Tag Archives: vending business venture

Healthy Vending

N INTERVIEW WITH LARRY TOWNER


Larry-headshot

 

Larry Towner

Healthy Vending

Vending Guru

In this episode of the Vending Business Show, we interview Larry Towner, a successful vending operator, and vending business consultant. He shares valuable tips about healthy vending, .

 


Episode Transcript:

Tom Shivers:  Hi. I’m Tom with the Vending Business Show and I’m here with Larry Towner, who is a vending business consultant, been in the vending business for a number of years and sold his business in 2012. Thanks for being here, Larry.

Larry Towner:     How are you, Tom?

Tom Shivers:     Good, good. Today, we’re talking about healthy vending. Earlier this year, Fresh Healthy Vending, which is a brand of vending company, had an IPO. It makes you wonder, wow, is healthy vending really hot now and if so, what does that mean?

Larry Towner: Well, healthy vending is a hot subject right now. There’s a lot of talk in the media about snack food. New York City just had that size restriction on sugary drinks and things like that. So the topic itself is very hot. The IPO that you’re seeing that came out is certainly an interesting development in the vending business. There are a number of public vending companies that are out there in the world and they are actually quite large corporations. The interest is that this particular company specializes in healthy vending alone. That’s what I find so intriguing. What’s your take on it, Tom?

Tom Shivers:    Yeah. I think it is a … You hear about healthy snacks and healthy from the USDA and all these things coming down from the USDA lately affecting schools and things like that. I think that’s kind of … Vending in schools is almost game over really. You do it the government’s way or you don’t do it at all. I’m not sure what the solution is for school vending, but healthy vending I think is interesting and it can work in some places. I don’t know if it works everywhere though.

Larry Towner :  Well, that’s always been kind of my position. In our companies, we always had a section of our machines that we dedicated to, I’m going to say healthier type snacks. I mean I’m kind of loving right now, I don’t watch a whole lot of TV, but I have watched, and I have seen that Nature Valley granola bars is showing off how healthy their products are and things like that and how it’s nature and this and that. I kind of laugh because if you actually look at the packaging, it’s pretty much about the same as eating a Snickers candy bar from a total calorie intake and fat content and things like that. It just has products that are actually a little bit better.

In our machines, we always had a section of our machines that were dedicated to healthier type snacks. When I have approached the healthy vending side, one of the things about the so called companies that specialize in healthy vending is that once you’re into that particular subset of the market, you’re not going to be able to do anything without compromising the integrity of what your … because their whole machine is fronted with this healthy vending concept and all of that. So you go and put it what would be a traditional bag of potato chips or a traditional candy bar and people are going to kind of look at you like you’re a little bit strange.

We always kind of went in the reverse way. We promoted sections of the machines as being healthy or if somebody wanted a whole healthy machine, we just put in a regular vending machine with all healthy items in the machine. It’s easy enough to do because you’re just changing product selections out. You’re not actually changing out the fronts of machines.

Fortunately, we all work with A&M Equipment and if you do want your machines fronted with healthy vending selections, Joe at A&M Equipment Sales will front your machines however you like them. So you don’t need to get tied up into a big franchise agreement or into anything like that. You can go out and compete with the so called healthy vending companies and present machines that offer up healthy selections at a fraction of the cost. That’s really the only difference I see is that vending is vending is vending. If someone puts money or slides a credit card in and a machine pushes the product out, at the end of the day, that’s what vending is.

Tom Shivers:    Very well said. Yeah. Tell us a little bit more about your business and what you do.

Larry Towner:   Well, my business, I’m in the consulting business. Like I said, we were in the vending business since the mid-80s and it makes me feel old. Been in the vending business since the mid-80s. We sold off our vending operation in 2012. We took up the marketing side. We help companies solve their vending problems, particularly smaller operators that need help in sales and marketing and operations and things like that. We help to make people more efficient so that they can make more money, help them with their maintenance issues. Across the board, we’ve done it all. We are available at ServiceGroupInternational.com and send us an email and we’ll get back with you.

Tom Shivers:    You’ve been watching the Vending Business Show,on our topic Healthy Vending a publication of A&M Equipment Sales.

Check out our AMS Healthy Vending Machine

 

 

How to Get Started In the Vending Business


How to Get Started in the Vending Business  AN INTERVIEW WITH LARRY TOWNER


 

Larry Towner

Vending Guru

How to  Get Started in the Vending Business In this episode of the Vending Business Show, we interview Larry Towner, a successful vending operator, and vending business consultant. He shares valuable tips to getting started in the vending business such as organizing and planning tips, proper networking and setting realistic goals.

