Are You Maximizing Your Laundromat’s Beverage and Snack Vending Operation?
Beyond washers, dryers and folding tables, perhaps the most commonly found pieces of equipment in nearly every self-service laundry are vending machines.
In fact, according to recent Coin Laundry Association statistics, more than 80 percent of laundry owners offer vended snacks and/or beverages to their customers.
However, in 2018, simply plugging in a used pop machine and a half-filled candy vendor in the nearest empty corner of your laundry may no longer be the surefire path to vending riches it once was.
Here’s a look at today’s changing vending industry – as well as how to maximize your store’s vending operation:
Vending Industry Snapshot
The vending and micro markets industry saw a boost in revenues in 2016, according the American Merchandiser 2017 State of the Vending Industry Report. Operators reported an average increase of 3.2 percent. Revenue totals, taking into account the different size independent operators, is calculated to be $21.6 billion. This nears pre-recession levels and is a seven-year high point.
Driving the growth are external and internal forces. Externally, increases are from the strengthening economy and increased consumer spending. Internal drivers for the rise in revenue come from technology. In the vending segment specifically, operators are making in-roads in cashless payment acceptance – with an estimated 31 percent of vending machines offering a cashless reader. This equates to more than a million vending machines.
Here is some additional vending industry data from the American Merchandiser report:
• The number of SKUs dedicated to sparkling water, ready-to-drink teas and coffees, juice, energy drinks, and in some cases, milk expanded in 2016. Meanwhile, the core cold beverages – classic sodas, were reduced.
• The Beverage Marketing Corp. reported that, although carbonated soft drinks slipped into second place among liquid refreshment categories, they continued to account for four of the five top beverage brands by volume.
• Bottled water surpassed carbonated soft drinks to become the number-one beverage by volume.
• A vast majority of vending and micro market operators, 84.7 percent, reported being asked to offer healthier items.
• Overall, candy saw an increase in revenue, with chocolate options, gum and mint offerings gaining the most ground. Cookies and crackers also saw a huge increase in sales in 2016, over 2015.
• The sales of nuts, seeds and food snack saw in increase, which fit into today’s healthier snacking trend.
• Ice cream experienced a drop in performance, with operators reporting an overall decrease in sales.
• Coffee prices, both in hot beverage vending machines and in office coffee service (OCS), were raised more often in 2016 than in 2015. In addition, hot beverage machines suffered in 2016, with fewer being placed in service; this is most likely due to the negative perception many consumers have of vended coffee.
• Nearly 70 percent of operators are using some form of technology, from telemeters to handhelds to iPads, in order to gather sales data from their vending machines.
• The percentage of operators using a vending management system (VMS) increased to 65.3 percent in 2016, compared to 54 percent the previous year.
Vending machines have long been a convenient and low-cost vehicle for shrinking an entire store into a refrigerator-size revenue generator. However, most vending machines until today have been focused on collecting money, providing change and dispensing products.
Nevertheless, the vending machine industry has undergone significant change over the past few years, using smart and sophisticated technologies to deploy innovations as diverse as touch-enabled high-definition screens and remote device management software technology to go far beyond simply dispensing food and beverage.
According to vending industry experts, here some of the top technology trends in the new smart vending machines that are shaking up the industry and transforming vending experiences.
1. Cashless Payments
Although it may seem like a concept of the distant future, plastic cards, checkbooks, and even cash may completely disappear in less than a decade, with the emergence of a range of cashless payment options. Indeed, cashless and mobile payment technologies are becoming more and more commonplace. Today, a number of vending machines are equipped with a standard option of cashless payment.
This type of technology has gone from dead end to mass adoption in a short span of time, thanks to tech giants like Apple and Google, who paired near-field communication (NFC) with innovations such as Apple Pay and Google Wallet.
2. Smartphone Interaction with Artificial Intelligence
While many smart vending machines offer the option of cashless payment, some vendors are taking it one step further. Some intelligent vending machines can now interact with smartphones in real time. A customer walks up to a smart vending machine, the AI-powered mobile app determines which machine it is and proceeds to pull up a real-time inventory, presenting the options to customers on their smartphone.
