102: How To Start An AI-Driven Vending Machine Business For $700

Main Interview only:

Joan: Well, welcome, Mike.

Mike: Joan. Thanks for having me.

Joan: Well, there is a seemingly endless stream of side hustle opportunities out there. Why vending machines? Why are you sold on them?

Mike: I think just the tangible component of them and the simplicity of, buy something at Costco for a dollar and sell it for three.

Joan: Okay, so you've already answered one of my questions, where you get your product from?

Well, what prompted you to get into it and buy your first machine?

Mike: Yeah, that's a good question. So for my day job, I used to travel a lot and know, I'd sit in these airports and during layovers and I'd always go to a vending machine and I'd be curious, like how in the heck can they charge 6 for a cold brew coffee? That you can get literally for 2 outside of an airport.

And then I realized, okay, there's some entrepreneur or guy or gal that's literally got this location. And so I just did a little kind of dive on it and became fascinated. And the more I learned, Joan, I realized this was actually Warren Buffett's first ever, income stream when he was a teenage boy.

Joan: Are you serious?

Mike: Yeah, absolutely.

Joan: didn't know that.

Mike: yeah, he started, started a vending route when he was 18. He sold it when he was 19. Cause it's like flipping a home. He just took the, took the equity on the, the sale and he regrets it to this day. It's crazy.

Joan: That is so cool. So what year was that? How long ago was that for you?

Mike: 2018 right before COVID is when I got into it.

Joan: So 2018. So you would have been, you would have been doing a bunch of online, research. Did you keep that one machine? What happened from

Mike: I have. Yeah. And that, that location's been cash flowing about, $600 a month ever since in profit.

Joan: How did you go about getting your first location?

Mike: I, I was all about trying to think through, foot traffic and where would people go to, to buy a snack, without going to just, just down to the 7 Eleven or Wawa. So, I went to an apartment complex, I live in a college town, right next to campus, and I was college kids coming home from late night fun might get the munchies, so I went in there one day and asked the manager if they had vending, she said no, of course they're trying to provide amenities to their residents to keep them, keep occupancy high, and she's like, We're ready to move forward.

And Joan, I didn't even know where to go find a vending machine. Thank gosh for Google, because I didn't know what I didn't know.

Joan: Yeah, exactly. so how did you source your first one?

Mike: So I, I went online and searched and obviously there's a lot of manufacturers of these kinds of machines in China. And I was like, yeah, I need like more customer support. And I found a company out of Iowa, that had a ton of YouTube videos that were how-to. So like how to bring a machine through a doorway, how to set the prices.

And so I knew if I got a machine through them, I could watch these videos and be a kind of a self learner. So I pulled the trigger on a machine from them and, yeah, the rest is kind of history.

Joan: When you said YouTube videos on how to get it through the door, I just had a flashback to a deli that I owned, and we bought a new cooler, and we, we got it in there, but then we needed to get into this back room, and it's like, oh crap, this thing doesn't fit, and we literally had to cut the drywall in the door to get it through, and then fix it afterwards.

Mike: yeah. Good thing is machines aren't, yeah, they're not as big as like those commercial fridges or commercial freezers and you can just open the door and it's, two feet versus six feet.

Joan: Yeah, and this was an older building that we were into, so the doorway might not even have been to code, like it might even been smaller than that of, of it going through. So how many machines do you have today?

Mike: Oh, let's see, well over 40.

I, um, I, kind of lost track cause we, we bought, I actually acquired a route and remotely in Chicago recently. So our portfolio continues to expand.

Joan: Well, what was happening in your business then that prompted you to decide, huh, I should get a second machine?

Mike: Yeah, I think the, the big thing for me was that machine?

That was doing over a thousand bucks a month, $600 in profit. I would spend 30 minutes a week on it. And so I kind of knew like, okay, I'm going to Costco once a week, whether I have one machine or two machines or three machines, it's the same amount of work plus a half hour per machine.

So why wouldn't, I parlay that. And so that's kind of what led me into, diving into a second, a third machine.

Joan: And pop and chips and vending machines have been a staple forever. Can I assume that there's, or hoping that there's a trend towards more healthy choices in there?

Mike: There's totally a trend.

Absolutely. Especially with the new generation. And we see it firsthand with a lot of these college kids in these luxury apartments that, they don't want a Pepsi. They want a Yerba Mate. They want a sugar free Celsius, things like that.

Joan: Okay. And so what are, some of your best sellers now then?

Mike: Celsius is definitely a top seller for thinking energy drinks. I think, if you're looking at more of the, just kind of regular drinks, there's always the Gatorade Zeros that are zero calorie. There's always the…now there's Prime, which is a hydration drink, even Liquid Death is a fascinating, popular drink with the younger generation.

And then on the, the snack side, there's a lot of like even protein chips, which I've never tried before. But, I mean, these things will have 20 grams of protein and less than three grams of, of sugar. So, they're kind of a hot thing, with some of these younger…

Joan: I guess that's one of the keys to the profitability then too, like, like any businesses knowing your demographic, who's your customer and catering to them. see that in your route of, what did you say, 40 machines?