 


Episode Transcript:


Tom shivers: How to get started in the vending business  I’m Tom Shivers with the Vending Business Show, here with Larry Towner, who has been in the vending business for many years and a few years ago sold the majority share of his vending business. Today, he mostly provides consulting. In the last show, Larry talked about how to start a vending business, and we’ll pick back up where we left off. So, Larry, thanks for being here.

Larry Towner: Oh. It’s a pleasure, Tom.

Tom shivers: Last time, you explained that sometimes people get in the vending business, but don’t realize what they’re getting themselves into, like what kind of person does well in the vending business. Then you shared some information resources to help people get off to a good start. What other tips do you have on how to get started in the vending business?

Larry Towner: Well, one thing, Tom, that I always try to stress to people is that the vending business is just that. It is a business. If you’re looking to get into a business, you need to have a sense of organization and/or planning. I tell everybody to be very careful when you get into the vending business to make sure that you write a business plan of some sort. Now, it can be as simple as sitting down with a pad of paper and just writing out some of the concerns and some of the things.

Larry Towner: We try to keep people to be aware if they go to some of these seminars that they see in the newspapers and things like that, to be very careful of those things. These guys are professionals at selling equipment and things that are not really of professional grade. So, they make it sound very exciting and very dynamic, and they give you an idea of the kinds of money that you can make, but what they don’t do is they don’t tell you the whole story. I tell people to really sit down and really think this through. Put pen to paper. Write yourself a business plan.

Larry Towner: Now, you don’t have to write a business plan that’s designed for going to the bank and getting financing. You might need to do that, but that’s a separate issue. It all depends on what your goals are, but have an idea of what you’re trying to achieve, number one. What’s your goal? Are you looking to become self-employed? Are you looking for additional income? Are you looking for a part-time business or a retirement business? What are your goals within those kinds of things? That’s where you start.

Larry Towner: Then you try to cater the vending business into those aspects of what you’re looking for. Don’t forget things like … What people are most common is what they present in a lot of these shows and things like that is they say, “Gosh. You’re buying this for a quarter, and you’re selling it of 50 cents, and you’re making 100% profit. How can you go wrong when you make that much money?”, and this, and that.

Larry Towner: Well, at the end of the day, what they don’t tell you is that you have to sell four items to make $1. You have to pay for your equipment and all your expenses out of that $1 that you make in profit, and you had to sell four items. When you think about it, on the average person’s paycheck, if you had to make your paycheck, how many items would you have to sell? People don’t even do that basic math, and when they think about it, they go, “Wow. I have to sell 4,000 items,” or, “I have to sell 10,000 items,” or whatever it is that the particular person is looking for.

Larry Towner: Out of that money too, what they always forget is that they have to have a vehicle. They have to pay for fuel. They have to pay for insurance. They have to pay for the machines. They have to pay for repairs. They have to pay for all the things that a business has to pay for just to be in business, which includes telephones. There’s hundreds and hundreds of books on writing business plans, but you need to sit down and really think about it. You can just say, “Wow. I’ll run this out of my garage, and it’ll just be clean and easy.” It can be that simple, but it can also not be that simple.

Larry Towner: So, it starts with a good understanding of the numbers, and how much profit you think you’re gonna make, and how much can you make per account and per machine, which brings up a few different issues that get into the planning. Some of the things in discussion with some people wanting to get into the business, I said, “Well, what kind of potential accounts do you think you have?” They would give me an idea of what they have, and they say, “Well, I can’t lose. I’m gonna buy a new machine and put it in there.” I’ll tell them flat out, “It’s gonna take you 10 years to pay for your equipment. Have you even thought about that?” They go, “No. I haven’t,” and they have opted out.

Larry Towner: That’s one of the biggest keys to success is to sit down and actually do a business plan of some sort. Write out what you want and how you think you’re gonna get there. Then walk backwards through all the steps and all of the things that it might take you to do to get to that number, and just give yourself some kind of a reality check. If you jump into this thing, you can obligate yourself for thousands of dollars and end up having very little income coming out of it. That’s one of my biggest things when I tell people, “If you’re gonna get into the business, it’s a business. Do a business plan.”

Tom shivers: Mm-hmm (affirmative). You’ve been in this, so what is a realistic goal for someone or maybe a couple of them?

Larry Towner: Well, again, it just kind of depends on what you’re looking for. The way I started in the business, and this has an amount of relevance, is I actually went to work for a guy in the vending business, and I worked for him in the vending business. He basically taught me the vending business. We went over it, and I got to see what it takes to be in the vending business, what accounts are, what products that sell, and things like that. So, that’s where you get into … When you get into your goals, it’s like where do you want to be?

