Vending Machines: Legitimate Investment or Get Rich Quick Scam? ...by Bill Knell
Ads for amazing, entrepreneurial opportunities fill the airways. On many cable channels, infomercials touting get rich quick schemes have replaced those for cut through steel knives and pocket fishing gear. It's a sign of the economic times. Our Nation's population is getting older and many folks over fifty have surplus money to invest. Younger people, looking for a way to escape the daily grind, are eager to max out credit cards, withdraw their nest egg and cash in those savings bonds to start a profitable business. The problem with cookie-cutter opportunities of the type currently being offered is that they are designed to make someone else rich, not you!
Vending machines have been the darlings of entrepreneurial magazines and publications for the past twenty years. While ads for roof coating and carpet cleaning franchises, computer enhanced photo and donut machines attract some takers, most people respond to the vending machine opportunity ads because they require a smaller investment.
The majority of people who invested a few hundred to a few thousand bucks in these deals got stung badly. Many of the seemingly reputable vending machine offers came from fly by night scam artists. They would collect a pile of money, close down their operation after sending out a few cheap machines that never worked right and start up all over again under a different business name. Even some of the vending deals that were legitimate were anything but the lazy man's road to wealth.
Those who invested in vending machines, received their equipment and began to place them in stores and other high traffic areas were in for a rude awakening. Most found out later that they paid double or even triple what the machines were actually worth. Others were being soaked on the price of inventory and had trouble getting the supplies in time to fill their machines. But that was just the beginning of their woes.
I cannot tell you how many letters and emails I have received over the years asking me if I could offer some advice on how to get out of a vending business that was sucking the very life, in terms of money and time, out of its owner. People that had expected an easy second income out of their new vending business to make their car or house payments found themselves stuck in a bottomless money pit. Broken or vandalized machines quickly ate up profits. The time needed to service their investment was also a big problem. The few hours a week mentioned as a realistic commitment of time to run their new business turned out to fall short by double digits.
Many vending machine business owners that I heard from were close to total exhaustion. They found themselves spending from four to eight hours every night dealing with the machines after leaving their normal day job. Much of that time was pure loss as they had to repair machines and deal with irate store owners who were getting tired of customers complaining to them about money lost in damaged or defective equipment.
I recall one sad tale that came from a man in his sixties. He purchased some vending machines for a retirement income and quickly found himself out on the road from twelve to fourteen hours every day fixing, restocking and changing the location the machines. After several months of this, he had a heart attack. His brother kindly agreed to visit the vending route while the man recovered. A week went by before his brother could start the serving the route. When he did, he found that many of the stores where the machines were located had placed them in back rooms or even left them on the street. The merchants just couldn't deal with all the customer complaints.
A new generation of vending machines has arrived on the scene to replace the candy, gum, snack and convenience models. These are electronic machines that offer movies, internet access and even money. For the right investment amount, you can own your own video rental business, pay-per-use internet access terminal or ATM! Most people are smart enough to realize how much work it would be to refill DVD rental machines for the small profit margin offered, but many get taken in by the internet access or ATM machine offers. A significant investment is needed to own the internet access or ATM machines, but are the rewards as great as the offers claim?
With cell phones and laptop computers now offering more wireless internet access possibilities then even, the internet machines would be used by a very small section of the population. Many restaurants, businesses and hotels now offer free internet access. Some even provide computers. Libraries offers computers and the internet for free. Ask any large phone company why you see less and less pay phones in public areas? If they are honest, they'll tell you that it's all about cost verses return. It costs phone companies a fortune to service payphones. There are hundreds of thousands of fewer users because of cell phone popularity and the remaining payphones are always targets for vandalism, theft and free dialing scams.
Most of the ATMs being offered to private citizens through entrepreneur ads are really just psuedo-bank machines. Most dispense receipts instead of cash. The customer then has to take the receipt to the store owner and get their cash. This makes more work for the store employees and provides hassles for the machine owner. The return is usually less then a dollar per transaction. The selling point to the store is supposed to be that customers who can get more money will spend it in their store. The problem is that most stores sign agreements with local companies offering real ATMs that dispense cash and provide little or no hassles for the store owner or employees. Why would they want yours?
Most of the new electronic machines are less likely to be vandalized because they make sales or transactions using credit cards, not cash. But that advantage can quickly vanish if you have to have to deal with merchant account providers. Many will hold back funds from credit card transactions to protect themselves from charge backs if you do more then a certain amount of business each month. The same is true of companies offering so-called easy to get or 100 percent approval merchant accounts and credit card systems that allow you to accept cards for items or services you sell online.
I have watched the entrepreneurial vending machine business for over twenty years and have yet to meet or hear from one satisfied customer. There are ways to purchase, own, supply and service vending machines that are far less expensive and more legitimate then by responding to a late night cable television or magazine advertisement. People who own legitimate vending machines will tell you that it's not an easy road to riches and requires the establishment of a good system of support that is beyond the financial scope of most individuals.