In a world where so many people are looking for the next business idea somewhere in the high tech universe, the more basic ones are easy to overlook . . . like a candy dispenser business! Interested? Here’s what’s involved.
The Benefits of Starting a Candy Dispenser Business
Why would you want to have a candy dispenser business?
- Simplicity. Like we discussed at the beginning, this is a very simple business that relies far less on technology (and the training that requires) than it does on negotiating skills and a willingness to put in the effort.
- Cash-and-carry. This is literally a cash business, and that means no credit card fees, bounced checks or hassling with banks.
- You can grow as big as you want. You can start with a single machine, then add a second, third, fourth and so on—using the profits from your machines.
- It can work well as a part-time business. If you’re only looking for a part-time business to supplement your income, this one is perfect. It can be done in a few hours a week.
- No employees. You can operate the business all by yourself, and that means no payroll taxes, workers comp, benefits or potential lawsuits.
The Cost to Start
One of the most attractive elements of a candy dispenser business is that it’s a very low cost start-up. Your basic upfront costs are the dispensing machines and the candy needed to fill them.
If you don’t have a lot of cash, you can start with just one dispensing machine. Brand new they can cost well over $100, but you don’t need to pay even that amount. Used dispensing machines aren’t all that hard to find. Check the classified section of your local newspaper and on Craigslist to see what’s available. You can probably get good machines for less than $50 each.
Candy is the next start up cost, and even this is fairly inexpensive. You can find commercial sized boxes of candy and gum balls at common outlets such as Sam’s Club, BJ’s, and Costco.
You should be able to launch your candy dispenser business for under $100. Apart from that, your primary ongoing costs will be gasoline (driving to the places that have your machines in them) and candy for restocking the dispensers.
Where Should You Put the Machines?
This is the single biggest challenge in the candy dispenser business, and it all comes down to location.
Since kids, teenagers and young adults are the biggest consumers of candy and gumballs, you want the machines to be in stores that are likely to draw in that market. Toy stores, hobby shops and sporting goods stores are examples. Hardware stores and auto parts dealers draw a different clientele and probably won’t work as well.
Small shops are generally the best locations. Large stores, schools, factories and office buildings are often difficult to place machines in and even if you can there may be a lot of competition either from other vendors or from the establishment itself.
In addition to the type of establishments, the physical placement of the machines is also important. Since candy and gumballs are impulse purchases you want them to be in the highest traffic areas of the store. Entrances, exits and check out counters are typically the best locations.
Try to get the owner to accept your machines as an add-on service for their customers so you don’t have to pay for the location. Failing that, you may have to work out the payment of a small monthly rental fee, or a percentage of the profits on each machine. This will take some serious negotiating skills, but you’ll have a stronger position if the merchant doesn’t already sell what you have in your machines.
How Much Money Can You Make?
Income potential depends largely on the amount of candy and gum balls you sell from a machine, which is why getting the right location is so important. You may have to experiment with several stores before you find the best opportunities. Once you do, you can generally expect a 50 % profit on the sale of candy and gum balls.
Obviously, the more stores you have machines placed in, the greater the income potential. Once you have a few profitable locations, you’ll have a better feel for what works and what doesn’t and you can adjust and move forward from there.
Working With Vending Companies
When starting out you may be tempted to buy some sort of package deal from a vending company, but that’s not the best course. If you do, they’ll most likely want thousands of dollars up front, and may provide poor grade dispensing machines and a few questionable store locations to place your machines in.
Understand however, that success or failure in the business will depend more on your own ability to find and negotiate strong locations for your machines than any other single factor. That’s a skill that has to be learned — it can never be bought with a package.
A Few More Things to Consider
If you are thinking about starting a candy dispenser business, there are a few more things to be aware of. Because it’s an easy entry business (low cash investment, no special skills), the competition is strong. Many stores you walk into — hoping to place your machines — will probably already have several up and running.
Gas prices are another issue. You’ll be driving from store to store to replace candy and gum balls, and collect cash from the machines, and that will require a good bit of driving. High gas prices can eat into your profits.