Larry Towner: If you want to be fully self-employed, my suggestion is that you go work for somebody first, understand the business, and then back yourself into the business. If your goal is a part-time income, like say you want to work a retirement income or you’re perhaps a woman that has children at home, and you think you can run this on a part-time basis and things like that, those things are attainable. It’s just a matter of getting down to the actual numbers and your time.

Larry Towner: You have to really be able to allocate your time out to figure out when you can actually get this work done, because it is quite a bit of work. I mean, it requires you being there. You have to go and fill machines, and you have to be available for repair on call, and things like this, or you have to be able to work with your customers to make all those things work out. Again, it’s difficult. You just have to be able to do that kind of thing.

Tom shivers: Let’s just say, for instance, I’ve got four soda machines in pretty high trafficked areas not far from where I live. I want to do it on a part-time basis. Can you give me some suggestions as to how much time and resource that that would involve?

Larry Towner: Yeah. If you’re talking a good, high volume location, a drink machine can hold, depending on whether you’re doing bottles or cans, a drink machine can hold in the neighborhood of about 300 bottles or maybe 600 cans total. You’re never gonna run that machine completely out, so if you’re running say cans, and you’re running at 75 cents, and you get a big machine that holds 600 cans, you know, you want to refill it at about a 200 can point, so you’d be hitting in the neighborhood of about say 400 times 75 cents is about $400 in gross sales.

Larry Towner: Out of that, you’re gonna pay for half of … Basically, about half of your money goes to pay for product, which gives you $150. If you’re doing that once a week or twice a week, you’re in the neighborhood of you’re gonna do a single net profit of about 100 … If you do it twice a week, you’re gonna do $300 a week. That’s a pretty high volume location, to be honest. That’s a very high volume location for somebody doing just drink machines, without a snack machine associated with it or a food machine, things like that.

Larry Towner: What you’ll find too is when you get out there, that in the marketplace you might have this concept that you want to do one thing, like say just drink machines, but the reality is it’s tough to get the really high volume locations in just one avenue for it. But that would give you $300 in single net profit in a week, and then you’re expenses to do that. It would take you two days during the week to do that, and it’s gonna take you approximately … [inaudible 00:08:40] It’s gonna take you probably an hour, maybe an hour and a half to actually service those machine, to fill them up. That gives you kind of an idea of what you’re gonna have.

Larry Towner: Then you have support time, what it’s gonna take you to actually get the product and load that into your truck, get it out to the locations. You’re gonna have to have a warehouse if you’re gonna do that kind of volume and things like that, or you’re gonna spend a lot of time running to local Walmarts or Sam’s Clubs, or Costco, or BJ’s, or whatever. So, to do that you’re probably gonna have five or six hours per machine to do that, in total time.

Tom shivers: Per week. I imagine if it’s in a high volume area that the turnover rate might dictate the best times to refill the machines? Does that come into play?

Larry Towner: Yeah. The timing is always an issue, as far as when you … You know, you want to be there in what I consider to be an off time, a time when there aren’t people there wanting product all the time. If it’s in a commercial location, that’s usually not on the hours, like you’re gonna be mid-hour, and not at break time. In a commercial location, in a street vending location, you’re gonna wanna be there at night or something like that. So, all that does play. We call those account dynamics essentially.

Larry Towner: What’s the best time to service it? Is the facility open at those times? Do you have what I call extended hours? Extended hours to me are any time that’s before 7:00 in the morning or after 5:00 in the afternoon, because that really opens up a huge ability to do work at times when otherwise it’s off time. You’re guaranteed to get into most locations between 7:00 and 5:00. The question is can you get in after the hours or before the hours to get you the extra time that you need? There’s a whole concept of dynamics in an account and how you manage your accounts and all of that. That’s a whole topic for a whole show we can do in the future.

Tom shivers; Any there tips for people getting started in this business, before we-

Larry Towner: Probably one of the biggest tips that I can give also, along with a very strong business plan, is to actually go out and do a few sales calls, and go try and find an account. A lot of vendors try to get into the business backwards. I say backwards in that they go out and they buy a bunch of equipment, and then they go out and try to place it. My philosophy always has been that you actually do that in reverse. You go out and get the account and then place the equipment, because the account will dictate the equipment that you buy.