Recently, beverage industry giant Coca-Cola announced its plans to debut new apps in the U.S., New Zealand and Australia that will allow users to order drinks ahead of time from a vending machine. The apps will include artificial intelligence (AI) to gather more information about customer tastes and preferences for future marketing promotions.
3. Energy-Saving Vending
Recent innovations in device management applications have enabled vendors to detect, diagnose and repair machines remotely. Coca-Cola revealed an ultra-saving vending machine in Japan that uses airtight doors and vacuum-insulated materials to ensure that beverages stay cold in the daytime without the need for refrigeration, which consumes more energy, reducing energy bills and helping to save the planet. Such platforms offer endless opportunities for the vending industry to maximize profitability and productivity.
4. Facial Recognition
Facial recognition technology was first introduced in vending machines in 2014, while many companies have been working on it for several years. The Luce X2 vending machine includes a motion sensor that knows when users are approaching and a camera that can recognize the consumer. The machine then offers a personalized menu based on the purchase history of the customer and prevents them from purchasing restricted products (such as an underage customer trying to buy cigarettes).
Many intelligent vending machine manufacturers have embraced this technology and have already launched vending machines with facial recognition technology in the commercial market.
Sensors that are built into intelligent vending machines collect a vast amount of data, including the vending machine inventory. These groundbreaking machines use the intelligence to monitor their own stock. Simply put, these machines are capable of making smart inventory decisions for themselves. For instance, they will know to stop ordering ice cream if the temperature drops, thus protecting the product inventory and reducing waste as well as additional costs.
“The future of the vending business is bright,” said Vince Hansen of Vend-Rite Manufacturing, pointing to touchscreens, interactive screens, automatic payment from smartphones, and the integration of mobile apps and cameras to capture analytic data as some of the industry’s most exciting developments. “And the U.S. is so far behind other countries in what and how we vend. Drinks, snacks, cleaning products are all commonplace in our market; however, in the travel industry, for instance, we’re starting to see a wider variety of products vended – such as electronics, foods, and apothecary items.
“Also, many items can now be purchased outside many different businesses, capturing sales after business hours. Vending thrives when it is convenient anywhere there is foot traffic. This market will continue to grow as more items and payment options are made available.”
Equipping Your Store
After deciding to get into the vending business at your laundromat, the next decision is whether you’re going to purchase your own machines and handle the day-to-day maintenance – or turn all of those issues and potential headaches over to a vending operator, which is similar to a route operator in the laundry business.
The decision you make is going to depend on your particular business situation. How many stores are you looking to equip? Are they attended? What type of volume do you anticipate? Are you or one of your attendants hands-on when it comes to machine repairs? How much revenue are you looking to earn from your vending operation?
If you decide to purchase your own machines, here’s what to look for in an equipment manufacturer, according to the National Automatic Merchandising Association:
• Sells equipment at an established, uniform price.
• Has the ability to supply parts, service manuals, trouble-shooting tips and conversion kits.
• U.L.-listed equipment.
• Various approvals under local, state and national health codes.
• Willingness to demonstrate equipment (open houses, training sessions, etc.).
• Upgrading machinery, developing new types of machines and technology.
If you choose to turn your vending account over to an operator, here are a few provisions you should include in the contract:
• Exclusivity of service rights.
• Cleaning and maintenance duties.
• Specified equipment.
• Insurance provisions.
• Service and storage details.
• Licenses and taxes.
• Access rights.
• Financial arrangements.
• Term of agreement.
• Cancellation provision.
• Reporting requirements.
Pitfalls to Avoid
As with the self-service laundry business, the vending business is a relatively simple one. However, that doesn’t mean it’s foolproof. There are clearly some common mistakes that you’d be wise to avoid when adding vending to your laundry operation.
If you own and stock your own food and beverage vendors, one of the biggest mistakes is buying products on impulse.
All wholesale price clubs aren’t the same. You’ve got Sam’s Club, Costco and a host of others, but you have to price shop because they’re not all the same. Even your local supermarket can be very competitive.
Another mistake is buying machines that are too big. The bigger the better is not necessarily the way to go in vending. At times, vending operators will put larger machines into a location so that they don’t have to refill them as often. But, if you own the equipment and are at your laundry on a daily basis, it might be smarter to go with smaller machines.
It’s a fine balance. You don’t want to go too small with the size of your machines either.
