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5 Things to Watch Out for in the Vending Business

There's another article on this site about all the great things about the vending machine business. This article is about all the no-so-great things about the vending machine business. If you're properly informed, you'll be able to avoid these scams, lies and risks.

1) Protected Territories
There are such things as real protected territories, but they only exist for extremely specialized kinds of vending machines. 98% of the time when you hear this term, its a sales tactic. Ask for it in writing and see them backpedal and qualify. These territories can also get bundled into franchise deals... and they're not usually worth anything.

2) Scam Financing
Alas, many of us don't buy things... we finance them. Sales people know this. It is not unheard of for a new vending machine owner to pay three or four times what a vending machine was worth due to a financing scam. This can be in the form of the old "no interest" loan that's great until you've got a late payment and then you get hit with 30% interest due all the way back from when the loan originated (that's a bill that will add some grey hairs).

Low to no downpayment financing also tends to have some clauses that court usury. Be very careful about who you're dealing with. It may be a much better idea to wait a month or two until you've saved up enough money to buy the machine outright.

3) Lease-Back Deals
This is another variation on scam financing. In this setup, the company leases the equipment to you for a fixed or variable monthly payment. Your contract with them includes them servicing the machines you lease, including collecting the money from the machines. All too often, the money collected from the machines is not enough to cover your monthly payment. You are now in a negative-cash flow business.

The really bad actors in this scheme have clauses in your contract that don't allow you to get out of the service contract for quite a long time - even up to 3 years. By then, you've paid them thousands, and you have built no equity whatsoever.

Please note that we're not saying all service contracts are bad, and we're not saying that all companies that offer this business structure are bad. Just be wary, ask lots of questions, and get at least five different references from happy customers. Don't just get their numbers and stop there. Call them. Ask them detailed questions.

4) Clueless Sales People
After you've picked the specific kind of vending machine you want to get, start getting familiar with how they work. Good salespeople and good companies will stand out fast - they'll be able to explain what to do if the unit's compressor seems to run all the time, or if one of the sodas gets stuck (for example). Bad salespeople that aren't representing real vending machine expertise will be totally stumped by these sorts of questions. Some of them don't even know what a SKU is.

5) Fake Manufacturers
You will come across promoters who claim to be the manufacturer. This, they explain, is why they can offer such low prices. Beware. These salespeople aren't actually the manufacturer - they just subcontract to the manufacturer, and this lets them say (quasi-legally) that they are the manufacturer.

You may also come across real manufacturers who are selling their vending machines. Most of these companies are not going to be around in a few years, and you'll be stuck with an expensive machine that can no longer be repaired.

So take a deep breathe, right now, and promise yourself you're not going to cut any corners. Save up some money and go to the tried and true top-quality vending machine distributors and buy yourself a good machine that delivers the goods - both to you and the people who put all those lovely quarters in it.