The Vending Business Blog

Don’t Purchase Vending Machines from Unscrupulous Suppliers

by | Aug 18, 2010 | Start A Vending Machine Business | 0 comments

Don’t purchase Vending Machines from Unscrupulous Suppliers  How to handle payment for vending equipment is a personal choice, but there are some guidelines. Most supply companies in the vending industry are legitimate, respectable entities, but the vending industry (like any other) has a contingent of unscrupulous suppliers.

A supplier of vending equipment wants to be paid. His business is not a finance company and, like all businesses, lives on cash flow. He’s in business to develop successful vending operators who will buy more vending equipment from the company in the future, and he should be a source of knowledge. A successful vending machine supply company sees hundreds of vending operators, knows their systems and how they work. That vending supplier knows what works and what doesn’t, and has probably seen every scheme that’s out there.

At the time he sells that vending machine to you, he has expenses associated with that piece of vending equipment. He has to have paid either the manufacturer (new) or the secondary party (used) for the piece. He has to have a place to refurbish that vending equipment, as well as storage space for it – both of which are line items in his budget.

You can purchase used vending equipment in several ways. If you buy in “as is” condition, what you see is what you get, and the machine might – or might not – work. This type of purchase is not for most vendors. “As is, working” condition means a vending machine might look old, or even unsightly, but functions properly. It has been refurbished, usually to specifications that make the vending machine look and function like new, and will often come with a limited warranty.

Of course, the cost of the vending equipment varies with the level of refurbishment. Both snack and soda vending machines are highly complex pieces of equipment that can cost hundreds of dollars to repair, requiring specific knowledge and specialized tools to make a piece location-ready. Learn about vending equipment – read and study, go to successful competitors’ locations and see what vending equipment they place.

A word of caution: Proper placement of equipment is critical to success. Vending equipment can be costly and the impulse to purchase new equipment for every location can lead to business failure. Be sure to evaluate your potential vending account carefully; estimate the number of people who will be in front of the machine daily, estimate sales, calculate your gross profit, and relate it to the cost of the vending equipment.

Let’s do a quick analysis. Your barber/beauty shop wants a soda machine and, through conversation, they know you are in the vending industry. They tell you there are hundreds of people who walk in every day, and that you would make a fortune if you placed a soda machine in the shop. (Of course, this is what every prospect says.) The shop has 3 employees working 7 days a week, and, when you are there, the shop is full and has a waiting list.  You are excited about the business you just generated, and commit to the location.

You purchase a new soda machine for $3500 because you don’t want any maintenance or problems. You finance the machine with a finance company specializing in vending equipment, then fill the machine with $250 worth of soda. One week later, you arrive to service the soda machine; you pull the money, and find your sales are less than $20. The shop owner tells you that his customers are starting to get used to the soda machine being there and that your sales are surely going to go up. You come back the next week and find less than $10. Oh, they had a slow week. Each week you hear another excuse.

Your first payment slip arrives for the soda machine from the finance company, for $100.  In the four weeks the machine has been placed, you have not generated $100 in sales, let alone profit (since you still have to pay for your product). While this might sound far-fetched, I can assure you I receive calls every day from people in this very predicament.

The vending industry is a proven business, with proven techniques, formulas and systems. Don’t make the mistake of thinking that all of the rules apply to everyone else, but not to you – at least not in this case. Don’t believe that you can’t lose.

With this lesson about equipment placement in mind, let’s return to the initial question: Should you pay for equipment with a wire transfer? In today’s world, identity theft is becoming the largest white collar crime. How well do you know this supplier? Have you checked them out with other vending machine operators? Have you looked online for any negative reports? If you turned up some evidence of dissatisfaction, how many complaints do they have, and how serious are they? (Keep in mind that not all customers are easily satisfied). Explore, look for the fatal flaw.  Is this their first venture into selling vending equipment? Do they have a facility? Are they real?  Do not act on impulse.

I would suggest not using wire transfer. Most legitimate suppliers or, for that matter, vending machine operators, can accept money in a variety of ways: credit card, Pay Pal, check, money order. Use a source of funding that has recourse if the terms of the transaction are not met. Use a source that does not allow for further attacks against your finances. Drafting, by wire, requires that you divulge personal information that can lead to abuse. Protect yourself and your business. Don’t Purchase Vending Machines from Unscrupulous Suppliers.More information  Take Over A Vending Route Or Start Your Own?

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