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How to Start a Vending Machine Business and Make Money

Margaret Spencer

Contributing Writer at Fundera
Margaret Spencer writes about small business finance and entrepreneurship. She is interested in financial empowerment for small business owners across industries, and passionate about sharing insights on accessibility and communication to help entrepreneurs grow.

Vending machines are by no means a novel business idea—they’re basically everywhere, after all. But the more you look into the vending industry, the more exciting it might actually be to find out how to start a vending machine business—especially when you learn that with more than five million machines in the US alone, this industry generates billions of dollars in annual revenue.

The vending industry can definitely be an attractive option for both new and experienced entrepreneurs. Other than its surprising profitability, the idea of starting a vending machine business may have come to you for another reason—maybe you’ve thought of the perfect location, have connections to vending-friendly product suppliers, or know of someone selling a vending machine.

Whatever drove your attention to the world of vending machines, if you’re looking for a weekend side hustle, a low startup-cost business, or simply an interesting new way to expand your portfolio, this venture can become lucrative with investments from as low as $2,000. With the right placement, product selection, and user interface, a no-frills vending machine can consistently pull anywhere from $600 to $800 in monthly revenue.

Ready to make your fortune off grab-and-go snacks? (We would be, too.) Here’s everything you need to know about starting a vending machine business.

What to Know Before Starting a Vending Machine Business

With just a few thousand dollars to invest, a vehicle, and determination, you’re completely capable of starting a vending machine business to successful returns. But starting a vending machine business isn’t all fun and games (though you can vend fun and games in your machine). There’s a bit of preliminary financial and logistical planning involved, too.

Even before you start researching machines or reading product reviews, take stock of your current finances—how much can you afford to invest, keeping in mind that it could take a year for a machine to become profitable? If you know how much money you’re able to invest in a new business, you’re better equipped to seek the right kind of small business financing.

And for entrepreneurs starting fresh in the vending business, determine how you want to break into your local market by visiting retailers and public places with vending facilities. Are you focused on health foods or gourmet options, or are you looking to provide more standard snack and beverage services? Or do you want to do something other than food altogether? Answering these questions—even if your plans change later—will help direct your location and equipment search.

Finally, set realistic expectations about profits—and costs. Owning and operating a vending business entails relatively low upfront capital, but you will have to commit some time and energy into stocking, servicing, and collecting money from your machines on a regular basis.

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How to Start a Profitable Vending Machine Business in 6 Steps

Any advantage or insight you have on vending machines is a great way to get in on this niche business. For example, if 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:

1. Consider your vending machine options.

There are way more options than your standard snack-and-soda vending machines. In particular, consider the following three types of vending machines, and choose the machine whose products would be the biggest hit with your target market.

Whichever type of vending machine you choose, start out 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.  

Food and Beverage Vending

According to Vending Market Watch’s 2017 annual report, food and beverage vending machines with snacks, soda, and candy make up the majority of the vending market share in the US, with beverages alone accounting for more than half 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 just drinks, just snacks, or snack-and-drink combinations. Some entrepreneurs choose to purchase different types 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—be it healthy snacks, just beverages, or even fresh food—until you have time to learn more about the industry.

To make the most sales, cater your offerings to a specific, location-driven market. So, you might stock your food and beverage machine at a gym with protein bars and shakes, or stock a school vending machine with juice and granola bars. You may think of soda and chips when you think vending machine, but there is money to be made offering equally convenient healthy alternatives people want—and will pay for.

Bulk Vending

Starting a vending machine business with machines that stock gumballs, stickers, or rubber balls—aka bulk vending—requires very little capital and low maintenance costs.

These typically low-maintenance machines might not be glamorous, but the quarters do add up. A refurbished 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, and 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. That said, many candy and toy machines are older, so a used device might require minor repairs before it’s functional.

Specialty Vending

It’s not just food and drinks in the vending business. Large public places like arenas, airports, and malls often have machines offering goods like tech accessories, beauty products, or other specialty goods. Some of these machines use the same technology as standard vending equipment, and some are differentiated as Automated Retail Machines.

Some specialty vending items include:

  • Hot beverages: Coffee or hot beverage vending is typically most successful in offices, but universities and conference centers are also good locations for this kind of offering. 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’re able to negotiate a contract with a local transit station, or even an airport. Upscale vending machines in malls and airports often contain luxury skincare or electronics.
  • Laundry products: Individually packaged detergent, fabric softener, and dryer sheets make great vending products if you identify the right market for it—like laundromats, apartment complexes, or dormitories.
  • Tobacco: Tobacco vending is legal in many states, and can be lucrative depending on the state taxes. Cannabis vending machines are also becoming available, but with a much more limited market.

2. Find the right location for your vending machine.

The type of vending machine you choose is crucial, but where to decide to put that machine is the most important factor in earning a profit from your vending business. For instance, an upscale vending machine might fail in a strip mall full of restaurants, but that same machine might flourish at an office park.

Locations where you can remember choosing to vend are a great place to start your search, so think about the times you’re most likely to purchase a beverage or snack. 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:

  • Schools
  • Hospitals or medical centers
  • Grocery stores
  • Airports and shopping malls
  • Laundromats
  • 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 locations, 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 machine at companies with at least one hundred 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 get a better understanding of local demand, and inform your machine and product selection.

Understand State-Specific Vending Laws, Regulations, and Compliance

Different rules apply to various types of machines, and vending regulations vary by state. Before talking to prospective location proprietors, find out how your state governs vendors by contacting your local chamber of commerce, or looking up your state’s small business regulations online.

