How to Start a Vending Machine Business

Besides passive income, vending machines offer several advantages: a business model that operates 24/7, requires minimal staffing requirements, and has relatively low startup and operating costs. However, the challenging part is finding a suitable location with ample foot traffic and minimal competition. 

 

Is now the time to start a vending machine business?

Entrepreneurship has surged since the pandemic, with over 19 million small business applications since the end of 2020. However, the market size of the vending machine industry has decreased by an average of 1.2% annually between 2018 and 2023, though there are encouraging signs of a potential turnaround. 

 

Source: U.S. Census Bureau, Business Formation Statistics

In 2023, the industry saw a 0.4% increase in market size, reaching $8.6 billion in revenue. This uptick could suggest that the sector may be recovering as more people return to offices, shopping malls, and public spaces post-pandemic. For reference, the average vending machine can generate around $300 in monthly revenue—and sometimes more, depending on location and product selection.

While challenges such as competition and changing consumer preferences remain, vending machines will always cater to a universal need—quick, accessible drinks or snacks. With proper planning, strategy, and adaptability, it’s certainly possible to create a vending machine company even in today’s evolving market. 

Start a vending machine business in 10 steps

Here’s everything you’ll need to consider and complete in order to open your own vending machine business. 

Step 1: Conduct market research

Market research is how you learn about your target customer base, assess available opportunities, and confirm that your business idea has the potential to succeed. Here’s how to begin your research:

• Assess market demand. Measure the need for vending machines in various locations. Focus on high-traffic areas such as office buildings, college campuses, shopping centers, hospitals, or public transit stations. Consider factors like foot traffic patterns, operating hours, and the demographics of people in these areas. 
• Identify your target customer. Determine who your potential customers are and what they need. For instance, if you’re thinking about setting up a vending machine in a gym, consider the members’ needs and what they might purchase (e.g., sports drinks, protein shakes, or workout supplies). 
• Analyze competition. Research existing vending machine operators and nearby alternatives (e.g., convenience stores or gas stations) in your target areas. Take note of their locations, product offerings, machine types, accepted forms of payment, and pricing strategies. 

You can use tools like Google Maps and local business directories to identify potential markets. Still, don’t hesitate to talk to people directly (including business owners or customers) to gather local insights. 

Throughout your research, look for unmet needs in the current market. For example, is there a need for healthier options, machines with modern payment systems, or simply additional capacity to meet sudden demand in busy locations (like college campuses between classes)?  

Step 2: Choose your products

Based on your findings, you can decide which types of machines and products to offer. Here are some of the most common options. 

Snacks and beverages 

These are the most popular vending machines, stocked with a variety of chips, candy, soda, and water. You can purchase individual beverage or snack vending machines or a combination machine to sell both, providing customers with more options in a single stop. 

Bulk vending

These machines typically dispense small items like candy, toys, or gumballs for children. You can find them in shopping malls, supermarkets, or practically any family-friendly location. While individual sales are usually small, these machines benefit from low maintenance (many don’t even run on electricity) and product costs. 

Specialized items

This category includes a range of products relevant to the machine’s location. These are just some examples of what you can sell in a specialized vending machine: 

• Hot beverages and meals. Coffee, tea, and microwavable foods for offices or hospitals. 
• Tech products. Chargers, earbuds, handheld electronics, or other small gadgets for airports or universities. 
• Health and beauty products. Over-the-counter medications, personal care items, or fitness supplements. 
• Laundry supplies. Detergents, fabric softeners, and dryer sheets for laundromats or apartment complexes. 

You want to tailor your offerings to your target customer’s age, income level, and lifestyle. Equally important is that you consider the gross profit and margin of each product, as some items can be popular but offer lower profits, while others sell less frequently but provide higher margins. 

However, product selection isn’t a one-time decision. You should regularly review your sales data and customer feedback to optimize your product mix, which might take some time before you see results. 

