How to start a vending machine business

Interested in starting a business, but want to avoid the high overheads and heavy commitment that are associated with opening a brick-and-mortar location?

Fortunately, there is a middle ground. Setting up a vending machine business can be a low-maintenance way to make passive income, and it might cost you less than you think to get started. 

However, success isn’t as easy as installing a machine and waiting to cash in. There is a stack of factors to consider when getting started, from securing a good location to keeping up with product restocks and maintenance. 

To help you avoid getting stuck in the slot, this guide outlines everything you need to know about setting up a vending machine business, including how you can turn your idea from packet to profit in six simple steps, and how much the venture could cost you. 

What is a vending machine business, and should I start one?

A vending machine business is a simple retail model that involves buying and maintaining vending machines in public spaces, which sell to customers automatically.

Vending machine owners purchase products at wholesale prices and keep the machines stocked, allowing customers to buy items without making any human contact. 

Unlike traditional retail brick-and-mortar stores, which require a physical location, staff, and complex business software, vending machine businesses are simple to set up, require a much smaller investment, and allow you to make money without being physically present. 

In addition to their low start-up costs, vending machine businesses can be very scalable. You’re able to place vending machines in multiple locations to broaden your reach, from sports centres to offices, enabling you to earn higher profits without adding too much to your workload. 

Setting up a vending machine isn’t a cakewalk, however. The competition is currently largely made up of large companies, making it harder for smaller entrepreneurs to break through.

The business isn’t completely hands-off either; you’ll be responsible for maintaining the machines, keeping them stocked, collecting the money, and preparing for the risk of theft and vandalism. 

The truth of the matter is, certain entrepreneurs will be much better suited to starting a vending machine business than others. For example, its relatively low barrier to entry lends itself well to first-time or risk-adverse business owners, while individuals with a knack for logistics will be better equipped to handle tasks like machine maintenance and route planning. 

Is it hard to start a vending machine business today?

Starting a vending machine business is a viable way to supplement your income, but we won’t sugarcoat it; it’s not always easy. 

On the upside, there’s ample opportunity. The vending machine market is currently worth over £3 billion in the UK, and due to a combination of post-COVID-19 back-to-the-office mandates, growing desires for ready-to-eat products, and the convenience of cashless transactions, it’s growing fast.

However, despite steadily growing demands, challenges remain. Starting a venture in this field requires significant investments, with a new machine costing upwards of £20,000 up-front, not to mention the costs of keeping it fully stocked. 

New business owners are also responsible for securing a high-footfall location. As part of this process, you’ll have to prepare a professional proposal, negotiate terms with different venues, and create a legally binding contract to make the arrangement official. 

Even after a location is secured, you’ll need to maintain and restock the machine at regular intervals to ensure it remains profitable. Managing these tasks can be time-consuming and unpredictable, and prevents the venture from being a truly ‘passive’ form of income. 

There are ways to maximise your chances of success, though. For instance, we recommend focusing on niche products like healthy snacks or gourmet coffee, as well as securing locations that complement these offerings, such as fitness centres or co-working offices. 

If you aren’t keen on setting everything up from scratch, you can also buy into a franchise. Doing so will help you instantly gain brand recognition and trust, while allowing you to leverage established supply chains and receive ongoing support. 

How to start a vending machine business in 6 steps

Starting a vending machine business can be a relatively straightforward process, as long as you know what you’re doing. Here’s how to go from plan to execution in six steps. 

Step 1: Create a business plan

Vending machine enterprises may not be a typical business venture, but they still require you to have a detailed business plan. 

This business plan will act as the blueprint for your business and guide every step of your operation. It’s a formal document that helps to solidify your business ideas, as well as secure funding from investors or banks. To ensure your vending machine business plan is fit for purpose, it should include:

• Market analysis – Research some industry trends and analyse your competitors to find your unique selling point (USP).
• Product information – Outline what items you are planning to sell and why. Will it be a standard selection of drinks and snacks or something more specialised? 
• Financial projections – Detail your estimated startup costs, monthly revenue, and operational expenses. You should also include a cash flow statement for the next three to five years. 
• An operational plan – Outline your business strategy, including how you will secure prime locations, manage your inventory, and restock the machines. 

You don’t need to start with a blank page, though. Get the ball rolling by using a free business plan template. 

Step 2: Find the right locations

After you’ve nailed your business plan, you need to decide where you’re going to install the vending machines. Your chosen location will be a major factor in your business’s success. Choose a location that’s too quiet or inaccessible, and you’ll struggle to sell enough to make a profit. 

Prioritising places with high foot traffic will be your biggest asset. This could be an office full of employees, a university campus bustling with students, or a transport hub being passed through by commuters. Within these places, pinpoint an area in a prominent, well-lit location that can easily be viewed and accessed. 

Once you’ve got an idea in mind, you’ll have to approach the owner with a professional pitch. Specifically, you’ll need to outline your value proposition, vending proposal, and how you differ from alternative options. You’ll also have to negotiate whether the placement agreement will be based on a revenue share or a flat fee.

