Vending Machine Business: Cost, Tips, Pros, and Cons
Vending machines are no longer a novel business idea—they’re everywhere. There is much to like about the vending industry for those looking to start their own business. Consider that there are millions of machines in the U.S. alone—and the vending machine industry generates over $23 billion in annual revenue. A market that size is a reason to explore how to start your own vending machine business.
How to start a vending machine business in 6 steps
- Consider all your vending machine options: Food and drink machines, bulk vending, and specialty vending.
- Find the right location for your vending machines: Consider places where you feel motivated to use a vending machine. Then work out an agreement with the proprietor.
- Find your vending machine: Vending machine sellers include manufacturers and wholesalers, secondary market retailers, and online resellers.
- Stock your vending machine with inventory: Consider site-specific needs when purchasing inventory for your machine. Also, don’t over-order stock in the beginning.
- Explore your vending machine business financing options: The best financing options include a short-term loan, equipment financing, and inventory financing.
- Make suitable investments in vending machine tools: A successful operation requires investing in tools that help you run your business more efficiently and prioritize customer service.
The vending machine industry is an attractive option for new and experienced entrepreneurs. Besides its surprising profitability, running a vending machine business is pretty versatile. It can be an excellent weekend side hustle, a low startup-cost business, or an interesting new way to expand your portfolio.
Ready to make your fortune off grab-and-go snacks and beverages? Here’s everything you need to know about how to start a vending machine business.
Vending machine costs
Most of the costs to start a vending machine business come from vending machines and stock items. With as little as a $2,000 investment, you can get a vending machine business up and running. Many vending machine operators recommend buying used or refurbished machines, which you can find for between $1,200 and $3,000. Depending on size and features, a new vending machine will cost anywhere from $3,000 to $10,000.
Besides the machine itself, you’ll also want to consider the cost of inventory to stock your machines. Depending on how many devices you plan to own and what kind of inventory you’ll stock, this could span a few hundred to thousands of dollars.
How to start a vending machine business: A step-by-step guide
Any advantage or insight on vending machines is a great way to get in on this niche business. For example, let’s say you’ve already identified a need for a snack machine near you. Reach out to property owners you know and gauge their interest in placing vending machines at their locations.
But even without personal connections, you can start a vending machine business—and make money doing it. Here’s how to start a vending machine business in six steps.
1. Consider your vending machine options
Many people may think vending machines only come in the standard snack-and-soda variety. If you’ve thought about how to start a vending machine business, you likely know there are more options. There are four different categories of vending machines (which we’ll outline below). Consider all four types when choosing the machine whose products would be the biggest hit with your target market.
Whichever type of vending machine you choose, start with one or two machines with a specific market focus. That way, you can gradually learn about popular stock- and site-specific patterns and add new machines accordingly.
According to Vending Market Watch’s 2019 annual report, food and beverage vending machines with snacks, soda, and candy make up most of the vending market share in the U.S., with beverages alone accounting for nearly a third of vending sales. You can’t go wrong with this old standard.
Of course, there are variations on this standard—you can get a machine that offers drinks, snacks, or snack-and-drink combinations. Some vending machine entrepreneurs choose to purchase different types of machines for one location or place one kind of machine in multiple locations.
Whatever you decide, it’s a good idea for new vending operators to start with a specialty. These options include healthy snacks, beverages, or even fresh food—until you learn more about the industry.
To make the most sales, cater your offerings to a specific, location-driven market. For instance, you might stock your food and beverage machine at a gym with protein bars and shakes or a school vending machine with juice and granola bars. When you think of a vending machine, you may think of soda and chips. Still, people want and will pay for convenient, healthy alternatives.
Starting a vending machine business with machines that stock gumballs, stickers, or rubber balls—also known as bulk vending—requires very little capital and low maintenance costs.
These typically low-maintenance vending machines might not be glamorous, but the quarters do add up. A refurbished vending machine could cost you less than $50 and bring in as much as $30 per month. The products you’re offering have incredibly low overhead. In the right market—like a school or amusement park—this modest investment offers the potential for a reliable, passive income source.