Some laundry owners will shop for equipment based only on price, and later many wish they had gotten something larger, especially if they find that they’re filling the machines too often. For the amount of foot traffic they have, some store owners realize, after the fact, that they could actually be selling more products if they offered a bit more variety.
As far as the types of products you offer, a common mistake is not selling what your customers truly want to buy. Perhaps survey your clientele as to what types of snacks and beverages they would prefer to see you carry, rather than guessing.
Choose the drinks and snacks according to your demographics, vending experts suggest. If you’re based in a heavily Hispanic neighborhood, take that into account. You certainly can load a vending machine by ethnic clientele and location.
Everything about your laundry should try to cater to the people you’re serving. You have to listen to your customers. If you do, vending can be a great addition.
Machine placement within your store also can create problems. Clearly, the size and configuration of your coin laundry will strongly dictate where you place your machines. However, avoid placing your vending machines in an area where they will receive a lot of direct sunlight – that can raise the temperature of the products inside, and it can even disrupt the digital displays in the keypads of the vending equipment over time.
Lastly, as with your washers and dryers, keep your vending machines looking spotless and inviting. Whether or not you choose to let a vending operator handle this segment of your operation, be sure your attendants run a cloth over the machines when they’re cleaning the rest of the store.
Clearly, vending machines are ideal for a laundromat because you’ve got a captive audience that’s going to be in your store for at least a couple of hours at a time, with little to do but wait. Why not give them something to do with their free time – and money – while they wait?
Here’s what some leading laundry owners had to say about the vending operations at their stores:
Broken Arrow, Okla.
Having a soda and snack machine in each store has been part of our business plan from the get-go, so we currently own three of each. All of the machines have been purchased from Sam’s Club, and all of the products that go into them are also purchased there. We also have a triple-head candy machine at one location. At one time, we also had a gumball machine that looked like a rocket ship. I figured out that gumballs are not really a good product to vend unless you enjoy scraping gum off sidewalks and other various places in and around your store.
I prefer to own any equipment that goes in any of our stores. I can’t even think of a reason for leasing.
The products we vend have evolved over time. I simply searched online for the most popular brands when we first opened in 2005, and have swapped out products that didn’t sell well over the years.
I have absolutely no idea why, but Funyuns are the top-selling product in our snack machines. Maybe it’s the bright yellow package. No matter… we find that bagged snacks like chips sell faster than the candy bars, but the candy bars have a longer shelf life – so it works out. Snickers bars are typically our fastest selling candy bar. Bottled water is our biggest selling beverage, followed by Mountain Dew and Dr. Pepper. I think our area of the country has a lot to do with the popularity of the top brands.
We set a base line of doubling our money on products we vend. On many products, such as bottled water, we make a lot more. We periodically spot-check prices in other locations to make sure we are not undercharging relative to other vending machines in our market.
Obviously, there’s the cost of the products, which is then tied up in inventory until you sell them. There’s also the time cost of buying and transporting the product from Sam’s Club to the stores. One of the primary duties of our assistant operations manager is buying and distributing supplies to the three stores. That includes vending and over-the-counter products, as well as janitorial and operating supplies for our wash-dry-fold operations.
The biggest challenge is probably just keeping everything stocked. Nothing looks worse to me than seeing one of our vending machines being out of anything. That’s lost opportunity and could make a customer unhappy. We make sure the attendants and store managers stay on top of this.
The state of Oklahoma sells a decal to affix to your vending machines, in lieu of paying sales tax. It’s really a bargain, compared to paying the actual sales tax, which in my area is between 8 percent and 9 percent. The decal is $75, which is the equivalent of paying sales tax on just under $900 worth of product – but each of our soda machines, for example, grossed from $4,500 to $5,000 last year.
In QuickBooks, our soda and snack machines are lumped under “Vending Income,” which also includes our soap vendors, two video games and a triple-head candy machine. The percentage of our total income for all of those is 3.5 percent since we opened in 2005. Last year, the percentage was 2.7 percent. However, the dollar amounts remain fairly constant – which is good, because it means our overall income is up.
Snack and drink vending isn’t your money-maker, but it does make some money. It also takes effort, but offering this amenity fits with our brand mantra of making laundry easy for our customers and is one of the many reasons a customer may choose us over a competitor. To me, it’s an important piece of the puzzle.
