According to IBISWorld, the market size, measured by revenue, of the Vending Machine Operators industry in Canada is $434.5m in 2023.
There are many advantages of a vending machine business: compared to other types of businesses, the cost of purchasing a vending machine and stocking it with inventory is relatively low.
This makes it an attractive option for entrepreneurs who want to start a business but don’t have a lot of capital to invest upfront.
Additionally, vending machine businesses can provide passive income. Vending machines can be programmed to operate 24/7, which means that business owners can earn passive income without having to be present at all times.
This can be especially beneficial for those who have other commitments or obligations.
However, there are also some challenges associated with running a vending machine business. One of the biggest challenges is finding profitable locations.
High-traffic areas such as shopping malls, schools, and office buildings are typically the most profitable locations, but they can also be competitive and expensive to secure.
In addition, vending machines require regular maintenance and occasional repairs, which can be costly and time-consuming.
If you want to start a new vending machine business in Ontario, here is a step-by-step guide you can follow:
Step1: Develop a Business Plan
A business plan can help you define the goals and objectives of your new business. It ensures that as a business owner, you have a clear understanding of what you are trying to achieve and how you plan to get there.
It can also help you identify potential challenges such as market saturation, competition, or regulatory issues. By anticipating these challenges, you can develop strategies to overcome them and minimize their impact.
Follow the steps below to create an effective business plan:
Executive Summary: Provide a brief overview of your business plan, including your mission statement, target market, and revenue projections.
Company Description: Describe your vending machine business, including the types of products you will sell, the locations you plan to operate in, and the business model you will use.
Market Analysis: Conduct market research to identify your target market, competitors, and trends in the vending machine industry in Ontario. This section should also describe your marketing strategy.
Products and Services: Detail the products and services you plan to offer in your vending machines, including pricing and product mix.
Operations and Management: Outline your operations plan, including the number of vending machines you plan to operate, the equipment and technology you will use, and how you will maintain and stock the machines. This section should also detail your management structure and team.
Financial Plan: Provide a detailed financial plan, including startup costs, revenue projections, and cash flow statements. This section should also include a break-even analysis and a plan for financing.
Risk Analysis: Identify the risks involved in your vending machine business, such as equipment malfunction or theft. Describe the measures you will take to mitigate these risks.
Conclusion: Summarize your business plan and emphasize why your vending machine business will be successful in Ontario, Canada.
Step 2: Register Your Business
Like any other business in Ontario, you need to secure proper licenses, permits, and inspections prior to opening or operating.
Registering your new vending machine business is important for establishing its legitimacy, protecting your personal assets, obtaining necessary permits and licenses, and ensuring compliance with tax laws.
It allows you to open a business bank account, apply for business credit, and obtain financing from lenders. It also makes it easier to keep track of your business finances separately from your personal finances.
Here are the steps you can take to register your business:
Choose a business name:Choose a name for your business that is unique and reflects the products or services you offer.
Determine your business structure: Decide on the legal structure of your business, such as sole proprietorship, partnership, or corporation.
Register your business name: Register your business name with the Ontario government. You can do this online through the ServiceOntario website, in-person, or through a business registration service like Ownr (click here to check out Ownr and get 15% off).
Obtain a Business Number: If you plan to hire employees or register for certain taxes, you will need to obtain a Business Number from the Canada Revenue Agency.
Register for HST/GST: If your vending machine business makes more than $30,000 in revenue in a year, you must register for a Harmonized Sales Tax (HST) or Goods and Services Tax (GST) number.
Obtain necessary licenses and permits: Depending on the type of products you plan to sell, you may need to obtain certain licenses or permits. For example, if you plan to sell food products, you will need to obtain a food handling permit.
Register for WSIB: If you plan to hire employees, you will need to register for the Workplace Safety and Insurance Board coverage.
Register for EHT: If your business payroll exceeds $450,000 per year, you will need to register for the Employer Health Tax (EHT).
Register for other applicable taxes: Depending on the nature of your vending machine business, you may need to register for other applicable taxes, such as tobacco tax or fuel tax.
Step 3: Choose Your Vending Machine Products
Choosing vending machine products can have a significant impact on profits. The products you choose to offer can affect both the revenue generated and the cost of goods sold, which ultimately determine your profits.
Choosing the inventory requires finding a balance between product popularity and profit margins. By carefully selecting products that are both in demand and have good profit margins, you can increase your chances of generating greater profits from your vending machine.
Here are some steps you can take to create a list of potential inventory:
Conduct market research: Before choosing products, conduct market research to identify your target market, its needs, and preferences. This research can help you choose the right products and determine their prices.
Consider the location: Choose products that are suitable for the locations where your vending machines will be placed. For example, if you plan to place vending machines in schools or hospitals, consider offering healthy snacks and beverages.
Choose a product mix: Offer a variety of products to attract a wider range of customers. For example, offer snacks, beverages, and other items such as gum or mints.
Keep up with trends: Stay up-to-date on current trends in the vending machine industry and make changes to your product mix as needed. For example, if there is a growing demand for plant-based snacks, consider adding these to your product mix.