Step 3: Choose a location 

The location where you set up a vending machine is arguably the most important factor in determining how well it performs. A well-placed machine in a high-traffic area can easily outperform one in a quiet location, even if the latter has better products or prices. 

To identify high-traffic areas, start by visually observing and analyzing foot traffic patterns in various locations throughout your target market (e.g., different shopping malls, gyms, or train stations). Look for places where people naturally congregate or pass through regularly, and take note of any competing vending machines. 

Once you’ve identified a few potential locations, you can prepare a pitch for the property owners or managers. This includes where you’ll place the machine, the benefits it’ll bring to the property, and your terms and conditions for doing business (i.e., the contract length, deliverables, and the commission rate).

Step 4: Choose a business model

As a vending machine business owner, you’ll place equipment in public locations and likely deal with food and beverage safety. This comes with a few legal considerations, such as: 

• Public liability. Your machines could lead to injury claims if not properly maintained or secured. 
• Product liability. You’re responsible for the quality and the safety of the items you sell. 
• Equipment investment. With significant capital tied up in machines, you’ll want to protect your assets from potential business debts and legal issues. 

Given these factors, it’s often wise to choose a business model—also known as a business structure—that offers personal asset protection, such as a limited liability company (LLC). A corporation might also be worth considering for larger operations or those with significant growth plans, though it comes with more complex regulatory requirements. 

However, we’ll explore the different business structures in more detail later. For now, remember that this decision can have long-lasting impacts, so it’s beneficial to consult a business attorney who can offer advice based on your situation and local regulations. 

Step 5: Write a business plan

Drawing on all your work from the previous steps, you’ll next create a business plan outlining your strategy. Here are the main elements to include in your vending machine business plan: 

• Executive summary. Provide an overview of your business, including your unique value proposition and long-term goals. 
• Business description and products. List the types and amounts of vending machines you’ll initially purchase and operate. You should also explain how your selection meets the market’s needs. 
• Market analysis. Include insights on local demographics, foot traffic patterns, and industry trends that support your business plan. 
• Competitive landscape. Analyze existing vending machine operators and other competitors in your target location and justify why you believe you have a chance to win over business. 
• Financial projections. Provide estimated costs (including your commission rates), revenues, and profitability outlook for the foreseeable future (usually 3 to 5 years). 
• Operations and management. Outline your day-to-day operations, including restocking, maintenance, and cash collection procedures. 

Your business plan will be particularly useful when approaching and negotiating with property owners. Use it to demonstrate why you’re offering a valuable service to their customers, not to mention the profits you expect the property owners to receive. 

Step 6: Obtain necessary permits and licenses

The permits and licenses required to operate a vending machine business depend on your location, the types of products you sell, and the scale of your operations. Standard licenses and permits you might need include the following: 

• General business license
• Sales tax license or seller’s permit
• Food service license
• Vending license
• Health permit

It’s crucial to check with your local government offices—including the health department and business licensing division—to ensure you identify all the registrations your vending machine business requires. Additionally, if you’re planning to place machines on government property or in schools, more permits or certifications might be required. 

If you’d like assistance, LegalZoom can do the research for you and find the federal, state, and local registrations required for your vending machine business. 

Step 7: Invest in and install equipment

When selecting equipment, first consider your budget and what your customers expect. New machines usually come with better technology and warranties, but they’re more expensive. Used vending machines can be budget-friendly, and you can often find options through online marketplaces (e.g., eBay, Facebook Marketplace, or Craigslist) or sales from an existing vending machine business. However, you should also budget for more maintenance if purchasing used equipment. 