Mike: Yeah,

Joan: You're going to be stocking them differently depending on where they are,

Mike: exactly, we have a location, not even a mile from this younger crowd next to campus. We have another complex that's more of the 50 to 60 year olds that will just rent their whole life and they're totally happy with it. And they're just, and it's the Diet Coke and Reese's crowd that we're trying to get them to buy a LaCroix or buy a, a seltzer water and instead of a diet coke and they're just, they're stuck in their ways.

Joan: so you know what sells and what doesn't.

Mike: Yeah.

Joan: So the move to the healthy stuff, do you see another trend that's maybe just starting to emerge?

Mike: I think the trend of, actually getting away from traditional vending machines. Now there's a lot of AI camera type machines we've installed where, Joan comes up to the machine. She doesn't have to enter in any codes for a specific product. She literally puts her credit card on the door, opens the door or unlocks the door with that credit card.

And then whatever you grab, there's AI cameras. That have a planogram of what's in that machine and will charge you. So rather than you might grab a water or a salad and a bag of chips, because you don't have to enter in a code to do another transaction. So that really increases the transaction values, cause it's less friction for the buyer.

So that's been a huge trend lately.

Joan: I, remember seeing an article on that now, maybe about a year ago, and it looked like something about the size of an Atco trailer, but much nicer looking and, much more, glass and being able to view in it from the front. And then you walk into it and yeah, basically it's like you're shopping in a mini store.

Is that the…

Mike: That's exactly it. So There's these kind of along the hallway and the terminals in the Denver airport, or you'll see them in sporting, facilities, but they're, they, they, Amazon has just walkout technology, so the gate will unlock when you put your credit card on there, and then there's cameras following you and tracking whatever you grab, and then for you to leave the, the walkway on the other side, so you're not even talking to anyone.

Joan: Right. Hmm. Any idea what the price tag is on those? Sure. Okay. Sure.

Mike: depending on the coolers, I mean the, if you want a whole setup like the Amazon one, you're looking at a hundred grand, but if you want just like the smart coolers that we're doing a ton of, you're, you're in the market of, of five to seven K.

Joan: Really? And as far as a smart cooler, what size are they? Or is it literally like a cooler that that the door unlocks and then you're just reaching into for whatever?

Mike: Yeah, it's literally the same companies. You probably bought the coolers from, from, for your deli. They will actually, these companies will, will buy from a minus 40 or any of these manufacturers, and then they'll put the technology in those coolers.

Joan: Nice. Well, suppose I'm sold at getting into the vending machine business as a side hustle. Where do I even start? What should be my first step?

Mike: The first step would be to think about high traffic locations that you are exposed to, whether that's you have kids and you go to every Saturday you take them to soccer and there's all these parents at a, at a park that has a restroom area and everyone, but there's no concession stand or the YMCA, or the medical plaza you drive by that has chiropractic on the first, orthopedics on the third, a CPA office on the fourth, and there's one central.

Basically if there's a full parking lot that's going to be a great vending location.

Joan: Okay. And would you be approaching the property manager?

Mike: That would be the ideal situation to start.

But a lot of these locations will have a lobby or front desk lady that can get you to that PM. and so usually, yeah, you just walk in, know, ask for the property manager. And then if you frame it as a, no cost to them. So you're going to buy the machine.

You're you're open to a revenue share with them or their client. So if it's a PM for a landlord, who's worried about occupancy, who's worried about interest rates on their loans, you can introduce the revenue share opportunity and then, minimal space needed. And you're off and running.

Joan: Is it typically profit share or a flat rate per month?

Mike: It totally depends. We have, we have both options. It's more, do you want to, RevShare is probably the easiest, just right off the top. Like you get 2 percent of revenue, but we have people where we'll lead with like 10 percent of profits. Cause it makes like that 10 percent seems bigger to lead with.

So we'll either do 2 percent of revenue or Like 10 percent of profits.

Joan: Okay.

And are you using some kind of a software platform that the property owner or property management company can tap into? Or are they just taking your word for it? How does that work?

Mike: We'll provide usually quarterly sales reports to them that we just download as a PDF, but I think that is where the market is going as we finally can now, as an operator, can track remotely on our phone's inventory. And then how do we give the ownership or a PM Visibility without sending a PDF once a quarter with our check.

I think the other side of this you got to keep in mind is these PMs, they're putting out fires all day. so they don't want the, they don't want to have to think about it. I mean, giving them login access would be ideal, but I have PMs where I'll reach out to them about dropping off a check for revenue share and they won't respond for two weeks. And it's not, I mean, that's literally like, Hey, can I come give you a check? And they're just literally putting out fires all day long.

Joan: And so in part because of that, then the trust factor hasn't been an issue as far as the percentage that they're getting. Are they just trusting you that you're, you're giving them a check for what you should be?

Mike: Absolutely.

And you got to keep in mind, the PM's not, they're not motivated by the revenue because a lot of times they have to pass that through to the client. They're motivated by residents or tenants, being happy and occupancy.

