If you’ve spent some time exploring different business ideas that generate a passive income, you may have come across the suggestion of starting a vending machine business. While you might associate vending machines with snacks and beverages, they’ve recently been popping up in all kinds of unexpected places, offering a wide range of goods.
Beyond the usual candy bars and cans of pops, you can find vending machines selling electronic goods and essential travel items to travelers in airports and train stations, personal care items and beauty products, toys, laundry detergent machines in laundromats, sanitary items in hospitals, and a variety of other products.
Since the vending business model is based on you renting out space for your machine and periodically restocking it and maintaining it as needed, you can operate a large number of machines since you don’t necessarily have to be there each day to run them as you would for, say, a food truck business. Sounds pretty good, doesn’t it? If you’re thinking of getting into the business yourself, here are the things you should consider before getting started.
Advantages of Starting a Vending Machine Business
Running a vending machine might seem like an easy way to earn some extra money, but like any other business model, it requires careful planning and execution to avoid costly mistakes.
Before diving into the details of how to launch your vending machine, let’s take a look at the advantages of this kind of business.
Easy to scale
Vending machines are relatively easy to manage, so it’s possible to operate multiple machines at once while still maintaining a full-time job or other businesses. You can choose to invest as much or as little time and money into your vending machine business as you’d like, making it an ideal side hustle or part-time endeavor.
Variety of choices
Vending machine businesses offer flexibility in terms of locations and products offered. You can choose locations that fit your schedule and sell products that best suit your target market. You could even survey your initial customers and add new products based on their requests.
Little to No Overhead Costs
Vending machines have a low startup cost and little ongoing overhead. Unlike other businesses that may require significant capital, a vending machine business typically requires a modest initial investment.
There are no utility bills or rent for commercial space associated with operating vending machines since they functionally work independently and do not always need electrical outlets.
Vending Machine Business Disadvantages
While starting a vending machine business certainly has its perks, there are also some drawbacks to consider. Here are a few disadvantages you should know about before getting started.
While these disadvantages may seem daunting at first glance, many successful entrepreneurs have built lucrative careers in the vending machine industry despite them. By carefully considering these drawbacks and putting together a solid business plan, you can set yourself up for success as a vending machine owner.
Time Commitment
One of the biggest drawbacks of starting a vending machine business is the time commitment. While it’s true that vending machines require less time and attention than other businesses, they still can’t be completely ignored.
You’ll need to visit each machine regularly to restock products, collect money, and assess the need for repairs and upgrades.
Theft and Vandalism
The most worrisome and damaging downside to running a vending machine is the risk of theft and vandalism. Positioning the machine in an area covered by CCTV cameras can reduce the likelihood of damage, but once in a while someone will risk it.
You can also reduce the likelihood of theft by frequently collecting the money or using a cashless vending system. While there is no way to completely protect against vandalism, few thieves are going to bother breaking into a machine if they know there isn’t any money.
Types of Vending Machine Options to Consider
There are many options when it comes to stocking vending machines, and picking the right products for your location is critical. Think about what your target customers will be happy to pay for. You can even ask people who frequent the area what they’d like to see in a local vending machine.
Food and Beverage Machines
While basic vendors are typically limited to dry, non-perishable goods, there are a variety of refrigerated and specially designed machines that can sell beverages and fresh food. Whether you want to sell chilled drinks or packaged sandwiches, you just need the right equipment to turn a profit.
Snack Machines
Snack machines are the classic vending machines. They work well because most of their products have long shelf lives and anyone with a craving for a bag of chips or a chocolate bar will gladly pay the price.
Coffee Machines
Coffee machines have been around for a long time, but they’re much more advanced and can produce excellent brew. Many models can even make other hot drinks like hot chocolate and tea, and they might even add milk or cream for you.
Personal Necessities Machines
While they aren’t especially common in Canada, personal necessities are sold in vending machines around the world. They can sell everything from personal hygiene products to first aid supplies and even clothing and accessories. Since most of these products don’t expire, less restocking is required and the likelihood of wasting product is extremely low.
Office Machines
Office machines can offer a combination of snacks, personal necessities, and office supplies. Whatever the workers in an office building are most likely to need and want will undoubtedly sell when things are broken and forgotten.
Frozen Vending Machines
Frozen machines are perfect for ice cream and other frozen treats that come individually wrapped. These are ideal in warm climates, especially during the summer months. While refrigeration raises operating costs and increases the need for repairs and maintenance, most frozen products will go for higher prices in the right location.
How To Start A Vending Machine Business
You might think that vending operators are all large corporations and that you can’t break into the game as a new entrant, but there’s plenty of opportunity for an entrepreneur. With a bit of research and some resources to get started, you can join the over 1,100 vending machine operators in Canada who are making money in the vending machine industry.
Choose the Perfect Location for Your Vending Machine
The first step is to evaluate the local market to determine the best location for your machine. If you plan to start with a specific type of machine, this will influence your ideal location. If you’re open to any type of machine, you may choose to pick a location first and then figure out what the local passerby are most likely to buy.
Consider the following factors:
- How many people regularly pass by or spend time in the location?
- What are the passersby likely to want to buy?
- Are they likely to be carrying change, credit cards, or neither?
- Are there enough people nearby that you could boost sales by advertising the machine?
These questions are a great starting point, but depending on the local population and competition, you may find other critical points for consideration.
Make a Budget and Secure Financing
The type of machine you intend to use and buying it used or new can significantly impact your startup costs, so do your own research to figure out how much you’ll need to invest up front.
Once you have an idea of the expenses you can create a budget and decide whether you need to secure financing. If you have some savings and intend to start small you may not need to secure a loan or other type of financing.