Larry Towner: If you go into a, oh, I don’t know, a very large manufacturing facility that has many hundreds of employees, you need a different set of equipment than if you go into an office situation that has 50 employees, or you’re in a street vending situation where you’re outside. That requires a different piece of equipment than something that you’re putting inside. You want to be able to go ut and make a few sales calls.

Larry Towner: The other thing that’ll help you, if you make some sales calls and you actually obtain the business, or you get an idea, if you go out and do a survey more or less, if you go out and talk to … you have a target market in mind that you worked on when you did your business plan. You say you want to service, it doesn’t matter, say commercial, industrial accounts. You go out, and you look at what your competition is doing out there. You’ll see what kind of pricing they have, what kind of equipment they have. If you talk to people, you’ll find out what kind of service level they get from them as well. A lot of it falls in under the planning stages.

Larry Towner: The other thing that you can find out too is if you go out, and you call on a certain number of accounts, and you find a common thread in what your competition is doing, and then you have to figure out a way to either get around what your competition is doing and offer more, so that they will actually change vendors, or you find a particular vendor that doesn’t do a good job, and you know all the points to hit, so you can go replace him when you run into him, and you walk into an account, and you say, “Oh. It’s X, Y, Z company.” I ask lots of questions in a sales [inaudible 00:12:55]. I say, “Hey. Are you having this problem with X, Y, Z company?” If you know that company, you’ll know that they are indeed having that problem. You say, “Wow.” You can sell them right out of the place.

Larry Towner: That’s something I say to people. You’ve got to be able to go in and sell a little bit. If you sell beforehand, really you’ll know everything that you need to know beforehand. If you come in and you go … Just for example, say you buy brand new equipment. You’ve invested $5,000 for a snack and soda machine or $6,000 for a snack and soda machine, just depending on what you buy. You need to generate X amount of dollars out of that equipment, or you’re gonna be in the hole. If you don’t do that, you’re gonna be in trouble, because you can’t place that everywhere. You can’t go out and put that into a smaller account. You’ll just have too much money invested into that equipment to actually turn and make a profit at it.

Tom shivers: Yeah. That makes a lot of sense. I know that’s kind of an entrepreneur quality that would say, “Hey. I want to sell some of this stuff before I decide I’m in the business.”

Larry Towner: Right. I tell people to do that in the vending business consistently. If they don’t, they can really get themselves into financial hot water. I get phone calls even today on a regular basis, where people say, “I’ve got a warehouse full of such and such equipment and things like that, and I can’t place it, and I can’t sell it. What would you buy it for?” Unfortunately, you end up insulting them, because you can’t really give them anything for it. That’s kind of a situation that you do run into.

Tom shivers: All right, Larry. Well, thanks for sharing. Tell us a little bit about your business, your consulting business.

Larry Towner: Well, the consulting business is basically we help new vendors and experienced vendors really optimize their companies or get a good idea of exactly what they’re doing. One of my goals with new vendors in particular, and this is gonna sound funny, but I try to talk them out of the business. It’s not in a bad way. I just want to make sure they understand what they’re getting into before they make that jump, because if we can save them some heartache I guess is what it is … I mean, I’ve actually seen marriages come apart because of the vending business and because it’s never what they expected.

Larry Towner: So, we try to just make sure people understand completely what they get into. That’s what we do. Then on an established business we can come in and we can just look at how you run your operations and make sure that you’re running it at an efficient and profitable mode. We’re always amazed we can learn things every day doing this, but that’s what we do.

Tom shivers: What’s a good way for someone to contact you?

Larry Towner: Generally over email. It’s servicegroupinternational@earthlink.net.

Tom shivers: All right. Service Group International all spelled out?

Larry Towner: All spelled out.

Tom shivers: Okay. @earthlink.net?

Larry Towner: Earthlink.net.

Tom shivers: All right. Super. Next time, we’ll be talking about the question, is vending a reliable business venture? You’ve been listening to How to get started in the vending business at the Vending Business Show, a publication of A&M Equipment Sales.

Other links to important Vending Business tips Vending Machine License: Is It Something You Need?

Vending How Reliable a Business Venture

Vending How Reliable a Business Venture HoIt’s time to turn our attention to whether vending is a viable business to enter, as well as the average cost for a very important part of the business: the vending machine.

Vending How Reliable a Business Venture?
The first recorded vending machines date back to the first century B.C., but came to prominence in the late 1880s. These were primarily postcard and gumball machines with simple mechanisms, a single selection and accepted one coin.

The snack and soda machines we recognize today – multi-selection, accepting multiple coin types, dispensing change – originated in the 1940s. In the ‘40s, of course, vending machines accepted coins only, did not dispense change, and limited selections about 20 items. These were fully mechanical vend mechanisms and required no power to operate the vend cycle.