Joan: Are you finding that there's locations that are just a no go, that are regulated internally or,

Mike: yeah, there are, there's definitely no go locations. Like I'm huge on kind of making it worth your time and being able to walk away. And you, even though, know, you might get a, a hit from a cold call or a cold email from a property that has 300 units, but if it's 17 garden style buildings spread out over a long area, they're not going to the clubhouse every day to get their mail.

They're not going to the clubhouse to walk through it to get up to their. to take an elevator up to their room. Like, they're just going and driving straight to their apartment in building 10. And so, like, for a property like that, yeah, it's 300 units, but the foot traffic for where you're going to put that in the clubhouse is going to be minimal.

Joan: So I guess that's part of the homework is hanging out at that location and actually really seeing what the traffic is like.

Mike: Absolutely. You got to qualify the location more than they're qualifying you.

I think just going by there and putting yourself in their shoes, do I work on the fifth floor? Okay, if I work on the fifth floor, how am I getting there? Is there a back door? Is there a front door? Where all that or like in this case with the apartment, it's okay. If I live in building 10, where am I picking up my Amazon packages?

Do I go to that gym? Is it a nice gym? Do they just go to a different gym, kind of put yourself in their shoes.

Joan: Right. And when you are approaching that, we'll say property manager, are you looking for a lease arrangement as opposed to month to month?

Mike: yeah, at least a lot of these service agreements, there's going to be a 30 to 60 day out anyway. So, yeah, you definitely want an agreement and that'll definitely help you if you ever sell your route someday. but you know, I think, of my First 10 locations. I probably had seven that weren't under contract and they're, they've already expanded to other sister properties, et cetera.

Joan: Okay. Any, tips that come to mind for what to look for in a lease when, negotiating that with the property manager?

Mike: people assume that you need to lead with revenue share and you will be surprised at how many property managers don't care. And I don't mean that in like a arrogant way. They just, their, their pain is the resident that comes down at 10 PM and is like, why don't we have a vending machine? Their pain is not, I need an extra 300 bucks a month from your vending machine.

Joan: Right,

Mike: And so you don't really need to lead with revenue shares. Sometimes it's strategic. If you know they have four sister properties in the town, or if we're talking property managers that have a whole portfolio, you might say like, Oh yeah, we'll definitely do revenue share if you entrust a five more. And now right away, you're up to six.

So, there's that side of it. And then the other side with the agreement that people don't think about, they're always thinking about protecting themselves from getting booted out by the property. But if this is a bad location, you might want to pull the machine yourself.

And if you're locked into a contract that doesn't allow you to do that, now you're kind of SOL.

Joan: That's a good point, especially with your first machine. you're all excited. Oh, man, I'm going to make all this money not thinking about, Oh, what if this doesn't work out?

Mike: Yeah. Spot on. And Joan, I see this all the time. Like I'll have people reach out?

To me on social media and they'll be like, Hey, I got my first three vending machines. Can I pick your brain? And the first question I ask is, Oh, how much revenue is any, is each machine doing? And they're like, they're sitting in my garage. And I'm like, well, why did you, why did you buy a vending machine? And the, well, I figured I'd buy it before I go find a place. And it's like, So then naturally they're just trying to find a place to dump this machine without qualifying the actual place or dumping the machine. Cause it's gotta be better than sitting in my garage.

And it's like, no, you're doing this backwards. it's the same thing where people will try to build a side hustle and go down the route of like, I need a logo, I need a website. And it's like, well, maybe we should see if there's actually a product market fit first

Joan: So then the first step would be, , I would want to crunch the numbers. So I would look at, okay, what's this machine going to cost me? How much can I buy the product for? What's the markup? What's the foot traffic? Go through all that and say, okay, you can set that aside. Now I got to find that killer first location.

Mike: Exactly.

Joan: Then you get the location, you get the lease signed, ideally, for what length of time? Or is that a non issue? Because you can either party can get out in 30 to 60 days anyway.

Mike: It's a non issue. I mean, we'll throw in three year contracts and then they'll come back and be like, yeah, we're going to do 12 months and you're going to take it.

Joan: Right. Right. To get the machine in there. And then at that point, then you go and order the machine. Because you've done the research, you know how long the delivery time is going to be, which brings me, to another point, new versus used machine.

Mike: Oh man. You really want me to tell this story about my failures, huh?

Joan: Yes, please.

Mike: Yeah. So my, one of my first locations, I was like, Oh, I'm going to save a couple thousand dollars. A new machine is around, know, depending on, on how, Exotic you want to get with the AI cameras is around 6k. So I was like, I'm gonna save a buck and get a 3, 000 machine from Craigslist. So I bought a used machine and I had it delivered to the location, the apartment complex in this case.

And sure enough, six months into this machine doing sales, yada, yada, yada, it breaks. And I'm like, oh my gosh, there's no warranty. There's no one to call. This manual I found online is from like whenever. And so I literally had to get rid of the machine and I will never use a used machine again because I don't want to be a machine expert.