Looking back over the years, I’ve offered amenities such as a kiddie ride, a complete video game room, pay TV on select folding tables, ice cream and a drop-off laundry service. All these “extra profit centers” seemed like good ideas at the time, but I wouldn’t consider bringing back any of them today.
However, I do offer snack and beverage vending, which accounts for about 2 percent of the total sales in my laundromat. The items are sold through a Vision vender (Master and slave units). This is a complex vending machine that uses conveyors and elevators to gently move product to the customer-retrieval areas.
I vend a wide variety of products including: Pepsi, Coca-Cola, Mountain Dew, bottled water, Reese’s Peanut Butter Cups, Hershey’s chocolate bars, M&M’s, Twizzlers, Skittles, Famous Amos cookies, Oreo cookies, Animal Crackers, popcorn, Pop Tarts, pastries, Doritos, Fritos, and Lay’s potato chips.
Most of the items vend for $1 and cost me about 60 cents. I like to markup impulse buys by about 40 percent. I vend these products out of the “Master side” of my Vision vendor, which I own. These products are selected based on their popularity with my customers – so any slow-selling products will be discontinued.
The Vision vendor features a cooling unit, which cools the lower part of the machine, where the drinks and candy bars are located. In addition, a microwave is built into the wall adjacent to the vending machine, enabling my customers to pop their popcorn or warm up their pastries and Pop Tarts.
Our vendor provides customers with plenty of options – cold drinks, hot snacks, cookies, chips, and candy. It’s just a small part of what makes Muskegon Laundromat a five-star facility, and I wouldn’t have it any other way. Also, although vending accounts for just a small percentage of total sales, it generates enough profit to pay me for my time (about an hour per week), while providing an excellent experience for my customers.
Virginia Beach, Va.
I have three vending machines per store – two drink machines and one snack machine. We own these machines and fill them ourselves, because that provides us with the highest profit potential. Snack and beverage vending represent about 5 percent of our total sales.
We’ve been doing this for years and have learned to use only name brands. And, from there, what simple stock whatever seems to be selling best in our stores. Our top-selling drinks are always bottled water, Coca-Cola and Pepsi; beyond that, based on the particular location, the next most popular drinks are either lemonade, cherry- or orange-flavored water. For snacks, our leading sellers are all of the Frito-Lay chip brands and then Honey Buns.
We set our prices based on an overall profit of 50 percent.
The only real cost involved in this part of the business would be the cost of goods. And the biggest challenge is taking the time to buy the products and fill machines.
Peggy Ann Conrad Trent
StarBrite Coin Laundry & Services
At StarBrite, we have one iVend snack machine and one Dixie-Narco beverage machine. We own both of them, because they were included among the assets when we purchased the laundry. I refurbished the snack machine myself; however, the drink machine was not cost-effective to repair, so we purchased used machine.
About a year and a half ago, I visited other businesses and asked what was selling best for them. That was my starting point. Then, based on the demographics of my customers, I began to add items that they requested or I thought they would like. If an item isn’t selling and expires, I try offering something else.
My leading sellers are Doritos, Lay’s chips, Takis snacks, Cheetos, Coca-Cola, Sprite, Dr. Pepper and Sunkist orange soda. Also, I’ve been adding some healthy snacks, such as Veggie Stix and Popchips, and they are selling well. I purchase all of my vended products from Sam’s Club. Twice weekly, I restock so that everything is available for weekend consumption.
With regard to pricing, I use the suggested selling price from Sam’s Club, and the markup is in the 50 percent to 60 percent range.
Besides purchasing snacks and drinks, the only other costs involved are maintaining the machines. I want my customers to feel confident that they will receive a cold drink every time, and that the bill acceptor and coin returns are working properly.
Regarding sales tax, I keep a spreadsheet of sales and file it quarterly. I file the sales tax online myself, rather than paying an accountant $50.
Snack and beverage vending represent about 1 percent of my total business. In my opinion, the way to look at vending is that it’s a convenience for the customer and trying to turn it into a revenue stream will end up costing you money in lost product, if the prices are too high. Another piece of advice is to know your customers and decide if it’s worth the upkeep and effort to stock your vendors yourself or to have a vending company supply the machines and product. Doing your due diligence will pay off with fresh products and continued business.