While having no employees can be an advantage, it’s also a disadvantage. As your business grows, you’ll need to cover a lot of territory in order to service dozens and especially hundreds of machines. When you do, you may start to think about hiring an employee or two to help make the rounds, but this doesn’t work too well with the candy dispensing business.
Your employee will be collecting cash from the machines, then replenishing them with candy and gum balls. Both can disappear without a trace and you’ll never be the wiser. A single dishonest employee can quite litereally run you out of business.
But if you can overcome the obstacles and get the location and negotiating part mastered, this can be one of the better business opportunities around.
Have you ever considered starting a candy dispenser business? Leave a comment below!
{ 25 comments… read them below or add one }
I once considered doing this. It certainly seems like a business with a lot of potential. A good place to put a vending machine might be a large office. Break rooms get a lot of traffic. With this right mix of snacks and drinks you could do very well.
Hi David–It would be worth trying to place the machines anywhere you can. In offices, especially large ones, the “house” (company or landlord) may want a cut, either in the form of a percentage or a flat rent.
Some good information! As I was reading it, I was imagining who I could talk to about placing machine in their stores. This would be a neat, low cost stream of income – if it’s done right.
Hi Ben–You could talk to anyone you want! This is just a thought, but you may want to do some prospected to see how many stores or offices will accept the machines before investing any money in them. That way you won’t invest any money without being sure you have a market for them.
Great post, Kevin. A friend lost his construction business a few years back with the crash of the building industry. He started a vending machine business and was blown away with the fact that even in a poor economy, people will spend a buck on a candy bar or bag of chips. He company did quite well and he would still be doing it had he not injured himself. Nonetheless, your post has inspired me to have one of the boys look for one machine to start with. Nothing like young entrepreneurs and I think this is a good idea for them.
Hi Carol–during one of the previous recessions (I can’t remember which) there was an article in one of the business magazines that told of how cookie mall shops were thriving despite the bad economy. They concluded that people would willingly spend money on something small that made them feel better, like a cookie. It’s one of those ideas that’s counter-intuitive on the surface, but makes complete sense at the same time. That’s probably true for the vending business.
Good idea getting your kids involved in some sort of business venture. One of the best things we can do for our kids is teach them how to be entrepreneurs. The schools won’t teach them that one! I’m already doing that with my son (in a differnt business), and plan to do the same with my daughter in a year or so.
Hi Shawn–The reality side of the post is taken from an interview with a friend who was in the business for a lot of years.
Thanks for the interesting article Kevin. Did you know that Warren Buffett’s first business was pinball machines? I believe he ended up managing about a dozen of them and put them in barber shops.
What other small businesses do you think are worth trying out? A few that come to mind for me are:
- Airbnb (great way to lower your fixed expenses)
- Selling things you create online
- Starting a blog (which I know you have written about extensively)
A great site to see what new products are being created is called Quirky (http://www.quirky.com/). They’re a leader in crowd sourced ideas. If you start an idea or help refine an idea you get a portion of future sales!
Thanks for your thoughts.
JP
Hi JP–It’s hard to generalize with a business to recommend. It really depends on your interests and passions. Beyond that, low upfront costs are important to lower risk. But you have to do some experimenting to find your way. What works for someone else may not work for you. Or you may succeed where someone else failed.
Thanks for your reply Kevin. I’ve noticed that a theme in many of your comment replies is repetition, testing and refinement. Not being afraid to fail. I was bouncing around a bit on Out Of Your Rut…can you recommend any posts/previous entries on this topic that I can take a look at?
Thanks!
Hi JP–I don’t want to promote articles from my site on CPF, so please email me at kevin (at) outofyourrut (dot) net.
Hi JP–I don’t want to promote my own posts here on CPF, so email me at kevin (at) outofyourrut (dot) com and we can discuss what you’re looking for.
I am surprised you can start something like this for so little. I will definitely check this out. Just curious Kevin, what is the other business you are doing with your son and what other businesses are there with the simplicity and low overhead as this one?
