The meters indicated he could only have made a few thou while he had them. Owning them interfered with earning his primary income and expanding would only have made it worse.

Sorry if I was a bit curt, but writing these long posts is time consuming. If anyone who has already done his research has a specific Q I will answer if I can.

Thommo

[Lucifer_au]

I agree with Thommo.

With vending machines, it really is about two things:
1. a good site (a good site is worth more tha the vending machine).
2. service

Finding a good site is not massivly difficult, but finding the time to find a good site and then to re-site it and also the time to fill it and it can suck away your free time. I guess that is why it is low cost, because every investmenthas a trade of between time/cost. Vending machines are cheap (compared ot i.p.'s, but their time contingent is very high).

Rgds.
Lucifer_au

[wish-ga]

Hey Fredo, how are the vending machines going?

:D

[fredo]

Still going strong 93 dollars per mth 12% after tax return

[likewow]

For anyone thinking of entering the vending industry, heres a tip i have picked up while helping a friend set up a vending biz.

Most if not all good sites are taken, meaning that vending operators try to get their vending machines into sites with the oppositions' machines already in them because sites without vending machines are without them for a good reason.

[wish-ga]

Like wow that is so interesting about finding places for vending machines. I am really going to take note of where has vending machines from now on.

Seems like it is the fast food principle. In that franchisees used to build where there was a McDonalds. If the area could sustain a McD then it could sustain a Pizza Hut/KFC. This is a bit outdated in concept due to the advent of the malls but it is interesting to note that vending machines also work on this principle.

Come to think of it most things do don't they. eg All the car yards in a strip down Pmatta Rd in Sydney.

[Thommo]

It's an old maxim in biz. "best place to operate is beside your opposition." Particularly true in the used-car biz, but not relevent in vending.

T

[Peter 14.7]

Just a note to say a very good thread and thanks to Thomo for all the info.

Say hi at SIG Thommo as I would like to know more.

Peter 147

[Gordon Gekko]

Hi Guys,

Interesting thread.

Hope i haven't missed this in the thread. Who pays for the electricity to run the machines?

GG

[likewow]

Like wow that is so interesting about finding places for vending machines. I am really going to take note of where has vending machines from now on.

Seems like it is the fast food principle. In that franchisees used to build where there was a McDonalds. If the area could sustain a McD then it could sustain a Pizza Hut/KFC. This is a bit outdated in concept due to the advent of the malls but it is interesting to note that vending machines also work on this principle.

Come to think of it most things do don't they. eg All the car yards in a strip down Pmatta Rd in Sydney.


wish-ga

I think you misunderstood my post. I didnt mean next to an existing vending machine, i meant in place of. Get the site owner to replace the existing machine with your own by using promise of better service, bigger range, better prices...etc..

A lot of vending site contracts state that the only machines that can be onsite are your own but my understanding is that vending site contracts are worth less than the paper theyre written on.


Gordon Gecko,

The site pays for the electricity

[Aceyducey]

Get the site owner to replace the existing machine with your own by using promise of better service, bigger range, better prices...etc..
hmm - now I know why some vending machines are always being vandalised - it's a turf war :)

Cheers,

Aceyducey

[jjnshell]

Hi LikeWow,

I would have to disagree with you on your thoughts of all the good sites being taken. Last week I added 5 new sites to my vending run. All these sites will return a profit of at least $50 per week. The site finding took 2 days.

Easy way to add $250 per week to my pocket.

Regards

jjnshell

[likewow]

Hi LikeWow,

I would have to disagree with you on your thoughts of all the good sites being taken. Last week I added 5 new sites to my vending run. All these sites will return a profit of at least $50 per week. The site finding took 2 days.

Easy way to add $250 per week to my pocket.

Regards

jjnshell

hi jjnshell

Of course there will always be new sites but i think that its generally accepted that all the really good sites are gone already at least in Sydney. What are you vending and whats your ROI for $50/wk?

Whats your benchmark or definition of a good site?

[jjnshell]

Hi LikeWOW,

The machines in question are mechanical 3 drink vendors holding 120 cans each. Each machine costs $2200. Return $2600 for the year. Although it resolves on my time, I don't have to turn up and work the man.



jjnshell

[likewow]

Hi LikeWOW,

The machines in question are mechanical 3 drink vendors holding 120 cans each. Each machine costs $2200. Return $2600 for the year. Although it resolves on my time, I don't have to turn up and work the man.



jjnshell

I know the ones you mean, the small bar fridge type with mechanical coin mech. I was referring to the medium/large snack/drink vendors in my previous posts.