Washin Coin Laundry's
I currently have a limited vending selection, but I have plans to expand in the future. Currently, I have a different setup in each of my three stores, so it’s given me a chance to see what works and how much is involved.
One store has a drink machine, provided by the local soft drink company. I get a very small percentage of the sales, which barely covers the cost of the power to run it. Customers have asked for snack options at this store.
Another store has a drink machine and snack machine, both of which I own. Both were bought from a neighboring salon that was closing down. The snack machine is a 1970s model with a “Presidential Walnut” finish around the front panel. When the service tech first saw it, he laughed but then told me to keep it as long as I can. It all works and replacement parts for it are still available. I’ve tried a few different snack types and have found that asking my attendants and customers what they would like has led me to the best selections.
My machines are inventoried and filled weekly by one of my attendants. I’ve never broke down the full detail of the cost and profit – including labor, time to buy supplies, inventory space, etc. – but, based on the volume of sales, my customers appreciate the service.
In a third store, I have a combination vending machine that I’ve turned over to my cleaning crew. They are responsible for filling it, and it provides them with some extra income; plus, it’s an incentive for them to clean. After all, a clean store equals more customers, which in turn equals more snack sales for them.
Based on some of the comments I have read at the Coin Laundry Association’s online forum, I’ll be increasing my number of machines and the variety of items vended. Adding phone chargers, earbuds, and other convenience items feature a good ROI without the worry of loss due to expiration dates.
1 Clean Laundry
St. Cloud, Fla.
I have one AMS snack/drink combination vending machine, which accepts bills and coins. I own this machine.
Last year, vending sales represented 5 percent of my total business revenue.
When it comes to deciding on the products I choose to vend, I let my customers decide for me. I try different products, and those that sell quickly stay – those that don’t get replaced with something else.
My top sellers are Coca-Cola, bottled water, Yoo-hoo, ginger ale, Hawaiian Punch, assorted Lay’s potato chips, Kit-Kat bars, and Peanut M&M’s. Diet sodas do not sell at all at my store.
I try to keep my prices in line with what the local convenience stores are charging. My markup is at least 50 percent – with the exception of bottled water, which has a 90 percent markup.
The biggest costs involved are my time and travel to the warehouse club to buy product and then keeping the machines stocked.
Sales tax for this portion of the business is filed quarterly. We keep track of sales weekly in an Excel spreadsheet. It takes about 10 minutes to file this on the state’s website.
Above all, give your customers what they want in the vending machines and always keep them fully stocked. Empty rows generate no revenue and turn off your customers.
All of our stores offer snack and toy vending. The snacks in those machines are usually candy or gumballs.
In a couple of our stores, we also offer snacks and Coke products out of glass-front vendors. The Coke machines feature a mechanical “arm” that retrieves and dispenses the selected beverages.
We own all of our vending machines, except for one Coke machine. The reason we own the majority of the machines is because the price was good, and it provides us with the flexibility to vend anything we want in them. The one machine on lease was our first Coke machine in a store. Although Coca-Cola will give you the machine for free, they require you to purchase product directly from them – and the markup is typically 30 percent to 50 percent higher than I pay for the same product at Costco.
For beverages, our best sellers are: Coke, bottled water, Sprite, Minute Maid apple juice and orange juice, Powerade, and Fuze iced tea. For snacks, people like Snickers, Peanut M&M’s, regular M&Ms, Twix, Kit Kat, Lays’ potato chips, Ruffles, teriyaki beef jerky, Pop Tarts, cinnamon rolls, Nutella, and popcorn.
For our drinks, the markup is about 33 percent to 50 percent, depending on the soda. Most of our sodas vend for $1.50, with juices and Monster energy drinks vending for more. Snack vending markups are 50 percent to 60 percent with most chips and candy bars vending for $1. Beef jerky is $2.50, and Nutella is $1.50.
Of course, the state of California requires us to report all income from the sale of these products annually to the State Board of Equalization. So, the tax comes out of the profits, since we have no way to charge the tax to the customers directly.
In all, snack/beverage vending represents 3 percent to 5 percent of our total revenue.
My advice to other owners would be to add vending if space allows, especially candy and small toy vending machines.