And I, and there's two sides of this fence. Like I have people that I help build vending routes for. In fact, one of them has 40 machines and they're all used. He's becoming a machine technician basically. And I want nothing to do with any of that. So like we get new machines.

If God forbid, something happens, literally we're, we're on the phone Face Timing with the manufacturer that will walk you through a quick troubleshoot. And they're like, okay, we're going to send out this part overnight. And know, it's out of sight out of mind, you get a used machine. And that, Machine company really has no interest in picking up the phone from you anyway.

So, I'm not a fan of used machines.

Joan: And I could totally see that. Like myself, I would get the brand new machine, want it under warranty, be able to pick up the phone, but I also, somebody else comes to mind, they would totally understand how everything in that thing is working and they would just fix it themselves and have the capability to do it.

I would imagine that's, easier to do with the older machines that are all mechanical, but then, as you get more and more into the computerized stuff, you need a software technician, not a mechanic.

Mike: Exactly.

Yeah, you're not dealing with motors anymore. And then the other side of this too, that back to the argument for new machines is when I buy new machines now, I finance them over 60 months. And then I usually have them paid off within nine months, from the profits of the machine.

So. Yeah, so I'll, because I'll be a little aggressive with the principal and, and, just go, go after the, kind of the, the lease, so to speak.

And a lot of these manufacturers, it's a while, while less, like I ordered four machines last week. They didn't pull my credit and I did zero money down. And that machine will do two grand a month. And my monthly payment for the machine is 170 bucks.

Joan: they didn't even do a credit report.

Mike: they didn't even do a credit report.

That's what I'm saying.

It's like they a lot of these manufacturers have in house financing and it's literally The equivalent of car dealerships

Joan: And run through , the price point , again with me, what would be like a basic machine cost?

Mike: probably 6k.

Joan: Okay. And then you mentioned AI cameras. Is that the ones that we were talking about, that the credit card unlocks them and you walk into the cooler type of one?

Mike: Yep. Exactly.

Joan: And they're upwards of, you said,

Mike: They're anywhere from I don't know 6 to 7k The reason it has data is like in our group because we order so many of these our community will actually get them for 5k But I don't know what they retail if you went to their website what they would would charge you on on the street

Joan: What are, maybe one or two places that people could look to, to buy? Now, obviously, again, on their own, they're not going to get the same pricing as

Mike: Yeah, yeah.

Joan: bulk, but. Okay.

Mike: that's really caught my eye recently is Micromart. com. they ha they also have digital screens on these, these smart coolers. So you're talking about digital ad revenue now. the second company, there's three of them. You got Cantaloupe And then you got 365 retail markets.

So all three of those are kind of the main players in the space.

Joan: are those manufacturers out of the US?

Mike: They are. Yep.

Joan: Oh, okay. So what other costs involved? You buy the machine, you are ideally maybe doing a revenue share of some description. Is there other costs? Like all the obviously products, whatever you're stocking it with.

Mike: Yeah. So if we, let's just go with a hypothetical. I'm a, I'm a side hustle hero. I found a location that says, let's move forward. How much capital am I going to need? So let's say it's a gym that you work out at. So the machine, let's say you finance one of these smart machines, let's say it's 6K with shipping.

That's going to be about $160 bucks a month. Over 60 months with around a, an eight, nine, 10 percent interest rate. So you got your first month payment's going to be 160 bucks. Your inventory is going to be around $400 to fill it the first time. Let's round it up and say $500. And that's literally, the only expense to get that machine up and running.

Now on the backside, you're going to have a credit card transaction fee because they're using their card. there's going to be a software fee for that machine because of the AI cameras and the software updates on the backend to maintain the app, but that's all a percentage of your revenue. And so even the commission to the property is going to be a, so the upfront costs to get going, you're looking at, Whatever that is.

Let's just round up $200, $500. You're looking at seven to $800 to get going with that first machine.

Joan: Plus shipping,

Mike: well, the shipping would be included in that

Joan: Okay. That's part of, that's part of the lease.

Mike: Yep.

Joan: What are the AI cameras for if it's not a higher end machine?

Mike: so when you grab something out of that cooler, you don't scan it. There's no like self checkout, like a grocery store. It's purely whatever you grab those cameras are going to charge you for.

Joan: the new machines you're dealing with are this cooler type, not the traditional push the button in, the can of pop falls out. Is that

Mike: yeah. And the reason, the reason why is for we did a fascinating case study about a month ago. We swapped out a traditional vending machine with the motors and the codes and that machine was doing 35 a day. So it was doing right around 11 to 1200 bucks a month. We pulled that machine and put a smart machine in same exact location.

Our daily sales, went from 35 a day to last month 120 a day.

Joan: Really?

Mike: machine did over $3,000. Because, my theory, is when you go to that machine, now you put your credit card in, open the door to the fridge, you’re going to grab, know, you're going to grab a soda. You're going to grab a bag of chips. You might grab a burrito, like there's no, Oh, for each one, I have to enter in a new code.