$2600 pa = $50/wk. Thats gross your talkin, so take out approx. half for cost of drinks and then take out costs of travel,insurance..etc...and then take out 48% of whats left for tax and you can see why a lot of people realise vending isnt the passive cash cow its perceived to be. I suppose the only way to make decent money from them is to have a lot of machines and that takes up a lot of time so its like any other business only more boring. :D

[always_learning]

If anyone has been to Japan they can see the Vending Machine industry is huge!!! My company even sells our own custom software development product for the vending machine industry.

They are literally everywhere, drinks, snacks, magazines, "adult" products, even in the middle of the country side you can find a vending machine with Coke, can coffee, green tea and beer. Japan has lower numbers of "ferals" which translates into less vandalism however, vandalized machines are few and far between.

[jjnshell]

LikeWOW,

Not so fast there big fella.

Each of those sites will sell at least 100 drinks per week, ie $50 net profit per week.

True, "good sites" for those large machines might be taken. But please don't tell me that there are no sites for small machines. I found a bunch in 2 days.

Insurance costs are minimal, depreciation is good. Mechanical machines rarely have problems. You are going to pay tax however you make your money.

Very low risk. I drop the kids at school, I pick them up from school, I go to sports days, kindy, playgroup. I am usually the only Dad at these events.

Boring, well, I'm not behind a desk all day. I get to go out and talk to lots of people and go surfing at least 3 days a week. (that's weekdays, weekends are for the kids)

If you havn't tried it, please don't bag it. You may just put someone off what I have found to be very worthwhile.

Regards
Jeff

[likewow]

jjnshell,

I wasnt bagging it, just consider it a bit boring compared to other businesses ive been involved in.

100 drinks p/w is pretty damn good from the small machines which are suitable for smaller slower sites. Thats 200% gross return, with 100% net return which is way above the norm for the industry, actually double.


Are your figures correct? If they are the rest of the vending industry must be doing something wrong.

[jjnshell]

LikeWOW,

yep, figures correct.

My average is around 80 drinks per week per machine in winter and 97 during summer.

During Summer I visit the bulk of my machines twice a week.

I'm not sure these machines are for slower sites. That is all relative. If you put a $8000 machine is a site turning over 100 drinks a week your return is not that crash hot. These machines are specifically designed for this market and fit it very well.

I know of several vendors in my area who all achieve similar returns.

Anything becomes boring after a long enough. Well, almost anything. Don't think I would ever grow tired of piloting the Space Shuttle.

Jeff

[likewow]

LikeWOW,

yep, figures correct.

My average is around 80 drinks per week per machine in winter and 97 during summer.

During Summer I visit the bulk of my machines twice a week.

I'm not sure these machines are for slower sites. That is all relative. If you put a $8000 machine is a site turning over 100 drinks a week your return is not that crash hot. These machines are specifically designed for this market and fit it very well.

I know of several vendors in my area who all achieve similar returns.

Anything becomes boring after a long enough. Well, almost anything. Don't think I would ever grow tired of piloting the Space Shuttle.

Jeff


All i can say is........they must drink some soft drink up there!!.....must be the heat. If you can get returns like that from the little machines.....good on ya mate!

[Thommo]

LW, If you ran a busy workplace with all the relevent concerns in doing so: Would you give a rat's bum, much less any time, to talk to me about the vending machine and whether I could offer a "better range/service"?

Trying to "steal" sites is a shortcut to bankruptcy.

Thommo

ps I've been off-line for two days and didn't know there was another page of posts

T

[likewow]

LW, If you ran a busy workplace with all the relevent concerns in doing so: Would you give a rat's bum, much less any time, to talk to me about the vending machine and whether I could offer a "better range/service"?

Trying to "steal" sites is a shortcut to bankruptcy.

Thommo

ps I've been off-line for two days and didn't know there was another page of posts

T

Well i can tell you that it is the case in Sydney. As with most things the level of competition is much higher there than just about anywhere else in Australia and vending is no different.

You would probably go bankrupt quicker by settling for the lame leftover sites with ordinary returns.

I wouldnt call it stealing sites, if theres no contract the site owner can choose who they please to go in there.

[Thommo]

Well i can tell you that
many are the Sydneyciders who bring their smart-arsed ideas to the provences who go home with the bum missing out of their tweeds.

Even much bigger fish have been caught. In the '80's the Japs were paying big money for cane farms and waterfront property in Cairns. Most came a gutser.

Two of my regular pubs are owned by Mexicans. The owners of one must be close to suicide while the other simply hate it here. Every market is different!!!!!

T

[likewow]

many are the Sydneyciders who bring their smart-arsed ideas to the provences who go home with the bum missing out of their tweeds.

Even much bigger fish have been caught. In the '80's the Japs were paying big money for cane farms and waterfront property in Cairns. Most came a gutser.

Two of my regular pubs are owned by Mexicans. The owners of one must be close to suicide while the other simply hate it here. Every market is different!!!!!

T

huh?? ......oh yeah!!.....ok :D