Hi Leanne–This one is one of the rare combinations of simplicity and low overhead. Most involve one or the other, and some include both! My son and I are doing some things on the web that are anything but simple!
I have serious reservations with the advice to people saying “It would be worth trying to place the machines anywhere you can.” I have a relative who had this kind of business. Just like any business this job venture is about location, location, location. My relative had people steal snacks and use fake coins. I would say be very careful where you place the machines. Also realize that restocking the machines will take lot’s of time. And gas is a good point. Not to mention purchasing the products unless you automate it.
Hi Jonathan–There’s merit to what you’re saying. But when you start a business you have to stick your neck out a bit and take some chances. Most door will be closed in your face, so you have to do some experimenting to see what works and what doesn’t. There’s no way to avoid that when you start a new business.
This is a fun post – and something that I have seriously contemplated doing with my teenage son. We went as far as purchasing a few machines. One thing to note as well – at least here in Minnesota – is that you may be required to purchase a food license for these and have the machines inspected. This is what ultimately ended our endevour, as I soon realized there more upfront fee’s than I had originally suspected. That said – I believe it’s still a great business and can almost run itself.
Hi Aaron–Unfortunately this is true in most businesses. We live in a heavily regulated and taxed world. You’ll have that in nearly any business you go into, so it’s kind of an equalizer. You have to accept it and go forward–or not. If the venture works, you’ll have to accept the regs and taxes as an “occupational hazard”. There are good businesses, but there are no perfect ones!
I had a little venture on the side similar to this. Instead of using candy machines I just used my retail store’s fridge. I would sell sodas, energy drinks, juice, water, candy, gum, chips, and various snacks to all my co-workers as we didn’t have vending machines. Shrinkage was a problem at first but I made a sign out sheet with a list of the items available that required people’s initials as well as threatened to discontinue doing the snacks if people couldn’t handle paying for what they took. Nobody wanted to go back to being without snacks so people conformed. I usually bought items at Sam’s in bulk. When there were sales I would buy items 15-50% off or buy one get one free at the local grocery stores or at Wal-Mart. It was a pain to take the items to work every day and buy the items but the reward was fantastic. I invested about $100 initially the first month. After that I just used the revenue to pay for inventory. It usually made about $300-500 each month. And my co-workers liked the convenience.
Hi Wes–Was the $300-$500 profit to you, or did all the money go back into inventory?
Hey Kevin – $300-500 was profit. Revenue was closer to $600-700. I usually bought $100-200 worth of inventory each month. My mark up was 100-250%. So for example I would usually get 16.9 oz sodas for .50 cents on sale at Walmart and resell them at $1.00. Next door my co-workers could get sodas for $1.20 so it was a win-win situation. Water was the best profitable item. I could buy a pack of 24-28 700 ML waters for $5.00 or $5.50. I’d resell each water for $1.00.
I actually started out with just soda’s. But the demand for snacks was amazing. So I expanded into chocolates which I bought in bulk. Then later I introduced gum, other candies, energy drinks, chips, etc. It was kind of trial and error. Business was especially when we were slow or during holidays/weekends. And people loved the convinience. I eventually even allowed people to buy/sign out items on their “tab” and pay me twice a month when we got paid. Saved me from having to deal with coins and cash every day.
Hi again Wes–First off, congratulations for finding a winning opportunity right in front of you. That’s Entrepreneurialism 101! This is basically what you’re looking do to with candy machines. A few good locations will be worth more than 100 poor ones. Only thing is, you may need to go through 100 locations to find the five or ten that will make the business work. It is doable, but it takes commitment.
This business opportunity is great. I am from Nigeria and would like to establish this business in Abuja (the Federal Capital Territory, Nigeria). Can i get more details on how to establish such business in Nigeria and customize the machine to accept our local currency?
All good stuff, but I was looking for a link or suggestion as to where to get the candy or gum ball dispenser and the product. We have a thrift store that would do great with this….anyone know?
Hi John–check Craigslist and the classified ads of the local newspaper. You can buy them brand new but they’ll be expensivce. You can probably buy used machines for a hundred dollars or so.