It's like, I'm going to grab all three and just walk away. There's not even a, I have to run the barcode. The cameras will charge You based on what you grab. So there's no scanning the barcode of each item. There's no self checkout at all.

Joan: You just probably close the door and it spits out a receipt or something.

Mike: Exactly. It texts you a receipt. Yep.

Joan: And part of it, at least initially too, might be, it just catches your eye and it's like, whoa, what's that? Oh, I got to check that out. even though

Mike: yeah, and now you're hooked. Yeah,

Joan: So how long has it been at that location?

Mike: six weeks, and I looked this morning because I'm on the west coast and by 9 a. m. we had already done 90 bucks for the day.

Joan: And where's the machine located?

Mike: An apartment complex right there In, the game room,

Joan: And I love the fact that you can just pull out your phone and it gives you a read on the inventory as well.

Mike: It does. Yep.

Joan: That's crazy. You're still having someone or yourself go by and drive by these, machines? How often does that happen?

Mike: Yeah. So this one is crushing it. So he's by there twice a week. So he's usually there front end of the week to replenish it from the weekend and then end of the week. So he'll probably go by tomorrow to top it off going into the weekend.

Joan: Which, isn't a bad problem to have. You look at your phone and it's like, Oh damn, I got to go make some more money now.

Mike: Yeah. Yeah.

Joan: So

Mike: Or he wakes up in the morning and looks at his phone. He's like, wow, I made 90 bucks. And it's, some kids coming home from the bar had the munchies last night or something.

Joan: I guess as far as stocking it that first time, there's no guarantees. There's no absolutes. It's a matter of, seeing who's in the area, who's going to be buying it and then determine what you think. I think they're going to be purchasing and go a little bit smaller quantities to see what's selling and what's not.

Mike: Yeah, and also I think, yeah, it's going to be a huge data play as this, the market's going through such a massive disruption Right, now with like flipping the old machines up on its head as far as these smart machines. So the future's in the data. I keep coming back to, everything is going to be all about the data.

Like, we're talking trends with products, but take that a step further, and what are they buying together now? Because they don't have to just enter in the codes one motor at a time. They, like, what are the Are they getting a soda and a bag of chips, a soda and a candy bar? Like how long are they at that machine?

Cause there's a camera on that smart machine. So then you start running the digital ads and you can quantify that foot traffic when you go to, Hey, Pepsi, do you want to do a buy one, get one free on the top of this machine? Yep.

Joan: and that becomes another source of revenue. Well that's An interesting situation because in preparation for this, interview, I stumbled across an article that focused on the University of Waterloo in Ontario, Canada. And, one of the students was using the machine and there was an error code.

And it said something about error code, facial recognition, blah, blah, blah. And this, this guy's like, whoa, what the hell? I'm just buying this pop and what's going on here? And the University of Waterloo demanded the company. Pull out all 27 machines. They're like, these people aren't giving permission for the facial recognition. And the company was trying to backtrack saying, well, it's not really facial recognition. They're, they're not storing the data. They were just looking at the, basically the demographic information. So what's your take on all that?

Mike: I do think that's a, definitely a concern. a lot of people, will think of like, they'll ask, Oh, what about machine insurance? And I come back to, well, what about cybersecurity insurance? Because now when we talk cameras and we talk, these terminals that are doing credit card transactions.

Like, what if that inventory platform on the backend gets hacked into? it's truly a, a lot of these smart coolers, there's no cash, which has a lot of benefits as an operator, but there's also the downside of those transactions are up in the cloud somewhere.

So, I think it's a definitely a valid concern.

I mean, you've seen all the scams and the alerts and the hacks these days, and it's just, it's, I don't see it getting any better.

Maybe actually getting worse.

Joan: So maybe we should hang on to some of those old machines just in case there's a demand for them back. I just want to buy a pop. I don't want to end up in somebody's database somewhere, so what types of items have the best markup have you found?

Mike: I think drinks definitely have the best for sure. candy bars have a high cost of goods. So like a Snickers is a dollar. You're not going to get 3 for a little Snickers bar, but you know, there, you can get Celsius's for example, these energy drinks. that'll sell for six bucks in an airport.

You can get them for a dollar from Costco and sell them for 3. 50, 4 in your machine and it's cheaper than the 7 Eleven. So there's definitely convenience there. and then, and then usually typically if it weighs more you can charge more. So, whether that's like a sandwich or a bigger bag of chips,those are going to have a bigger transaction values and a lot of times, even better margins as well.

Joan: Who pays for the electricity?

Mike: The property.

Joan: Okay. So the profit sharing would offset that plus some.

Mike: Oh, for

sure. Yeah, These, a lot of these smart coolers will go into like sleep mode when they're not being used.

So it'll it'll basically be running. It's kind of like a hybrid car when you're not pushing the gas pedal. It's just, it's basically off.

Joan: So you mentioned Costco several times. Is that where you get most of your product?