However, if you’re planning a larger business, those providing you with capital will likely require a well-thought-out business plan before they advance the funds. A business plan typically includes an executive summary, an overview of your business structure and products or services, market research, a marketing strategy, an overview of your company organization, and an overview of your financial plans and pricing.
Register Your Business
Once you have done your research, created a business plan, and secured financing if necessary, the next step as a business owner is to register your business. You can register either as a sole proprietor or a corporation, with each structure having its benefits and drawbacks.
Even if you are a sole proprietor and don’t expect to make huge revenue from your business right away, there are still good reasons to make sure you register. By registering, you ensure your business is a legitimate operation from the point of view of the government. You can also get an HST or GST number, depending on which province you operate in, allowing you to collect sales tax and reap tax benefits.
It also allows you to register your business name, which can be an effective way to make your business memorable as you enter a new industry.
Secure Your Inventory and Suppliers
With your business registered, you can start taking the exciting first steps of getting your vending machines out there in the world.
Since at this stage, you’ve decided what product mix you’re going to sell in your machines, make sure you have stock with which to fill them. Different suppliers will have different price points and minimum order quantities, so by contacting a range of suppliers, you will find the one that is best suited for your business.
For example, one supplier may have excellent prices but large order minimums of 1000 units or more. A second supplier may have slightly higher prices, but allow you to order only 100 units of a product. When you’re just starting out, you may want to go with the second supplier since you won’t know how quickly you’ll sell through your stock or which items in your product mix will be most successful.
If you’re selling items that have expiry dates, this is particularly important since you can end up having to throw out stock that reaches its best-before date.
Another consideration at this stage is identifying backup suppliers if your first choice falls through on an item that sells well.
Purchase Your Vending Machine
Finally, you can purchase your vending machine! There are perfectly good used options, so unless you want to have the most cutting-edge technology and a brand-new machine, starting with a high-quality used option can be a great way to cut down your startup costs and turn a profit sooner.
If you plan to buy a new machine, compare the details of the relevant manufacturers and models. Don’t hesitate to get in touch with the company and ask them questions via email or on a call. If a used machine seems ideal, check a variety of vendors and consider asking for additional information including the machine’s history and pictures or videos to confirm its functionality.
Where to Buy a Vending Machine
Although the vending industry is fairly niche, there are a surprising number of options when you’re looking to buy a vending machine in Canada.
Online Shops
Many online shops offer new and used vending machines at competitive prices. This can be a great way to find variety and research your options. Be sure to check reviews before buying from an online shop, as some vendors may not be reputable or reliable.
Vending Machine Retailers
While retailers may have higher prices, they can also include better customer service and may provide additional products and services such as training or mentorship. If you have more money than time, going with a well-respected retailer may be your best option.
Vending Machine Manufacturers
Most things are less expensive when purchased directly from the manufacturer, but there are drawbacks associated with this approach as well. While manufacturer sales should definitely include a warranty, they’re less likely to help make sure your business venture succeeds.
Used Market
If you decide a used machine is your best option, there are a number of places online (and potentially locally) where you can find deals. Search the internet and ask around in local entrepreneurship groups. Sometimes the ideal offer is only a quick referral away.
Online Marketplaces
Online marketplaces like Facebook Marketplace, Kijiji, and even Craigslist contain a massive variety of listings. While you’re less likely to find a high-quality machine in these markets if you get lucky you might find a great deal at a much better price than elsewhere.
Auctions
Traditional and silent auctions are used for a variety of reasons including liquidating assets and fundraising. If you find an auction that features one or more machines, there’s a good chance there won’t be too much competition for you to outbid.
Are Vending Machines Taxed?
Yes, income from operating a vending machine is taxable like any other small business. However, specifics vary between provinces, so make sure you understand your local obligations before filing.
Key Takeaways
Here’s a quick review of the key concepts covered in this article:
- Operating vending machines is a niche and potentially profitable business that’s easy to customize to your location and scale as desired.
- Certain machines (such as healthy snack vending machines) may require more upfront investment but may be more lucrative in the long run.
- Finding the right location and customizing your wares to the people there is critical.
- You can find machines for sale new and used; ensure you choose the right type for your location and clarify warranties and return policies in case of damage.
- A vending machine business should be treated like any other business, with a budget, plan, and strategy in place before opening.
Where to Buy a Vending Machine FAQs
Here are some frequently asked questions about vending machines in Canada.
Do Vending Machines Make Good Money?
Vending machines can be a good money maker, depending on factors such as location, machine type, and overhead. High-traffic areas such as airports and train stations are ideal for vending machines, as people in these locations tend to have more disposable income and may be willing to pay higher prices for convenient snacks or beverages.
Certain types of vending machines, such as a healthy snack or organic beverage machines, can also be more profitable than traditional candy and soda machines.
Can I Buy a Vending Machine and Place It Anywhere?
Anyone can buy a bending machine, but in order to place it in public you must have permission from whoever controls the space. In a store or its parking lot, you would make an agreement with the company. In the hallway of an office building, you would contact whoever controls the lease. In a public park, you might be dealing with the city or provincial government.
In most cases, you will need to pay a certain amount of “rent” regardless of where your machine lives. Make sure to build this into your budget from the beginning.
How Much Does a Vending Machine Cost to Buy?
Prices vary depending on the manufacturer, type, and condition. You can probably find a basic used machine for $2000 or less, but a new machine with modern functions may cost anywhere from $3000 to $10,000 or more. This is why it’s important to compare your options and make the right choice for your budget and target market.
This article offers general information only, is current as of the date of publication, and is not intended as legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. While the information presented is believed to be factual and current, its accuracy is not guaranteed and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the author(s) as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by RBC Ventures Inc. or its affiliates.