Vending machines have sprouted like mushrooms throughout the United States and internally. If you are considering starting a vending machine business and living in California, you can make good money from this industry.
Data from Technavio shows that the global vending industry is anticipated to grow at a compound annual growth rate of 16.81% from 2022 to 2027, increasing by $12426.7 million. This data has encouraged many entrepreneurs to take a leap into the industry. Therefore, if you decide to own a vending machine in California, you are not alone.
But how can you start a successful vending machine in California and make it a full-time career? Worry not; I got you covered with this detailed starting a vending business checklist.
You might also enjoy reading: is online vending machine good for passive income? The answer is Yes. Read this article to find out why!
Three Vending Machine Startup Options
If you have been gathering information about startup options, you have come to the right place. You can buy an already operational vending machine business, buy a franchise, or start the business from scratch.
Regardless of your method, consulting an attorney on legal matters and financial and tax experts for accounting is essential. The type of business you choose also determines your startup and ongoing costs.
Let’s now discuss these options.
1- Buying An Established Vending Machine Business
Buying an established vending machine business could be the fastest track in the industry. It allows you to inherit a secured revenue stream. However, before you jump into this option, do your due diligence to unearth any deal-breaking issues.
- Are the machines functioning correctly?
- Is the business making profits according to financial reports?
- Are there problematic existing contracts with vendors and clients?
2- Buying a Vending Machine Franchise
A vending machine franchise allows you to run a business under a parent company. A franchise will enable you to start a business with established administrative and operational infrastructure.
Some of the best vending machine franchises you can invest in include:
- Fresh health vending
- Clothing bin
- Healthy cravings
- Natural2Go
- Pharmabox
- Reis & Irvy’s
- Power Drop Shop
- IceBorn
- Espresso Delight
However, one thing to remember is that franchise has different levels of support depending on the parent company.
Often parent companies will require an upfront fee before you can acquire a franchise. The franchisor will take a certain percentage of your operation or charge a monthly fee. So, before you sign the dotted line on the contract, carefully read the franchise agreement. This will help you discover any unreasonable restrictions.
Also, ensure you know what the contract expects of you before you enter into business with the franchisor.
3- Start Your Vending Machine Business From Scratch
This is the option with the most work. It will require commitment and dedication to jumpstart a vending machine business from ground zero.
It means suitable sourcing machines and ideal locations. However, it also gives you the most freedom to pursue your business.
And because option 3 involves the most work, we will use it to examine the general steps to start a vending machine in California.
Steps To Start a New Vending Machine Business
Here are things you will need to do to get your new business off the ground.
1- Know What You Want To Sell
Deciding what you want to sell in your vending machine is the first step toward becoming an entrepreneur. I suggest you conduct market and industry research to establish what your target audience will likely buy from a vending machine.
While some products, such as water, coffee, snacks, and sodas, do well across the board, others appeal to particular interests.
The products you sell will depend on the location you have chosen. For instance, if you target students from the California Institute of technology or Pomona College in Claremont, you can also include sandwiches, salads, and microwaveable meals in your vending machine.
Remember, before stocking perishable items, you need to match your sales with the order volume. Otherwise, you will incur losses when forced to dispose of rotten or out-of-date products.
You can also stock over-the-counter medication, especially if you plan to place your vending machine near popular restrooms, shopping centers, malls, and transportation hubs.
Other items you can sell in a vending machine include:
- CBD products
- Laundry supplies
- Dog treats
- Skincare products
- Nail polish
- Fitness merchandise
- Hair products
- Electronics accessories
- Pens and pencils
2- Establish Which Features Are a Must-Have For The Vending Machine
Vending machines come with different features depending on the manufacturer. Therefore, knowing the features you will need in your vending device beforehand is crucial.
Some entrepreneurs prefer:
- LED lighting
- Functionality to accept plastic money
- Graphic and branded wraps to make the shopping experience attractive and interesting to entrepreneurs.