Most bulk vending machines are mechanical devices and don’t require electricity or battery power to operate, which means the cost of operation is low to nonexistent. Many candy and toy vending machines are older, so a used device might require minor repairs before it’s functional.
When starting a vending machine business, you’re not just limited to food and drinks. Prominent public places like arenas, airports, and malls often have machines offering goods like tech accessories, beauty products, or other specialty items. Some vending machines use the same technology as standard vending equipment, but some are called Automated Retail Machines.
Some specialty vending items include:
- Hot beverages: Coffee or hot beverage vending is typically most successful in offices. Universities and conference centers are also good locations for this vending machine business. Manufacturers often produce both specialty beverage equipment and traditional machines, so you may be able to combine your purchases.
- Retail: Essential travel items like phone chargers, headphones, and neck pillows can be lucrative vending products if you can negotiate a contract with a local transit station or even an airport. Upscale vending machines in malls and airports often contain luxury skincare products or electronics.
- Laundry products: Individually packaged detergent, fabric softener, and dryer sheets make great vending products if you identify the right market for them—like laundromats, apartment complexes, or dormitories.
- Tobacco: Tobacco vending is legal in many states and can be lucrative depending on the state taxes. Even cannabis vending machines are becoming available, but with a much more limited market.
If you don’t want to build your business from scratch, you may want to consider buying a franchise to start your vending machine business. As a franchisee, you can work within a proven business framework and receive extra support and training to set up your vending business. You’ll also be able to decide how many or how few machines you want to purchase. However, remember that you will be responsible for paying a portion of your profits to the franchisor as a franchisee.
2. Find the right location for your vending machine
The type of vending machine you choose is crucial, but where you decide to put that machine is essential in earning a profit from your vending machine business. For instance, a portion of upscale food and beverage vending machine might fail in a strip mall full of restaurants. Still, that machine might flourish in an office park.
When starting a vending machine business, think about the locations where you have personally purchased something from a vending machine. Also, think of times when people are most likely to buy a beverage, snack, or other items. There’s a good chance your restaurant selection was limited, you were in a hurry, or you were waiting somewhere like the airport or DMV.
Some other location ideas for your vending machine include:
- Hospitals or medical centers
- Grocery stores
- Airports and shopping malls
- Apartment complexes
- Manufacturing plants
The next step is securing your location. A good salesperson might feel comfortable cold-calling a property or business owner or soliciting them in person. This approach can work for smaller areas, especially if you’re a frequent patron or already know the owner.
You can also try visiting your local Chamber of Commerce. They can give you information about major businesses in your area, which might give you some ideas for potential locations. Ideally, try to place your vending machine at companies with at least 100 employees or considerable foot traffic, like a multi-business office park.
If you already have locations in mind, reach out to proprietors, or work on getting contact information for the relevant manager. Talking to prospective partners about location needs can help you better understand local demand and inform your vending machine and product selection.
Understand state-specific vending laws, regulations, and compliance
Different rules apply to various vending machines, and vending regulations vary by state. Before starting a vending machine business and reaching out to prospective location proprietors, find out how your state governs vendors. Contact your local Chamber of Commerce or look up your state’s small business regulations online.
Also, any vending machine you put in public may be subject to specific ADA compliance standards. Keeping accessibility in mind when considering vending machine options is a good idea.
Know commission requirements and prepare a proprietor contract
Before pocketing the profits of your vending machine, you’ll need to pay a commission to the proprietor who provides the location and the electricity required to operate your device. Generally, you’ll pay the property owner 10% to 25% of the revenue from your vending machine.
Draw up a contract if you hope to establish an exclusive partnership with a location. The agreement with the proprietor should state your agreed compensation rate, contract length, and terms you have with the owner.
Include provisions for breach of contract, too. It’s also wise to include expectations and obligations regarding servicing and restocking your vending machines, vandalism or theft, and possibly unprofitability. As always, have a lawyer look over the contract before signing.