Rush City, Minn.
We have one drink machine and one glass-front snack machine in each laundry. We own all of the machines – purchasing pop, bottled water, chips, and candy from Sam’ Club. Our leading sellers are Mountain Dew and Snickers.
We have one row of 25-cent candy in the snack machines for the little kids who come to the laundromat with their parents. They are more than happy with a sucker or fruit rollup for a quarter, and their parents, who just spent $25 or $30 doing laundry, don’t have to fork over another dollar for a candy bar.
Our total vending sales in each laundry – including soap vending – is about 8 percent of whatever the wash and dry sales are for that store.
I think snack and drink vending tends to get overlooked for some reason, but it actually has the highest margins of anything in my laundromat. My markup is typically 100 percent. And nobody has anything else in their laundry with those sorts of margins.
Also, if you look at it on a dollar-per-square-foot basis, the footprint that vending takes is usually relatively small – so, again, it’s probably providing some of the highest revenue in your business.
I own three stores, and each store grosses more than $2,000 a month, just on vending alone. I have one snack and two soda machines in each laundry. Yes, I could sell snack and drinks over the counter, but with my business model, I want those items to be in vending machines. I want my employees on the floor – helping customers, cleaning or doing wash-dry-fold – not standing behind the counter, selling snacks and drinks.
When choosing products to stock your vendors, you have to be a good student. We’re constantly monitoring which products sell better than others. And we’re always trying different items. I’m not smart enough to know what some 8-year-old kid’s favorite selection is, so we just monitor the turnover and try to stock the items that sell the most.
In my case, I buy a lot of my stores’ snacks and drinks from warehouse clubs, so to some degree, what I can sell is limited to what that warehouse club offers. And I’ve found that the local managers of those warehouse clubs have a fair amount of discretion. For example, here in Houston, we might have 20 Sam’s Clubs, and you would be surprised at the variation of what’s offer between the different stores.
This can be a challenge. Let’s say you find something that does really well in your store and, two months later, the warehouse club manager decides not to carry that brand anymore.
Another issue is expiration dates. In my experience with beverages, warehouse clubs tend to sell the products that are going to expire in a relatively short amount of time. So, if you buy several cases of a certain soda, you might eventually be stuck with some out-of-date stuff.
Of course, the other option is to work directly with a distributor. There are independent distributors, and there are brand-specific distributors, like Coke or Pepsi. The independents will have a larger selection and variety, but they’re a middle man, so they will tend to markup their products a bit higher.
With regard to pricing, you can price it relative to your competition. If you have a convenience store close by, you might price your vended items relative to what the store charges. In my case, I just want to make sure I get my 100 percent markup. For example, we sell Arizona Iced Tea; my cost is about 60 cents a can, and I charge $1.25.
There are a number of other factors to consider when vending drinks and snacks. Here are a few important ones:
Storage – If you’re going to vend a lot of different products, you have to have a place to keep them. And, if it’s chocolate, you have to be sure it doesn’t melt; you can’t keep your Snickers bars in a 100-degree warehouse. You have to store your products safe, secure place.
Lease – You want to make sure that your lease allows you to sell snacks. Some leases will preclude you from doing that, so double-check with your landlord.
Layout – I put the vending machines along the back wall of my stores. Unfortunately, there is room for kids to get behind them, and occasionally some of them will play back there or even pull out the power cords. Learn from my mistake and enclose your vending machines so that so kids can’t get behind them.
Extra Bill Acceptor – If you have more than one vending machine, I would invest in an additional bill acceptor, so that when one of them goes down, you can quickly swap it out and keep your machines running. You can buy used bill acceptors online or from a local repair shop – and they’re typically less than $100. It’s worth it to have a spare on the shelf.
Keys – In most cases, you can buy a single lock for all of your vending machines. This way, instead of having eight or nine keys, you can have just one. Re-lock all of your machines to the same key.
All in all, the vending business is the highest margin business you will have in your laundry, but it’s also probably the most amount of work – when you consider all of those trips to the warehouse clubs and regularly stocking the machines. However, for me, making $2,000 to $3,000 per month per store with 100 percent markup is worth it.
My advice to other store owners is to take a hard look at offering vended snacks and drinks. If you’re not doing it, ask yourself why.