- Voice-activated screens or interactive touch screens
- Ability to remotely monitor stock levels
3- Look For Financing
The initial cost (cost of the machines and items you want to sell) can be overwhelming, especially if you want advanced vending machines.
A traditional vending machine could cost around $2000, and the candy and gumballs could range from $15 to $450. You may need between $300 and $10,000 to run a vending machine business in California.
But if you want to sell sodas and snacks exclusively, you may need between $1500 and $8500.
You may need to seek finances if your savings are insufficient to cater to startup costs. But where can you get the best startup loans for your vending machine business to boost your finances?
Consider the following:
- Short-term loans from traditional banks
- Family and friends
- Angel investors
- Crowdfunding
4- Choose a Suitable Location For The Business
California has many ideal locations for a vending machine business, depending on what you are selling.
Properly research the best location because it can make or break your business. But what determines a good location for your vending machine business? Look for areas with high foot traffic. But the place should also beam with customers who will buy your products.
Here are some favorable locations:
- Bus stations
- Hospitals
- Airports
- Car dealership
- Laundromats
- Gyms
- Apartment complexes
- Hotels and motels
- Malls
- Nursing homes
- Schools and colleges
- Train stations
- Universities
However, before you station your vending machine, confirm if the region or area requires ADA compliance standards. You should also consider the safety of the machine and the products.
5- Name Your Business
What is in a name? You may ask. The name of your business is how your clients will know your brand. It differentiates your vending machine business from the competition.
Therefore, ensure another vending machine company has yet to take the name. Conducting a corporate name search in your state will help you.
If you are interested in learning what makes a good company name good, I wrote an article where I share helpful tips for choosing the perfect name.
6- Choose The Business Entity Type
The type of business you run will have legal and tax implications. This decision also affects the costs and time you need to keep your business compliant with the state requirement.
You can decide on the following structures:
- Sole proprietorship
- Partnership
- Limited liability Company (LLC)
- C Corporation
- S Corporation
Sole proprietorships and partnerships do not differentiate the business and its owner. You are personally held liable for business mistakes or financial issues.
The other business structures separate the owner and the business; thus, you may have some personal liability protection.
7- Register Your New Vending Machine Business
If you choose the LLC business structure or incorporate the business, you will need to file the Article of incorporation.
Sole proprietorships and partnerships are often not required to submit paperwork. However, if you use a business name that does not include your first or last name, you need to file a DBA (Doing Business As).
8- Obtain Necessary Permits And Licenses
The next step is to research federal and state laws and regulations governing vending machine businesses so that you comply.
If this seems tedious, talk to your attorney. They can help you obtain a vending machine license and permit easily.
You could also obtain an EIN, also called the federal tax number, especially when you have employed people to work at the business.
9- Examine And Sign Contracts With Property Or Business Owners
Since you may operate your vending machine on other people’s properties and businesses, you will need to sign an agreement stating how much you will pay for the space and electricity you will use.
The payment models are often in a commission form. Vending industry experts estimate a 7% commission as the average, although others charge as high as 25%.
10- Purchase Insurance For The Business
Running a vending machine involves various risks, such as consumer equipment injuries, vandalism, and spoiled food. Insurance help protect the machines and third parties.
If you wonder whether vending machines be hacked or not, I wrote a whole article that I encourage you to read.
11- Ensure Continuous Compliance
Now that your business is running and you have all the necessary documentation, you want to ensure continuous compliance.
Ensure taxes are filed on time, business reports are accurate and updated, all licenses are renewed, and you have complied with state requirements.
What to read next:
- Can Vending Machines Detect Fake Money?
- Where Are Vending Machines Most Profitable?
- Is a Kiosk The Same As a Vending Machine?
Concluding Thoughts
Vending machines can do well in California if you follow these steps. It is not a complicated journey, but like any other business, it requires diligence and hard work.
Here are things to remember:
- Research your location to know which products to sell
- Comply with all federal and state requirements for a vending machine business
- Source for finances with relevant institutions
- Ensure the machine and its content are safe and secure.