Regardless of how you purchase your vending machines, you want to ensure they meet your business’ needs and customer expectations. As a result, consider investing in the following features (but note that they might raise the overall vending machine cost):

• Multiple payment options, including credit cards, mobile payments, and cash 
• Remote monitoring capabilities, including inventory tracking and sales reporting
• Temperature control for food and beverages, which is especially important if stocking perishable items 
• Customization options that allow for easy product rotation or price adjustments 
• ADA compliance, including appropriate height for controls, Braille labeling, and audio assistance features where applicable

Once you’ve selected your equipment, you’re ready to install the machines. If you install them yourself, pay close attention to the manufacturer’s specifications for electrical connections, mounting, and machine settings. After installation, you should test all the components, including the payment methods, product dispensing mechanisms, and temperature settings.

However, if you’re not comfortable with the technical aspects, consider hiring a professional for installation. 

Step 8: Stock and maintain your machines

When it comes to stocking, focus on the basics: keep fresh products in stock, offer enough variety, and charge a reasonable price for each item. Start with a manageable inventory of popular items that are likely to sell (e.g., bottled water and popular soda brands), and pay attention to expiration dates, especially for perishable goods. 

You can gradually expand your product range as you learn more about your customers’ preferences. Keep track of which items sell quickly and which ones linger, adjusting your stock as needed to maximize profit margins and meet demand. Likewise, different locations might have varying preferences, so be prepared to change your product mix for each machine. 

Lastly, don’t forget about preventive and routine maintenance. Regularly inspect and service your machines to catch potential problems, including lubricating moving parts, checking electrical connections, and calibrating temperature controls as needed. You should also clean them periodically to ensure they’re presentable to potential customers. 

Step 9: Market your business

Marketing a vending machine business involves two parts: convincing property owners to use your machines and attracting potential customers. Here are some strategies to consider for both approaches. 

Marketing to potential locations

• Build a simple website that shows your business’ offerings, service area, and contact information
• Create professional brochures or digital presentations highlighting benefits like additional revenue and convenience (i.e., minimal work for the property owner) 
• Join local business associations for networking opportunities 
• Run local ad campaigns on Google or Facebook
• Offer trial periods to hesitant property owners 

As discussed, your vending machine’s location directly influences how well it performs, so be prepared to demonstrate why your vending machines can realistically add value to the properties. 

Marketing to customers 

Once your machines are in place, consider these marketing tactics to boost visibility and sales: 

• Design eye-catching machine wraps or signage to stand out in a busy environment
• Create a rewards program to encourage repeat business
• Implement location-based advertising or engage with local customers through social media 

Consistent branding across all machines and marketing materials helps build recognition and trust, but you don’t necessarily have to go overboard for a vending machine business. More often than not, customers will pass by and decide whether they’ll make a purchase on the spot, so you might not need an extensive online marketing campaign to reach more customers. 

Similar to initial inventory stocking, it’s generally wise to start with a small but essential marketing strategy and gradually invest more as you learn about the business. 

Step 10: Launch and manage your business

Before you dispense your first products, you’ll need to complete several administrative tasks to finalize your business: 

• File your business name with the state authorities (usually your Secretary of State office) 
• Apply for a federal tax ID (EIN) through the IRS
• Open a dedicated business bank account
• Implement an accounting system 
• Acquire appropriate insurance policies (e.g., liability, property, and product) 
• Set your initial product prices

In the early months after launching your business, focus on your cash flow, expenses, and sales data. You might consider creating a spreadsheet to track all this information and remember to swap out underperforming items as needed. 

As you gain more experience, you can start to think about next steps and whether you’re ready to expand. This could involve adding more machines to your current locations, exploring new places to set up machines, or diversifying your product range. 

How much does a vending machine business cost?

Starting a vending machine business can be relatively affordable compared to other small businesses, but the exact costs depend on the scale of your operation and the types of machines you choose. 

Generally, you can expect initial startup costs to range from $2,000 to $10,000 for a single-machine operation and potentially $10,000 to $50,000 or more for a multi-machine business. Here’s an overview of the primary expenses you should consider. 

