Speciality Coffee Vending Business Thoughts

tastylildrink

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Nov 14, 2006
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Hello all. I'm new here and I really love this forum. I have a question please. I consider myself an coffee fanatic. I love my vanilla lattes especially. Got my own barista espresso machine, grinder, set of syrups with pumps, even some coffee art for the wall in my coffee area, the whole nine yards. With my passion for coffee, and my entrepreneurial sprit, I an wanting to start and be a part of the coffee industry to share my passion with others. With that said, I have been looking at everything, and looking at forums like this one for months and months. I'm really trying to be thorough cause I have just a little cash and only one shot to get it right. I first looked at opening a retail store, but these days, without a drive-thru, your automatically loosing business, and putting one in is expensive, plus all the other costs associated with the build-out, equipment, etc for the rest of the store. For a 1200 sf size location without a drive-thru in my area, my best estimates put the cost at 80K minimum for everything. I’ve got a little cash, but not tha much, and I have struck out 3 times with 3 different banks for any kind of SBA loan even though my credit is rock solid. Next, I’ve been looking at the mobile coffee trailer. An outfit out of Canada has a hot dog style trailer, but built for espresso, complete with butane espresso machine, and battery for the built-in refrigerator, sink, water, storage. Really quite a sweet rig, but also costs about 20K with shipping, but still not a bad deal which I may still do. I would love to get the local Home Depot or Lowes to let me operate out front on weekends. So that takes to my question here and now. I have seen and talked to several outfits that are offering franchises where they sell you their espresso machines, and they assist you in placing these machines in other businesses like deli's, small restaurants, office buildings, etc, and you make your profit on the coffee modules they sell you at .25. You mark up the price of each module to .75 to the merchant. That is your profit; .50 per drink. Oh, by the way, the merchant pays nothing for the machine. Just the coffee, milk, and syrups. These machines look cheap, and I don’t like the coffee module concept for three reasons. Freshness, lack of varieties, and your locked into one source for your main product. I have however, in my entrepreneurial way, thought of doing this same concept, but using more superior quality fully automatic espresso machines that grind fresh beans, and includes a built-in automatic frother. The machines I am looking at have a digital counter that tells you how many times the machine has dispensed a drink. That is how the merchant can be billed, rather then by the capsules they must buy from you in the previous example. Using my concpet, my calculations are if I charge the vendor $1.00 for each drink dispensed, and if each vendor sells just 30 drinks per day, and I have 10 machines placed, subtract a little gas, insurance, and taxes, I should net about $4,500 per month. (the vendor will buy from me or buy themselves, the coffee, milk and syrup). My only job after placing the machines is stopping in regularily to clean the machine, get the counts, re-supply the merchant with coffee, etc. and collect my money for the drinks counted.

Does anyone have any experience in this endeavor, and if so, what? And are my figures even close to reality? What are the drawbacks, the plusses (obviously the big one is no rent and your own hours)?

I have not seen any posts at least in my initial searches on this forum for this subject. Thnx much…
 

courtneybperez

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Nov 15, 2006
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Lubbock, TX
Reply to Your Question

Ok...where do I begin...we recently purchased a coffee house in my hometown that I was a regular at for over 10 years. I have known all of the previous owners, and in my head I have listed all of the mistakes I thought they had made...let me tell you, when you are there and on the other side of the bar, it is a completely different world. Try to follow me because I may bounce around a little here. I wanted this shop for myself and I ended up letting my stepmother purchase it. That has been a good thing. She knows how to run a business and I know the people and the product. We use only the best--meaning Panache coffee and espresso, which you can get from Coffee Bean International (CBI). IT IS THE BEST. Trust me on that. We also only use Xanadu teas which can also be purchased from CBI. The second previous owner of our shop had a cart like you speak of, set up in a community college. It was nothing but a hassel and he lost a great deal of money in it. It was an exceptional cart--loaded with everything imaginable. He is also still attempting to sell it. You can contact me if you are interested and I will get you in touch with him. My advice to you is this--research everything you think about doing. Coffee is a cash business and you will lose money if you do not closely monitor your cart(s). $1 for a drink is way too low. We charge at minimum $2 for each of our drinks. Black coffee is as follows: SM $1 MD $1.50 and LG $2.00 Bottomless Cups range from $3.50-$5.00. Our espresso drinks are $2.50+. The mark up is there and you can make money, but you will have to work it. We do not have a drive through at our location. Our customers come inside because they enjoy the atmosphere and they enjoy the social aspect. We are not a Star***ks. We are personal. We want to know our customers and that keeps them coming back. I bake homemade desserts and pastries and they love them! The thing is that every coffee business is becoming commercial. Customers enjoy a relaxed atmosphere and knowing their Baristas. You can have all of the best of everything and still not have the customers. You can make money but it takes a great deal of effort, training, learning, and time. And just when you think you have it all down, you realize you knew very little.