3. Find your vending machine
You can’t start a vending machine business without first obtaining a machine. Finding your vending machine can be as simple as an online search. Search locally and from national suppliers to get an idea of the different vending machine offerings and price points. Considering the inventory cost when looking at vending machine prices would be best.
To find the vending machine of your dreams, start your search with these three types of sellers:
- Manufacturers or wholesale vending suppliers have the widest selection of vending machines for sale, the newest technology, and the most end-to-end services for delivery, repairs, and training. Equipment through vending franchises might require a minimum order of multiple machines or other fees for machine servicing and entrepreneur development programs, which are the most expensive option.
- Secondary market sellers or online specialty retailers allow you to browse multiple brands and models of vending machines and often have helpful resources for business owners.
- Consumer-to-consumer platforms like Craigslist and eBay have thousands of vending machines for sale. Save time by filtering by merchant or owner location, so you don’t have to worry about high shipping costs. Peer-to-peer platforms are a good choice for first-time vending entrepreneurs who don’t want to spend thousands on new or refurbished machines.
As you’ll quickly find once you start your search, vending machines come with various features and capabilities, all at different price points.
Some of those unique features include:
- Snack/drink combination machines
- Credit card and high bill denomination functionality
- Touch or voice accessibility
- Remote monitoring software and low-stock alerts
- Branded “wraps” for the front of your machine
- Interactive screens
Try not to be too tempted by these unique features, though, since they can become costly. Choose the vending machine that best fits the products you want to offer and what you can afford at the moment.
4. Stock your vending machine with inventory
Once you’ve landed on a vending machine, you’re on your way to starting a vending machine business. Next, you have to stock it with an inventory.
Product selection is an excellent opportunity to boost sales. Rather than stock items based on broader food and beverage trends, pay attention to local, site-specific needs. To stay safe, don’t over-order stock initially, and adjust your offerings based on demand.
Drinks will make up most of your sales if you provide combined food and beverage services in your vending machine business. The refreshments market is growing and expanding from soda to coffee, flavored water, and healthier beverages like coconut water. It’s worth considering what your location can support in terms of pricier specialty foods and drinks.
Drink size and shapes will affect your range of machine choices. So if you feel strongly about selling cartons or irregularly shaped products, try to find a machine with adjustable product sizing.
5. Explore your financing options
Starting a vending machine business doesn’t require nearly as much startup capital as most other small businesses do. Some companies can cost hundreds of thousands of dollars to start. Still, a few thousand dollars isn’t exactly pocket change. If you need a loan to purchase your vending machine, consider these two options:
If you’re a business owner with solid financial history, securing a short-term loan to finance your vending machine might be your best course of action.
Like traditional term loans, short-term lenders deposit a lump sum of cash directly into your business bank account. You’ll repay your loan, plus interest, over a predetermined time. As you can guess based on their name, repayment terms for short-term loans are considerably shorter than their long-term counterparts—usually 18 months or fewer. And interest rates are a bit higher than longer-term loans. For those reasons, short-term loans are generally easier to qualify for than long-term ones.
But this is a small business loan, so short-term lenders need to review and approve your business’s financials before agreeing to extend you a loan. If possible, you’ll want to bring a good business revenue history and good personal creditworthiness to prove your candidacy.
You don’t necessarily need tons of capital on hand to start a vending machine business that makes money. But if you need help, you can shoot for an equipment financing loan. Loan terms depend on the value of your equipment, which also acts as collateral in case you default on your loan payments.
Vending machines can last over ten years with proper maintenance. To assure lenders, they will require your financial information and business plan. If you apply for an equipment loan, you will also need equipment quotes for the machine(s) you plan to purchase. Additionally, if you need capital to buy inventory, you may want to consider inventory financing.
6. Make the right investments
You’re ready to start a vending machine business once you take care of location selection, purchasing a machine, and negotiating placement terms. Now it’s time to focus on making the business profitable.
Invest in a vending management system (VMS)
Depending on the technology in your machine, your vending equipment may come pre-programmed with management software. You can streamline operations, record inventory, and track revenue.