Step 3: Source machines and products

Now it’s time to acquire the physical assets for your venture: the vending machines and the products to fill them. 

The ideal vending machine for you will ultimately depend on your business plan and budget. For example, if you’re interested in smart technological features like cashless payment systems, energy-efficient LED lighting and stock monitoring tools, we’d recommend getting a new or refurbished unit from a professional vending machine supplier. 

Alternatively, if you’re on a tighter budget and can make do with a more basic model, you can also consider buying machines from online marketplaces like eBay and Gumtree. While buying directly from individuals allows you to secure a great deal, you will have to install the machine yourself, and it’ll be harder to guarantee its quality. 

When it comes to sourcing your inventory, sourcing stock from wholesalers and bulk suppliers will help you secure competitive prices. For example, UK wholesalers like Costco Business, Booker, and Makro offer a wide variety of items at affordable prices if you have a membership. Online bulk suppliers like Amazon Business also offer good deals on popular products. 

Step 4: Obtain licensing and legal requirements

Machine and stock secured? Now it’s time to get compliant with the law to avoid fines and other potential legal risks. 

Your first port of call will be to register your business with HMRC. You have the option to register as a sole trader or a limited company, depending on your chosen business model. The former is by far the simplest option, but the latter will protect your personal finances if the business encounters financial difficulty.

Next, you’ll have to contact your local council. You’ll need to obtain a street trading license if you place a machine in a public space, and you may also need to register your business with the environmental health department if you’re planning on selling food or drink. 

Lastly, while it’s not compulsory, it’s highly recommended to protect your business with insurance to mitigate risk. Some options to consider are public liability insurance, a policy which protects you from financial claims if a customer is injured as a result of your vending machine, and theft and damage insurance, which protects your assets against instances of theft, vandalism, and other forms of damage.

Step 5: Market your vending machine business

Instead of hoping customers stumble across your vending machine, be proactive by implementing a marketing strategy. 

First, you should define your brand. Consider what makes your business different. Is it your focus on healthy or sustainable snacks, competitive prices, or niche products? Use this USP to guide your marketing efforts, from your business name to the custom wraps on your machines. 

After you’ve perfected your branding, get the word out by building an online presence. Create a simple website to showcase your machines, or share photos of your services on social media to attract potential customers. 

Don’t forget the power of local marketing, either. Sending a press release out to local newspapers, gyms, or shopping centres can be an effective way to generate free publicity and to draw local customers to your machine. You could also consider partnering with local businesses or schools and giving them a portion of your profits in exchange for exposure.

Step 6: Decide on a maintenance model

The work isn’t over after you’ve installed your machine. While a vending machine business helps you earn more passively than other business models, hands-on maintenance is required to ensure its long-term profitability. 

To avoid getting your wires crossed, your maintenance model should cover three major areas. Firstly, you should create a regular schedule for restocking products, based on your machine sales volumes. Empty slots result in frustrated customers and lost sales, so we recommend staying ahead of the curve by using remote monitoring technology. 

You’ll also need to collect cash from the machine in frequent intervals. Not only does this ensure your cash flow remains healthy, but it also helps minimise financial fallout in the event of theft. 

Last up, you should use every machine visit as an opportunity to check for faults. Is the machine accepting coins and notes, processing card payments, and dispensing products correctly? If not, fix the problem before it gets the chance to impact sales. 

How much will it cost to start a vending machine business?

The cost of starting a vending machine business can vary significantly, with startup costs ranging from £2,000 to £10,000 or more for a single machine set-up.

Your biggest expense will be the vending machine. The starting price for basic snack vending machines is around £1,500, while high-tech options with advanced features can cost upwards of £10,000. If you’re comfortable with buying second-hand equipment, used machines cost around 30-50% less, but require more upkeep. 

You’ll also need to budget for initial stock, which can cost £200 to £500 to fill a machine. On top of that, you need to consider the cost of maintenance and repairs. Depending on the condition of your vending machine, we’d allocate £50 to £150 for every site visit to cover all bases, or you can pay up to £600 per year to outsource the service. 

Finally, you need to factor in ongoing fees. Unless you paid an upfront fee to secure your location, you’ll have to pay a percentage of your revenue (5 to 10%) to secure its spot. Card processing fees will cost an additional 1.5 to 3.5% of all card transactions. 

Conclusion

Setting up a vending machine business may not be a piece of cake, but it’s a viable way to bring in some money on the side, and a low-maintenance alternative to traditional retail. If you make smart decisions early on — from securing top locations to investing in premium stock — the rewards can be huge, too. 

Making smart investments early on will be the icing on the cake. For example, by opting for vending machines with advanced technological features, you can maximise your chances of building a profitable venture.

However, just like with any business, you shouldn’t run before you can walk. Start your journey by creating a detailed business plan, and don’t skimp on important details like business strategy and cash flow projections. 

By using this as your business blueprint, while consistently focusing on machine maintenance and customer satisfaction, you’ll be well on your way to success.