Vending Franchises Posted by Paul Andrews

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Vending Franchises

Posted by Paul Andrews in Ask The Experts on 09.12.2008 8:33:58 pm | 377 views

I am in current employment with the postal service and am facing the possibility of being made redundant next year, as opposed to looking for another job I would like to invest my savings into a franchise.  Having spent the past 20 years working for the postal service my experience is limited but I am willing to try my hand at most things and am currently looking at various vending franchises.  Can any experts here give me some information on how profitable this industry is?

Thanks

Paul Andrews.

Comments

Andy Cheetham on 10.12.2008 8:45:50 am

Hi Paul

Despite first impressions running a vending machine franchise requires a fair degree of sales ability and often a cold calling process, it's not for the faint hearted. You need to be wary exploring this area of franchising as many operators are little more than business opportunites looking to flog as many machines as possible and tie you to a minimum purchasing obligation or at least an inflated cost for branded stock (although case history shows they may struggle to legally enforce the latter). Don't be fooled either by those promising to do the selling for you and establish your first 25 sites, as the quality of each site is the key thing not the number of sites and if a site has a low yield then the pay back on the capital cost of the machine for you may be many many years or even never! I speak from considerable experience here Paul having previously run a merchandising network supplying over 7000 retail outlets.

Finally since the franchisor is unlikely to own the brand you are wide open to a competitor walking into your sites and offering a higher "cut" for the site or some other incentive for an identical offering. Many consultants would also warn you that if a franchisor doesn't own the brand they trade with or have exclusive rights to it, they are not really a franchisor in the first place - they are a business opportunity.

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JT on 10.12.2008 11:04:18 am

Paul

Andy has raised a few very important issues around vending franchising. Perhaps a vital point is the value of the initial sites provided by the franchisor. It is reasonable to assume that they should seek out productive sites for you to service - after all they will be making additional income from your product sales. However, take a close look at  the territories you could be offered and then consider the typical customer mix that the  outlets in each territory will attract. The franchisor will find you your sites because they are contracted to do so. Once they have achieved the contractual number ask the hard questions about what happens next. Try to find out if the sites provided by the franchisor will guarantee a minimum turnover.  Will you have the opportunity to decline sites provided by the franchisor if they are obvioulsy not suitable, without prejudicing their obligation to provide a fixed number of sites? Also, consider how much vending will be affected by the seasons - you can reasonably expect Spring  and Summerto be good because families will be on days out and children enjoy snacks and families and will form the  basis of your business. Consider Autumn and Winter when families don't venture out to the beer gardens and family rooms. Will you be able to vary your product selection to cater for changing tastes?  Will you have the freedom to buy in stock from other, perhaps more competitive sources? Give cash flow some consideration - calculate the minimum return from an average site by contacting existing franchisees with a few different vending companies. Each franchisor should provide details of a few franchisees without hesitation. Remember to take an average of minimum sales. Divide this into your desired income level and this will give you your optimum level of sites.  Only you can decide if  you want to commit to servicing that  number of sites and in Summertime that could  be twice a week for most of them.  Consider security as well - who pays for vandalised machines and lost / stolen stock? There are many, many very successful vending franchisees making a comfortable income but I am sure most, if not all, will tell you that it can be very time consuming and also very frustrating at times. Go into any franchise with your eyes wide open and ask the questions BEFORE investing.

 

Paul Andrews on 10.12.2008 3:49:30 pm

Thanks for the detailed replies.

 

It looks like an industry to be wary of and not as easy an investment as it sounds from the face view.  Your idea about contacting existing franchisees is good though and parhaps I will look further into it as if they are running in profit then maybe it could still be worthwhile. What I like about the idea is it looks fairly easy to run and as I do not have a great deal of experience in running my own business this is what attracts me.  At the same time though I have limited savings and need to be sure they are invested well.

 

Would the best idea be to contact various vending machine companies and ask them all for a list of probitable franchises they have in operation?  If I understand you correctly, this way I can find out first hand from the people who have already invested in the company.

 

Paul

JT on 10.12.2008 5:33:55 pm

Paul

 

That is by far the best way forward for you and indeed anyone buying a franchise. Visit a few of them and balance one against the other. Ask for a list of franchisees so that you may choose who to call. If your heart  is set on vending explore the potential to buy the machines and stock separately, this way you keep your options open. You may find that companies are reluctant to provide contact detailsuntil they have first met you - reasonable if I am honest.

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