But most standard machines require you to manually manage your inventory, which might be doable if you own just a couple of vending machines. Once you have 5-10 separate vending machines, it’s probably a good idea to invest in a vending management system to help you stay on top of your inventory remotely. VMS software allows you to manage your vending machines from an internet-enabled device remotely. Most VMS systems provide real-time inventory updates and reporting tools.
Invest in customer service
Even if you only have one or two vending machines, it’s worthwhile to emphasize customer service from the beginning of this (or any) venture. Follow best practices to optimize your vending machine for your customers.
Like many location-based businesses, vending operators depend on word-of-mouth referrals and in-person connections. Foster relationships with business owners, look up your state’s vending association or join local networking groups for entrepreneurs.
Most importantly, ensure that your vending machines are stocked and functioning weekly or biweekly. You can also consider providing an 800-number for service requests and comments, which is a great way to get helpful feedback.
Invest your time
Like any other venture, starting a vending machine business requires more than just capital investment. You’ll also have to invest time and attention in your vending machine business.
A full-size vending machine might require you to collect money weekly. Consider a weekly schedule when determining how much time you can realistically spend traveling to locations. Operating a vending machine business requires purchasing inventory, visiting sites, and continual restocking. Also, prepare to spend time researching trends in sales, new products or locations, and talking to peers.
The typical service cycle for bulk vending—non-perishable candy or stickers—is between four and eight weeks. So, suppose you can’t get away from your full-time commitments often. In that case, bulk vending might be an excellent way to break into the vending machine business without sacrificing too much of your time.
Advantages and disadvantages of starting a vending machine business
With just a few thousand dollars to invest, a vehicle, and determination, you’re completely capable of creating a vending machine business and turning a profit. But creating a vending machine business isn’t all fun and games (though you can vend fun and games in your machine). Like any new venture, there are advantages and disadvantages to consider.
Vending machine business advantages
- Easy to scale: Scaling your vending machine business is incredibly easy. You can start with a few vending machines and expand locations as you become more successful.
- Variety of choices: These days, all types of vending machines exist. Vending machines now serve healthy foods, gourmet options, and sometimes options entirely unrelated to food.
- Little to no overhead costs: There are little to no overhead costs of running a vending machine business, especially if you’re running the business on your own. Since vending machine businesses don’t require many employees or office space, you don’t have to worry about making payroll, benefits, or spending thousands on rent.
Vending machine business disadvantages
- Time commitment: Operating a vending machine business will require you to commit time and energy to stock, service regularly, and collect money from your machines.
- Theft and vandalism: Vending machines are an easy target for theft and vandalism. Ensure that your machine locations are secure and safe to avoid profit loss.
Frequently Asked Questions
1. Are vending machines profitable?
Yes, vending machines can be profitable. The average vending machine earns $35 a week. Still, vending machines that are well-stocked and placed in safe, high-traffic locations can generate over $400 a month.
2. Do vending machine owners pay rent?
Yes, vending machine owners pay rent or commission to the building owner. Vending machine owners generally pay between 5% and 20% of their sales.
3. Are vending machines taxed?
Yes, vending machines are taxed based on the revenue they generate. The amount of sales tax varies depending on your state.
4. Where can you place vending machines?
You can place vending machines in most commercial spaces, such as offices, retail shops, bowling alleys, etc. But you’ll need to sign a contract with the property owner first.
The bottom line
The vending machine business drives billions of dollars globally each year. You may be able to break into this lucrative market with less than $1,000, proper market research, informed decision-making, and an entrepreneurial spirit.
Invest in small amounts as you learn about your vending machine’s demand patterns. Start generating a passive income without taking out a massive loan or debt. If you work another job, gradually increasing the scope of your vending machine business will allow you to take on more or less when you’re ready.
Regardless of your financial situation, the vending industry offers an opportunity to operate your own business while only risking as much as you’re comfortable investing.
Vending machine businesses are not for everyone but can be a great way to make money. If you love the freedom of being your own boss and don’t mind putting in long hours, entrepreneurship might be a good career choice. Being an entrepreneur is not an easy path to success, but it can be a gratifying career. Learn more about entrepreneurship here.