Why You Shouldn't Invest in a Vending Business
What makes a vending machine a good investment? The idea of placing a machine in a location with a lot of foot traffic, and then sitting back and accruing passive income from machines is certainly an attractive financial prospect. But what if there was a business that optimizes on the pros and mitigates the cons of a vending business? Let’s compare a standard vending machine business, with the coffee service franchise Xpresso Delight.
Both businesses require a capital investment in a machine per location, costing at least a few thousand dollars. For a vending business, a somewhat modern machine will most likely cost around $2k, where the higher end ones can be over $7k. Xpresso Delight’s premium Jura espresso machines will fall somewhere in between that range. Secondly, both businesses earn revenue on a per unit basis. A vending business can have items with varying costs, margins, and profitability, depending on if you are selling gum balls, candy bars, sodas, etc. Determining the most profitable product mix involves a lot of initial guesswork and ongoing monitoring. Even then, there is seasonality to consider, as well as variability amongst vending machine purchases depending on the type of consumer that is walking by that day. As an Xpresso Delight franchisee, you are setting a fixed price per cup of coffee at each location, with a known cost per cup, and a known audience, providing a consistent and predictable revenue stream.
When you dive deeper into the Xpresso Delight model, you find more key differences between this coffee service franchise and a traditional vending business. First, customers for vending businesses pay out of pocket for the goods in the vending machine. Xpresso Delight offers “free” coffee to customers in the corporate offices in which the machines are placed, while the company hosting the premium Jura espresso machine is billed per cup on a monthly basis. It’s a single payer, monthly payment for the franchisee versus an unknown number of individual transactions that could vary greatly with a vending machine. From the franchisee perspective, this is especially enticing as customers for Xpresso Delight are not financially impacted by their consumption, and employers are already accustomed to providing coffee to their employees.
Secondly, products in vending machines are usually treated as luxury goods by consumers. Candy bars or a sugar filled soda are purchased to satisfy a spur of the moment craving, not a daily routine. Xpresso Delight though provides cups of coffee and espresso based drinks such as latte’s, macchiato’s, cappuccinos, etc. These beverages are widely consumed as a necessity during the work week, and are a habit forming beverage that consumers drink throughout the day like clockwork.
Lastly, looking at the volume of potential customers, the Xpresso Delight coffee service franchise offers significant stability and consistency. Vending machines, depending on where they are placed (malls, amusement parks, etc.), are vulnerable to external factors such as weather, traffic, and more that can drastically impact your customer flow on a daily basis. Xpresso Delight on the other hand, with machines placed in private corporate offices rather than public spaces, holds a captive audience and a regular flow of consumers, as employees generally only miss work for holidays, vacation, and the occasional sick day.
In summary, owning vending machines can be appealing for a truly passive income, but the vulnerability to consumer impulses, foot traffic decline, and product mix guesswork make for an unpredictable model. Xpresso Delight has a known, captive audience, a product that is often a necessity for workers throughout their day, and a monthly single payer model that makes for consistent, predictable revenue.
Xpresso Delight is the largest and fastest growing coffee service franchise in the world. Find out why.
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