Mike: it was starting out as a little side hustle. but now I'm to the point with kind of the size of our route where we're going straight to the distributors and the manufacturers of the consumer products, just because, know, Then we get some product? rebates that, a club like a Costco or a Sam's, won't give you those.

so that's, as you start to scale that side hustle, you'll kind of evolve from what's local and convenient to, Okay. let's order this at scale once a month and I don't need my operator going to Costco for eight hours a week.

Joan: Yeah. Once you get up to that level and you've got the data that tells you what's selling or not.

Mike: Yeah,

Joan: Thinking of the deli again, there were times where places like Costco in our town, it was Walmart or some of the larger supermarket chains, they would put cases of pop on sale as lost liters.

Cheaper. then I was buying it wholesale from our pop guy. And so we'd load up with cases from these stores. So I can see that, you're going to the distributors now or the wholesalers.

Mike: Yeah. It's fascinating. The whole loss leaders thing. And then when you get big enough, those, Pepsi and Coke will compete for shelf space. And where do you put those products on your, cause it's not just motors anymore where it's like, Oh, this motor only fits a 12 ounce can, or this motor will actually hold a 16 ounce bottle.

It's like, here's an open fridge door. Where are we going to put what, and what are we going to put on it? And that's when you can really start to negotiate those rebates with these product distributors.

Joan: As far as the actual product placement in your

Mike: Mm hmm.

Joan: right? So the, that you would literally get a better deal if. It's basically at, eye level, within reach, that kind of thing.

Mike: Yeah, so if it was, let's say Joan gets three or four locations, now she goes to her local Pepsi distributor and they're like, oh, we'll give you a 2 percent rebate. And you're like, no, I'd like a 5 percent rebate if I order 20 cases and I put you guys on the top two shelves of my micro market.

Joan: Got it. Nice strategy. What's something that a newbie often screws up or typically overlooks?

Mike: they don't create the demand first. They go right to what machine should I get? That's kind of back to what we talked about earlier. Everyone gets so excited about the things that are, you don't have to worry about yet. I think you gotta, you gotta really kind of put yourself out there, for example, the gym, if  you belong to a gym and you're paying a membership, the manager's going to listen to what you have to say. naturally anyway, or,if you go to the doctor and a medical office building where there's 50 people waiting in the for 10 different floors of services, that doctor is going to know who the property manager is. And he's also going to be PO that the downstairs cafeteria closes at 2 p. m. every day when his nurses are working all night and they need some coffee or something to get them through the night. So,

Joan: And the lineups, and the lineups too long.

Mike: exactly. So I think just kind of tapping into finding a lead first versus like figuring out what kind of machine I need to get and all of that first.

Joan: And that's tapping into the people that you already know, the places that you already visit. You mentioned building excitement. What did you mean by that?

Mike: We have locations where until we do a promo, like two months into it, and then all of a sudden sales spike. It actually wasn't the location, but if you have a 10 floor building and it's on the third floor, A lot of people are rolling into the lobby and the humans are habitual, right? So they just go into the lobby.

They go up to the eighth floor where their office is and they're not roaming around on the other floors, but the minute now they have an excitement or you offer a 2 code for your first transaction or whatever, now they're, they're going to get exposed to that machine.

Joan: So you are doing some type of promotions or advertising around it to spread awareness that, hey, this machine is on the third floor.

Mike: Exactly. So we're doing a big rollout this weekend with a, a micro market. It's going live tomorrow, but we're doing an e blast today where we created a promo code around that property. That's whatever the property name is 10. So it's they're blasting it to all their tenants and it's going to be 10 percent off through the end of the weekend.

Joan: That's excellent. So you would create the marketing piece, the email, send it to the property manager. He and she would then send it out to all the, all the, residents.

Mike: Exactly. And just create that property excitement.

Joan: Right. Nice. So that is a piece of it is that, promotion ahead of time.

Mike: Yeah. Yeah. yeah,

Joan: Nice.

Do you think one of the challenges these days is the market just being oversaturated or being saturated?

Mike: That's a, a valid concern. my hesitation to that or my counter to that is 90 percent of the leads we find already have vending machines. And they are either broken or it's the baby boomer generation that doesn't have a cell phone and they don't track inventory, so guess what?

The only way to track inventory is to drive by it.

Well, humans are lazy, so this machine sits empty, and the only thing worse than not having a vending machine for your residence or your tenants is having one that's empty. And so, know, there's two we installed this week where they already had vending. But they thought that these big bulky machines were ugly.

They didn't want the giant Coke logo with only Coke, like the healthier, the modern coolers where instead of five motors of Coke, we can have maybe one Coke and then the rest is salads and subs and whatever that kind of,  so that's where I don't think it's saturated from that perspective. But yeah, I mean, I think traditional vending machines that have been around forever.

Joan: But then to your point, then that is the first step is finding that location.

Mike: Yeah. Yeah. and and the pitching them on the, the more modern approach to it and the healthier approach.

Joan: Right. And give it a nice facelift. Do you go to vending machine trade shows?

Mike: I did. Like two months ago was my first one, the national, vending conference.