Vending machines

• Bulk vending machines (for candy or small toys): Under $500
• Food vending machines: $1,500 to $2,500 for a used machine, while new models can range from $3,000 to $10,000 or more, depending on features
• Beverage vending machines: $1,500 to $5,000 for a used machine and $4,000 to $10,000 or more for new models
• Combo machines: $3,000 to $5,000 for a used machine and $6,500 to $10,000 or more for new models

Specialized vending machines (such as for electronics or fresh food) can vary widely in price, and some might need to be custom-built. As a result, you should reach out to the manufacturer directly if you plan on investing in specialized machines.

Installation and setup

If you’re handy and comfortable with basic electrical work, you might be able to install the machines at no additional cost. On the other hand, professional installation typically ranges from a few hundred dollars to several thousand, depending on the number of machines, installation complexity, and location. You should also factor in any delivery or shipping costs (if applicable). 

Inventory and restocking

For basic snack and beverage machines, you can expect to spend between $200 and $300 to fully stock a single machine. This also assumes you purchase in bulk, but be careful not to overstock perishable items. 

If you offer specialized or premium products, your inventory costs could increase to $800 or more per machine. This typically includes items like fresh sandwiches, organic foods, or electronics. 

Licensing, permits, and insurance

General business licenses and permits typically range from $50 to $400, though the exact costs depend on which type of registrations you need, the products you sell, and your location. Check with your local government offices or consult an attorney to understand the exact requirements (and fees) in your area. 

In addition, you should budget for general liability insurance, which usually costs between $500 and $1,000 annually. As your vending business grows, you may need to increase your coverage and prepare to pay more for your premiums. 

If you’re using a vehicle to stock or service your machines, you might need to purchase commercial vehicle insurance. This may cost anywhere from $100 to $300 per month, depending on the type of vehicle, the driver’s history, and average rates in your state. 

Location commissions

Typically, commissions for property owners range from 5% to 25% of your machine’s monthly revenue. However, this depends on several factors, including the following: 

• Foot traffic volume
• Demographics of the location (e.g., office workers, shoppers, or students)
• Competition 
• Services provided by the location (e.g., electricity or security) 

As a general rule of thumb, high-traffic areas or premium spots will likely ask for higher commissions, but you can expect more revenue. Conversely, a lower-traffic area with a smaller commission could still be profitable if your operating costs are low.  

How to decide which type of business structure is right for you

Here are some pointers to consider when deciding which business structure is right for your vending machine business. 

• Sole proprietorship. The easiest and simplest choice for solo operators managing a few vending machines and who accept the risks. 
• Partnership. Enables you to share resources and responsibilities but means you must split control and ownership. 
• Limited liability company. An LLC offers liability protection and flexibility, making it one of the more common choices for new operators. 
• Corporation. Ideal for large-scale vending machine businesses, as it offers the most comprehensive liability protection. 

It’s highly recommended to seek advice from a tax specialist or business attorney before finalizing your choice. To get the ball rolling, we can help you find an experienced attorney who can answer your questions, review documents, and offer ongoing support as you launch your business. 

FAQs

Are vending machines profitable?

A successful vending machine business can be profitable, with average monthly revenues of around $300 per machine, but this varies widely based on location and products sold. Typical profit margins range from 15% to 30%, while some top-performing owners report margins over 50%, especially for popular items like bottled water or granola bars. 

Where can I put a vending machine?

You can place a vending machine practically in any high-traffic location, including hotels, office buildings, schools, hospitals, shopping centers, and transportation hubs. Other potential spots include apartment complexes, laundromats, and manufacturing facilities or warehouses. 

Do vending machine owners pay rent?

Most vending machine operators pay some form of rent or commission to property owners. This is typically a set percentage of sales, usually ranging from 5% to 25%, depending on the location’s desirability. 

How are vending machines taxed?

Vending machine income is generally subject to both income and sales tax. Income tax applies to your business profits, while sales tax must be collected on taxable items and remitted to your state. Before selling any products, it’s best to consult a tax professional or attorney for advice.