Consider seasonality: Consider seasonal changes when choosing products. For example, offer cold beverages during the summer months and hot beverages during the winter months.
Choose quality products: Offer quality products that are fresh, appealing, and satisfy your customer’s needs. Partner with reputable suppliers to ensure that your products are of high quality and consistently available.
Monitor sales:Monitor your sales to determine which products are selling well and which products are not. Use this information to adjust your product mix and pricing strategies to maximize your revenue.
Step 4: Find Locations for Your Vending Machines
Finding the right location for your vending machine is extremely important as it can greatly impact the success of your vending business.
The location of your vending machine can affect the number of customers you attract, the frequency of purchases, and ultimately the revenue you generate.
Here are some tips to consider when choosing a location for your vending machines:
Identify your target market: Identify your target market and the locations where they spend time. For example, if your target market is students, consider placing vending machines in schools, colleges, and universities.
Consider foot traffic: Choose locations with high foot traffic to maximize your exposure and sales potential. Places like malls, transit stations, hospitals, and office buildings are good examples of high-foot-traffic locations.
Research competitors: Conduct market research to identify your competitors and determine the best locations where there is less competition.
Consider security: Choose locations that are safe and secure to reduce the risk of vandalism and theft. Consider placing vending machines in well-lit areas and locations with security cameras.
Check for power and connectivity: Make sure that the location has access to power and an internet connection to ensure that your vending machines are operational.
Offices and workplaces: Offices and workplaces can be good locations for vending machines since many people work long hours and may not have time to leave the building for snacks or drinks. Consider placing your vending machines in office break rooms or common areas.
Recreational areas: Consider placing your vending machines in parks, beaches, and other recreational areas. These locations can be popular during the summer months, and customers may be more willing to purchase cold drinks and snacks.
Tourist areas: Tourist areas can be good locations for vending machines, especially if you offer products that are popular with tourists, such as souvenirs or snacks that are unique to the area.
Low competition areas: Avoid locations with too many competing vending machines. Choose areas where there is less competition or target specific niches that other vending machines may not be serving.
Step 5: Purchase Vending Machines
Buying vending machines is a critical step in starting your own vending machine business. If you end up with machines that need maintenance every week, you won’t be in business for long.
Here are some considerations to think about when buying vending machines:
Type of machine: Choose the type of vending machine that best fits your needs, such as snack machines, beverage machines, or combination machines.
Capacity: Consider the capacity of the vending machine, which refers to the number of items it can hold. Choose a machine with a capacity that meets your needs and is appropriate for the location.
Size and weight: Consider the size and weight of the vending machine, especially if you plan to move it frequently. Choose a machine that is portable and easy to move.
Payment methods: Consider the payment methods that the vending machine accepts, such as cash, credit cards, or mobile payments. Choose a machine that accepts payment methods that are convenient for your customers.
Maintenance requirements: Consider the maintenance requirements of the vending machine. Choose a machine that is easy to maintain and repair, with parts that are readily available.
Energy efficiency: Choose vending machines that are energy-efficient, which can reduce your operating costs and be more environmentally friendly.
Warranty and support: Consider the warranty and support that comes with the vending machine. Choose a machine that comes with a warranty and has a support system in place in case of any issues.
Brand reputation: The reputation of the vending machine brand. Choose a brand that has a good reputation for reliability and customer service.
Cost: The cost of the vending machine, as well as any additional fees for installation and maintenance. Choose a machine that fits within your budget and offers good value for the price.
Step 6: Stock Your Vending Machines
Stocking is a critical component of a successful vending machine business. Proper stocking helps you control costs by reducing waste and minimizing spoilage.
If products are not selling, you can adjust your inventory accordingly to avoid unnecessary waste and expense.
By regularly checking inventory levels and keeping your machines well-stocked with popular and in-demand products, you can maximize revenue, control costs, and ensure that your customers are satisfied.
Here are things to consider when creating your stocking plans:
Plan your inventory: Plan your inventory carefully based on your target market and the location of your machines. Choose products that are popular and have a high-profit margin.
Monitor inventory levels: Monitor inventory levels regularly and restock machines as needed to ensure that products are always available.
Check expiration dates: Check expiration dates regularly and remove any expired products from your machines.
Rotate inventory: Rotate your inventory to ensure that older products are sold before they expire.
Keep machines clean: Keep your machines clean and well-maintained, and wipe down the exterior and interior regularly.
Use efficient stocking techniques: Use efficient stocking techniques to maximize space and ensure that products are easily accessible to customers.
Price your products appropriately: Price your products appropriately based on market demand, competition, and profit margin.
Offer a variety of products: Offer a variety of products that appeal to different tastes and dietary restrictions.
Consider seasonal products: Consider seasonal products that are popular during certain times of the year, such as holiday-themed snacks or cold drinks during the summer.
Analyze sales data: Analyze sales data regularly to identify trends and adjust your inventory as needed.