Joan: Oh Mike, you must've been like a kid in a candy store there with all those machines and the new technology. And

Mike: it's crazy. It's all the, the, the TikTok videos that go viral. You got the, the pizza machine. You got the, literally it was like, It's almost like a casino buffet machine. It had everything from noodles and meatballs to pizza to fried chicken machine. I didn't even want to like know how the back end of that thing operates.

Cause yeah, it was just, there was everything under the moon at this thing.

Joan: yeah. Around the corner from my sister's place, they installed one of those. It's like a pizza vending machine it's made right there. I didn't try it, but you know, they said that's not bad.at two in the morning if you're driving home from something and you can get this fresh hot pizza.

Well, I was going to ask you what's the most unique product you've heard or seen that's been sold out of a vending machine.

Mike: Ooh, that's a good question. I still think the Lego machines you see in the airports, like when I roll through O'Hare, I'm like, know, I'd actually buy a hundred dollar Lego set from a vending machine just to keep my kid occupied on that flight. I'm flying 14 hours to Europe. I'll, I'll buy that Lego set.

Totally ROI there.

Joan: I've never seen that. So it's like a Lego branded vending machine.

Mike: That's exactly it. It's a shiny yellow Lego machine. that just sells Lego sets in the airport. And there's ever like, you can't get a set for cheaper than 90 bucks.

Joan: Wow. Yeah, I have noticed in my, airport here, the, International Airport has a vending machine by Best Buy, electronic store, and they're selling, noise cancelling headphones and earbuds and that kind of thing.

Mike: Absolutely.

Yeah.

Joan: Well, thinking back on it, because you've got 40 machines now, what's one of those crazy, oh man, you've got to be kidding me, moments when you got a call about one of your machines or something you discovered when you arrived,

Mike: Yeah.

There was a call one time, from my operator that was like, Hey, I think someone was trying to, there was the front glass of the traditional machines was scratched from the inside. I was like, Oh, that's really weird. And so I went by there and Sure enough, a kid, a college kid had taken a hanger.

And straighten it out and then hooked up through the door to try to snag products that would fall down into that. So they have these old door flaps now that protect from that, but we didn't have those initially.

And so that was definitely like a, are you kidding me? Cause he definitely had thought that through.

And then, even recently we had, Install these smart machines and we'll do like an eight pack of, of a snack. Let's say Pop Tarts, like a box of eight. We'll, we'll sell boxes of eights. And, one kid had opened the box and taken out one pack. Well, the AI cameras just charge them for all eight. So it's like, dude, you forgot seven more.

You might as well just take the whole box with you. Cause there's no like. Scanning it or any of that stuff. Whatever you grab the AI cameras reading that spot or that shelf space as an item So He just got charged for all eight, but he thought he was trying to pull a fast one.

Joan: He didn't outsmart the AI that time.

Mike: No, he didn't He didn't outsmart. I'm sure we'll run into more use cases like that where hopefully they don't outsmart it. But who knows?

Joan: Yeah. What's the biggest challenge for someone trying to get into the market and set this up?

Mike: it's all like your your route and your Limitations are always gonna be the number of leads And so I come to this from a very, kind of scaling the number of locations and leads perspective and figuring out how to hire an operator and create, like create the demand first. and that's always going to be the limiting factor is finding locations.

And, know, you think back to, earlier when we talked about self storage, I think in three to four years, there's going to be a big consolidation. because the cashflow is so attractive in this that, people are just going to start snatching up

small routes and small mom and pops that are going to Costco.

And now like, they're like, Oh wow, I got into this with little to minimal capital. And now I have two years of cashflow in machines that are doing, let's say they got five machines doing a thousand bucks a month. know, that's 5, 000 a month times 12. That's a 60k year route that they can sell for potentially a 2x multiple.

Well, I got into that with Less than a thousand bucks a machine. I'm sure I'll take the 120 K and sell it to a conglomerate. That's just gonna consolidate it all. And their operators now just going to add five more locations to his stocking route. So I think it's going to be a big consolidation coming up here.

Joan: that is exactly what's been happening in the self storage industry is these bigger players buying up the mom and pop operations that are ready to retire and, flashing the big bucks. And it's like, Oh, okay, I'm out of here.

Mike: Yeah. Yeah. That was fun while it lasted. Yeah.

Joan: Yeah. I was going to ask you about that. Vending machines, say an international airport, my guess is there's some large players in the industry that are already have those contracts.

Would that be a reasonable assumption?

Mike: absolutely.

Well, that's where you're going to either have to, say no thanks, or offer a outside the box idea just to get in the door, like a Lego machine or a, if a canteen or a food provider already has a vending services, cause they're the ones that are, providing the food for the airplanes, you're not going to have margins that match them because they're already going to the airport to stock the, the airplanes with products.

So if you come at it with a Lego solution or even the Best Buy example, and even that's starting to get saturated. So maybe you come at it with like a massage chair solution, like all these kind of outside the box ideas just to get a footprint at the airport.