Also, any machine you put in a public place may be subject to certain ADA compliance standards, and it’s a good idea to keep accessibility in mind when considering machines.  

Know Commission Requirements, and Ready a Proprietor Contract

Before pocketing the profits of your vending machine, you’ll need to pay commission to the proprietor who provides the location, and the electricity required to operate your machine. Generally, you’ll pay  the property owner 10 to 25% of the revenue from your machine.

Whether or not you hope to establish an exclusive partnership with a location, draw up a contract with the proprietor stating your agreed compensation rate, contract length, and terms you have with the owner.

Include provisions for breach of contract, too. It’s also smart to include expectations and obligations regarding servicing and restocking machines, vandalism or theft, and the possibility of unprofitability. As always, have a lawyer look over the contract before signing.

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3. Find your machine…

Finding your vending machine can be as simple as an online search. To get an idea of the different offerings and price points out there, search both locally and from national suppliers. You should also consider the cost of inventory when looking at machine prices.

To find the vending machine of your dreams, start with these three outlets:

  1. Manufacturer or wholesale vending suppliers have the widest selection of machines, the newest technology, and the most end-to-end services for delivery, repairs, and training. This is the most expensive option, though—equipment through vending franchises might require a minimum order of multiple machines, or other fees that go toward machine servicing and entrepreneur development programs.
  2. Secondary market sellers or specialty online retailers allow you to browse multiple brands and models of machines, and often have helpful resources for business owners.
  3. 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 major shipping costs. This may be the best option for first-time vending entrepreneurs, who don’t want to spend thousands on a new or refurbished machine.

As you’ll quickly find once you start your search, vending machines come with a range of features and capabilities, all at different price points.

Some of those special features include:

  • Snack/drink combination machines
  • Credit card and large bill 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 special features, though, since they can become costly. Choose the machine that best fits the products you want to offer, and what you can afford at the moment.

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4. …and stock it with inventory!

Once you’ve landed on a machine, you have to stock it with inventory to match.

Product selection is an excellent opportunity to boost sales. Rather than choosing to stock items based on wider food and beverage trends, pay attention to local, site-specific needs. To stay on the safe side, don’t over-order stock in the beginning, and adjust your offerings based on demand.

If you choose to provide combined food and beverage services, drinks will make up most of your sales. As the growing refreshments market expands 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—many vending machine operators recommend used or refurbished machines, which you can find between $1,200 and $3,000. A new machine will cost anywhere from $3,000 to $10,000, depending on its size and features.

Still, a couple thousand dollars isn’t exactly pocket change. If you need a loan to purchase your vending machine, consider these two options.

Short-Term Loan

If you’re already a business owner, and you have the business financial history to prove it, 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, and you’ll repay your loan, plus interest, over a predetermined amount of 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, though, short-term loans are generally easier to qualify for than long-term loans.

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.

Equipment Financing

You don’t necessarily need tons of capital on hand to start a vending machine business that makes money. But if you need a little help, you can shoot for an equipment financing loan. The terms of these loans depend on the value of your equipment, which also acts as collateral in case you default on your loan payments.

Cared for properly, vending machines can last upwards of 10 years, which might help assure lenders. In addition to your own financial information and business plan, you will need equipment quotes for the machine(s) you plan to purchase if you choose to apply for an equipment loan.

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6. Make the right investments.

With a location selected, machine purchased, and placement terms taken care of, you’re on your way to starting a vending machine business—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, which you can use to 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 to 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.        

Invest in Customer Service

Even if you only have one or two machines, it’s worthwhile to emphasize customer service from the beginning of this (or any) venture. To make sure your vending machine is optimized for your customers, you just need to follow a few best practices.  

Like many location-based businesses, vending operators are often dependent 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 machines are stocked and functioning on a weekly or biweekly basis. You can also consider providing an 800-number for service requests and comments, which is a great way to get useful feedback.

Invest Your Time

Just like any other venture, starting a vending machine business requires more than just capital investment—you’ll have to invest at least some of your time and attention to your vending machine business, too.

A full-size vending machine might require you to collect money weekly, which is important to keep in mind when determining how much time you can realistically spend traveling to locations. And in addition to the time it takes to purchase inventory, visit locations, and restock, operating a vending  machine business requires you to spend time researching trends in sales, new products or locations, and talking to peers.

The typical service cycle for bulk vending—think non-perishable candy or stickers—is between 4 to 8 weeks. So, if you can’t get away from work often, bulk vending might be a good way for you to break into the business without sacrificing too much of your time.    

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How to Make the Most of Your Vending Machine Business

The vending machine business drives billions of dollars globally each year. Luckily, you can break into this lucrative market with less than $1,000, the right market research, informed decision-making, and entrepreneurial energy.

Invest incrementally as you learn about your vending machine’s demand patterns, and start generating a passive income without taking out a massive loan or going into debt. Depending on whether or not you’ll continue to work another job, increasing the scope of your vending machine business gradually will allow you to take on more when you’re ready, or scale back if necessary.

No matter where you are financially, the vending industry guarantees an opportunity to operate your own business, while only risking as much as you’re comfortable investing.

Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.

Margaret Spencer

Contributing Writer at Fundera
Margaret Spencer writes about small business finance and entrepreneurship. She is interested in financial empowerment for small business owners across industries, and passionate about sharing insights on accessibility and communication to help entrepreneurs grow.

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