A vending machine business can be a lucrative entrepreneurial opportunity, either as a side hustle or a full-time venture.
It can allow owners to dive in with low startup costs and promising profit potential. Globally, the retail vending machine market was valued at $51.91 billion in 2021 and is expected to grow 10.7% annually in the next eight years – to $129.4 billion by 2030, according to Grand View Research.
After all, when people are hungry and in a hurry, vending machines can offer a quick and convenient solution. Consumer demand for vending machine staples like chips, candy, and soda remains strong, and advancements in technology have broadened the scope of products people can get from machines, including everything from fresh fruit, yogurt, and juice smoothies to cake slices, pizza, and hot dogs.
Beyond food, vending machines can stock plenty of other items, such as toiletries, makeup, laundry supplies, electronics, and in some states, cigarettes.
Many businesses start with a small number of machines – or just one – to test the waters. A main advantage of vending machine businesses: overhead costs are low, since it generally doesn’t require office space. Plus, hiring employees may not be necessary if the owner plans to operate the business solo. Profits vary depending on the products and locations, but the money an average vending machine generates can add up quickly if you’re managing multiple machines.
Owning a successful vending machine business takes careful strategic planning. Here’s a five-step guide to starting, including the most important step: figuring out the best products to place in the right location.
1. Register the business.
To register a vending machine business, start by obtaining an Employee Identification Number (EIN) for free from the Internal Revenue Service (IRS), which can be used to file state and federal taxes. Rather than conduct the business in your name, it typically makes sense to set it up as a limited liability company (LLC) or other type of corporation, which protects an owner’s personal assets if injuries or damages occur. To set up a business, many states require owners to register and/or pay fees. Then the owner can set up a bank account to handle all business-related transactions, including purchasing machines and inventory.
To determine state requirements for licenses and permits, such as a beverage or health department license, business owners can refer to the business directory on the IRS website, which provides links to more detailed guidance for each state. Owners should also check with the cities and counties they’re operating in to learn about any required local licenses or permits.
2. Pick your products.
Choosing the right product(s) for the right place is key to a prosperous vending machine venture. Conduct research to determine which products to sell and where by scouting various locations that see plenty of foot traffic and thinking about what customers might demand in those spots.
Starting a vending machine company can be an attractive entrepreneurial opportunity, especially since the business doesn’t require many of the operating costs other businesses do.
For example, snacks and drinks might work well in office parks, while microwaveable meals could be a good match for hospitals. Healthy foods might thrive in gyms, and personal care products like shampoos and shaving creams may take off in airports. In 2021, beverages dominated the vending machine business, accounting for more than 43% of global revenue, according to Grand View Research, which noted that hotels are a hot spot for beverage machines.
To maximize profits, vendors may want to contact various wholesale suppliers to pinpoint items with the lowest possible cost per unit.
3. Secure the property.
Once you figure out the best location for your machines, you’ll need to get the property owners on board. That means making connections with local business owners and developing a pitch for placing machines on their property.
Most vendors draw up a contract that outlines the products that will be sold, where the machines will be placed, and how long they will operate machines on a property. The contract may also stipulate that the property owner won’t allow competing vendors to place machines in the same location.
It usually also specifies the rent that you’ll will pay for occupying the space, which is typically a commission on sales – between 5% and 25% of product sales.
4. Purchase the vending machines.
There are different options for machines, depending on the types of products you plan to sell. The cost of machines ranges from a few hundred dollars to $10,000, depending on their features, with more sophisticated machines offering extras like interactive screens, voice accessibility, and remote monitoring software that sends alerts when stock is low.
Types of machines include:
- Bulk. These machines dispense one product at the same price, such as rubber balls, gumballs, or hard candy. Bulk machines typically accept coins, so they produce the least amount of revenue, but they’re also smaller and less costly than other machines.
- Mechanical. These carry several products at different prices and can accept dollar bills and coins. Think of the classic snack-and-soda machines.
- Electronic. Electronic vending machines accept credit or debit cards, either in addition to or in place of cash, and often feature touchscreen interfaces. These machines are growing in popularity to accommodate customers who don’t have cash on hand.
- Specialty. Some items require specialty machines, for instance, to keep coffee hot or ice cream cold. In addition, items like electronics and personal care products may require specialty machines.
To reduce costs, especially when getting started, vendors may consider buying used or refurbished machines or renting machines.
5. Monitor your machines.
Once the machines are set up, you can map out a route to keep close tabs on each location regularly, replenish supplies, pluck any foods that have expired, and empty cash from the machines. At the same time, you can check to make sure the equipment is working properly. Because there is typically no on-site staff monitoring vending machines, they can be vulnerable to theft and vandalism, so finding a secure location is key.
You’ll also need to be mindful to ensure the machines are continually in compliance with federal, state, and local regulations. Some cities may limit the contents of machines in certain areas, for example, by prohibiting soda in school buildings. Plus, vending machines must meet federal Americans with Disabilities Act guidelines to allow people with disabilities easy access to the machines. Owners of 20 or more vending machines must follow a requirement by the U.S. Food and Drug Administration (FDA) to disclose calorie information about food they're selling.
The Takeaway
Starting a vending machine company can be an attractive entrepreneurial opportunity, especially since the business doesn’t require many of the operating costs other businesses do, such as renting office space and hiring permanent staff. If vendors do their research, determine the best items to sell, and secure contracts with property owners, a vending machine company has the potential to be highly profitable.
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