Joan: And for the, going back to the LEGO example, whether it's an airport or some other location where it would make sense, is it a matter of going to LEGO in the US or LEGO Canada or the UK, wherever you are, and almost pitching them on the idea, or they're not involved at all?

Mike: That's a good question. a lot of these players are different. Like I, Farmer's Fridge has the salad vending machines that are very niche and very, know, they're kind of getting some traction with their little, bold, salads. They have Farmer's Fridge machines and they are actually going directly to the airports themselves.

So I've asked them because I'm big on like this healthy, I kind of concept like, Hey, can we buy some of your machines and your product? I think they're trying to, control their brand for now, but I think, eventually they're going to need some growth channels and that's where they're doing.

They might have to let go and let other people kind of buy their machines and use their machines, out in the wild.

Joan: Yeah. I'm just thinking of a creative entrepreneur out there where they see a product that's missing somewhere and think, Oh, this company's product would do really, really well here. Going to that company and say, Hey, give me a really good price on your product and I'll take care of the rest, but let me buy from you for X amount of dollars.

Mike: Exactly. I mean, even the airport thing with the Legos, what are other things that either a kid needs for his flight that he might've forgot? I mean, you're, we could talk through like travel pillows, all those kinds of items, it's no different than the incidental section of a hotel. When you check in, they got like phone chargers, they got the Tylenol, but what are those other things? Throw those in a machine and people are going to buy them based on convenience.

Joan: I just thought of something else for the airport vending machine.

There was a flight that I was on, and this, the parents had an infant with them, and it was the infant's first flight, and the parents were concerned about how the child, and of course, the passengers around, were going to, React. And they had these little packages made that they handed out to all the people around them that included things like, earplugs, chocolates, and a little note explaining it was the child's first flight.

Isn't that sweet?

Mike: Yeah.

Yeah.

That's interesting because there's a lot of United will give kids a little packet, almost like when you go to a, an olive garden or something. And it's got crayons. It's got a little piece of paper. That's like the Lion King and you can color in Simba. And then it's got, know, maybe a jigsaw puzzle.

I mean, you could literally do a vending machine that anything that was a distracted kid for a flight.

Joan: Yeah. Just something that focused on the parents and these ones to hand around to the passengers all around them. Because I mean, we've done this on a flight that, the family comes on and you're like, Oh man, you're going to be sitting next to me and this kid's going to be crying. And so that broke the ice right away.

And now you went from this kind of hesitation. Oh my God, what this flight's going to be like to this. Oh, this is so cool.

Mike: Yeah.

It's almost like you need like a machine with shooters and like all kinds of just chocolates to,

Joan: Yeah,

yeah. We'll put our heads together and get a machine in a airport real soon.

Mike: I love it.

Joan: What is something that I should have asked you about the vending machine business that I haven't yet?

Mike: Oh, that's a really good question. I think one thing that just there's different exit strategies when you get into vending, there's the, there's kind of the buy and hold mindset of your cash flowing forever, but there is that of just like real estate, when you get that first location, that is an asset.

So that asset to you, you can sell someday. Let's say you build a route in Toronto and now it's like you moved to Chicago and you don't want to manage that route remotely. You just sell that asset for a very significant. amount. So, that's where I think the interesting thing with vending to me is, know, it's not sexy.

It's not get rich quick, but it's an asset that you can either hold on to just like real estate for cashflow for the next generation. Or if you're over it in three years or you're over in a year, you just sell the route.

Joan: Yeah. And it's not labor intensive.

Mike: Exactly.

Joan: What's the best way for our listeners to connect with you, Mike?

Mike: probably the easiest is just Vendingpreneurs.com. They can, they can book a call, through the website there. And it's a, seamless way to kind of get ahold of us.

In its truest sense, it's a out of the box vending solution for side hustle, nine to fiver types that don't even know where to start, don't even have any leads yet. Like, we coach them from A to Z on finding a lead to what machines should go in that location, to where they should get their product, how they should price their product, contract templates, like the whole kind of cycle of a, a vending location and so we just help people build some, some side hustle, wherever they live.

Joan: Great. And getting them thinking about aspects of the vending machine business that they might not have thought of or occurred.

Mike: Exactly. Yeah.

Joan: So lastly, what's your best tip to inspire others to start or grow their side hustle?

Mike: Oh man. Putting me on the spot after just listening to some of your episodes. I think the common theme for me is you just got to start. what's the saying? Like an idea is just that. So there's so many people that come to me with great ideas and I'm like, I don't need another great idea. I either need more time in the day or someone that's going to execute on the idea.

Joan: Right.

Mike: so for me, it's, as you go down this path or take this leap into your first side hustle, you just got to start and no one's got to figure it out, but the people that did figure out things is they just started.

Joan: That's right. You start, you learn, .

Mike: Exactly. Yeah.

Joan: Well, thank you so much, Mike, for guiding us on how to start and grow a profitable vending machine route and your insights. And of course, for being today's SideHustle Hero.

Mike: Joan, thanks for having me. I love what you guys are doing and, just grateful to be a part of it.