Early soda machines required power to refrigerate the product. The modern vending machine design with spiral dispense, full change capacity, dollar bill acceptance (usually by dollar bill coin changer), 30-40 snack selections, and up to 10 soda options, came to being in the late 1960s and was refined in the 1970s.

Improvements in vending machine technology since have been based on electronics and computer innovation, with standardization of protocols and improvements in currency acceptance. Ultra-modern vending machines can accept a variety of payment types – credit cards, large denomination bills (up to $100), cell phone charges (charging a product to your cell phone bill) – can be monitored remotely by Internet, can produce sales figures to individual unit numbers (sold 13 Snickers and 8 Doritos out of this machine last week), log machine entry times, and can even provide surveillance with camera technology. Yes, we’ve come a long way, baby.

So how is this history lesson relevant? Vending machine technology is responding to market need. The successful vending operators have driven this technology with their purchasing habits. Like all businesses, if technology affords a profitable advantage, that product has a market. The fact that the vending machine manufacturers have continued to produce better and better vending machines means that the vending business is a reliable venture when run properly.

Vending How Reliable a Business Venture? Like all businesses, proper operations is the key to success. Learning about your account market, the kind of locations and businesses you serve, learning about marketing, the product you are you going to sell, and the type/s of vending equipment you’ll use, all these factor into the success of your vending machine business.

Vending How Reliable a Business Venture?  There are thousands of successful vending machine companies in the United States, and if you think the vending business is for you, offer to work for a company in another city for free. For free, are you kidding?! Instead of taking that week’s vacation on a cruise, work for a vending machine company: learn all you can about every aspect of the business – load trucks, fix machines, look at the accounting, install machines. Pay attention to the products sold, the order in which they go into the vending machine, find out what sells best, ask questions. The real-world education you will receive will be invaluable. One week’s worth of effort can literally save you hundreds of thousands of dollars. (And an operator in a different city than yours won’t feel threatened by your business plans.)

The vending machine business is an established industry, so don’t try to reinvent the wheel. . .at least not at first. Work a proven system until you achieve profitability, then implement new systems to improve your economies of scale. Don’t fall into the trap of believing that the rules of the business do not apply to you.

So what do vending machines cost?
The first criteria in determining cost depends upon the location for which the vending machines are destined.

Most successful vending operators have a formula to determine the value of the equipment to be placed into a given account. In our surveys of hundreds of companies, we have found that most operators want to pay off the equipment with 9 months’ profit from the vending machine account. This equates to about half of the gross sales for a 9-month period. If they project an account to do $10,000 in sales in 9 months, then the equipment cost should be $5,000 or less. Less effectively produces more profit from your vending machine investment.

Now that you have a budget (based on your agreement with the customer), it’s time to find the vending machine equipment. You have two basic choices:

  1. Used vending machine equipment
  2. New vending machine equipment

New vending machine equipment is straightforward: find the brand and model you feel comfortable with. New equipment ranges from $2,000 to $10,000 per vending machine and depends on the type of machine, as well as its options. Types include snack machines, soda machines, refrigerated machines, frozen food machines, change machines, and more. Options include payment methods, size of vending machine, number of selections, electronics packages, and so forth.

Used vending machine equipment has many options on pricing, from free to several thousand dollars. With all used machines, make sure you have a clear title. Be extremely careful in buying a branded machine (Coke, Pepsi, M&M, etc.), because many of these machines are owned by the brand company, which retains ownership rights. If you purchase one of these machines, you could find yourself either losing the machine without compensation, or heading to jail for possession of stolen property.

Most free vending machines have been abandoned when an operator went out of business. You can also find operators selling their vending equipment through the want ads. Both of these venues generally require a tremendous amount of work to get the vending machine location-ready. While the initial cost might be low, the time and repair costs can be excessive, making other alternatives actually less expensive in the long run.

Reputable used vending machine equipment suppliers sell equipment at several levels: as-is, as-is working, refurbished (several levels), and like new. As-is and as-is working are similar to free machines or those found through want ads. I don’t suggest these options unless you are a highly skilled mechanic with access to a large parts inventory.

Instead, I suggest you concentrate on refurbished vending machines. Select the refurbishment level that the customer needs, and stick to your pre-determined budget. Expect to pay at least $1,000 per machine. And don’t forget shipping, which can be  considerable and is a part of the cost of vending machine equipment.  Check out the Vending Business Show  Vending Machine License: Is It Something You Need?