Step 7: Install and Maintain Vending Machines
Maintaining vending machines is essential for a successful vending business. Regular maintenance can help prevent breakdowns and malfunctions, which can lead to lost revenue and dissatisfied customers.
By keeping your vending machines in good working order, you can avoid downtime and ensure that they are always available for customers to use.
Here are some steps you can take to keep your machines well-maintained:
Install your machines properly: Ensure that your machines are properly installed in a proper location.
Follow electrical requirements: Follow all electrical requirements and ensure that your machines are properly grounded and connected to a stable power source.
Regularly clean your machines: Regularly clean your machines to keep them in good condition and prevent the buildup of dirt or debris.
Perform routine maintenance: Perform routine maintenance on your machines, such as checking for loose or broken parts, ensuring that the coin and bill acceptors are functioning properly, and replacing light bulbs as needed.
Keep spare parts on hand: Keep spare parts and tools on hand to make repairs quickly and easily when needed.
Consider upgrading your machines: Consider upgrading your machines to newer models that offer features such as cashless payment options or remote monitoring and inventory management.
Use energy-efficient machines: Use energy-efficient machines that will help you save on utility costs and reduce your environmental impact.
Respond promptly to service calls: Respond promptly to service calls from customers to ensure that your machines are always working properly.
Use reputable vending machine suppliers: Use reputable vending machine suppliers who can provide you with quality machines and reliable customer service.
Step 8: Promote Your Vending Machine Business
Attracting new customers and increasing revenue is crucial for any business and can be achieved through effective promotion.
You can use various methods such as social media and collaborating with nearby businesses to build a loyal customer base and expand your business in the long run.
Here are some steps you can take to promote your new business:
Create a website: Create a website that showcases your vending machine business and includes information such as the products you offer, your locations, and your contact information. Make sure your website is mobile-friendly.
Use social media: Use social media platforms such as Facebook, Twitter, and Instagram to promote your business, share photos of your machines and products, and interact with potential customers.
Offer promotions: Offer promotions such as discounts, free products, or loyalty programs to attract new customers and encourage repeat business.
Partner with local businesses: Partner with local businesses such as offices, schools, and hospitals to place your machines in their locations and increase your customer base.
Attend local events: Attend local events such as fairs and festivals to promote your business and hand out samples or promotional materials.
Advertise in local media: Advertise your business in local newspapers, magazines, or radio stations to reach a wider audience.
Offer healthy options: Consider offering healthy vending options, such as fresh fruit, granola bars, and low-calorie snacks, to appeal to health-conscious customers.
Use eye-catching signage: Use eye-catching signage on your machines to attract customers and promote your brand.
Maintain a positive reputation: Maintain a positive reputation by offering excellent customer service, keeping your machines clean and well-stocked, and promptly addressing any customer concerns.
Step 9: Monitor and Analyze the Performance
You can identify trends in product popularity, sales volume, and customer behavior by analyzing your business performance.
This can assist you in making educated decisions about what products to stock, where to locate your machines, and how to optimize your business for maximum revenue.
Here are some steps to take to monitor and analyze the performance of your business:
Collect data: Collect data on sales, inventory levels, and customer feedback. You can use vending management software to collect this data automatically.
Analyze sales data:Analyze sales data to identify trends, such as which products are selling well and at what times of day or week. You can use this information to adjust your inventory and optimize your product offerings.
Monitor inventory levels: Monitor inventory levels to ensure that your machines are always well-stocked. You can use vending management software to track inventory levels in real time and receive alerts when inventory levels are low.
Analyze customer feedback: Analyze customer feedback to identify areas where you can improve your service or product offerings. You can gather customer feedback through surveys, social media, or talking to customers directly.
Evaluate your locations:Evaluate the performance of your vending machines at each location to determine which areas are the most profitable. You can use this information to adjust your product offerings or to prioritize placing machines in high-traffic locations.
Monitor your expenses: Monitor your expenses, such as the cost of purchasing products, machine maintenance, and location fees, to ensure that you are running your business efficiently.
Set performance goals: Set performance goals for your vending machine business, such as increasing sales by a certain percentage or expanding into new locations. Use your data analysis to determine realistic goals and track your progress over time.
Adjust your strategy: Adjust your strategy based on your data analysis and performance goals. For example, if you find that certain products are selling well, you may want to increase the number of machines that offer those products.
Conclusion:
Starting a vending machine business can be a lucrative and rewarding venture. However, it is essential to do your research, develop a solid business plan, and make informed decisions every step of the way.
By finding the right location, choosing the right products, maintaining your machines, and promoting your business effectively, you can build something that generates revenue and provides a positive experience for customers.
With dedication and hard work, you can turn your vending machine business into a thriving enterprise and achieve your entrepreneurial goals.
Maurice (Moe) Muise learned the ins-and-outs of government while an employee of the Government of Canada in Ottawa for 10 years. His current focus is helping small businesses in Ontario to identify and maximize government grants to grow their business.
Click here to learn more about Moe’s background and how he can help your business.