I hope this helps. Please contact me if you need anything else. Best of luck to you!
 
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tastylildrink

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My Bad, let me clarify...

Thank you for your reply. I believe I need to explain better. I’m sorry but I rambled on quite a bit in my first segment so it’s easy to loose my question.

Let me try again without so much rambling. The idea I was thinking of was installing a single espresso machine that I would purchase into businesses like deli’s, business offices, and office complexes. Much like a coffee vending business except I would use super automatic espresso machines instead of plain ole pour over bunn coffee makers. The deli or business office owner would not have to buy or pay for these machines from me, rather using the drink counter built into the machines, I would bill the deli owner or merchant the $1.00 per drink. If I could place 10 machines into 10 deli’s, business offices, etc., and each machine dispensed just 25 drinks each day, 5 days per week, 4 weeks per month, I could net over $3700 per month. This is the business idea I wanted to see if anyone had any comments on. My thinking is I currently work in a 16 story bank building. The deli on the first floor does not have espresso, and I really dislike drip, which is all that is available in our office. I would easily pay $3.00 to go down the elevator, and get a quality espresso drink to take back to my little cubicle. Ideas, suggestions, draw-backs?
 

courtneybperez

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Nov 15, 2006
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Lubbock, TX
Whoops

Ok now I see what you are thinking...let me ask you this, would the espresso machine be set up to grind its beans itself, pour shots and do everything as a vending machine would do? If so, how would the quality of the drink be? My thing is, I know coffee and espresso and as soon as the bean is ground, it almost immediately begins to lose its flavor and aroma. Would these beans just sit there ground? I need a little more information before I can help you...sorry.
 

cafemakers

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Nov 3, 2004
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Re: My Bad, let me clarify...

tastylildrink said:
Thank you for your reply. I believe I need to explain better. I’m sorry but I rambled on quite a bit in my first segment so it’s easy to loose my question.

Let me try again without so much rambling. The idea I was thinking of was installing a single espresso machine that I would purchase into businesses like deli’s, business offices, and office complexes. Much like a coffee vending business except I would use super automatic espresso machines instead of plain ole pour over bunn coffee makers. The deli or business office owner would not have to buy or pay for these machines from me, rather using the drink counter built into the machines, I would bill the deli owner or merchant the $1.00 per drink. If I could place 10 machines into 10 deli’s, business offices, etc., and each machine dispensed just 25 drinks each day, 5 days per week, 4 weeks per month, I could net over $3700 per month. This is the business idea I wanted to see if anyone had any comments on. My thinking is I currently work in a 16 story bank building. The deli on the first floor does not have espresso, and I really dislike drip, which is all that is available in our office. I would easily pay $3.00 to go down the elevator, and get a quality espresso drink to take back to my little cubicle. Ideas, suggestions, draw-backs?

Although a nice idea, I suspect that the true cost of this business model and capital required to get underway would be prohibitive. By the time that you consider the cost of commercial superauto equipment that will perform reliably per location, water treatment, installation (plus the installation of 220v service, water line and drain), on-site marketing, service calls and routine maintenence, each site would need to produce a decent volume of business to become profitable - at such volumes, I would expect these locations to operate their own coffee bars or license a program from Starbucks or others.

How much capital do you have to invest into your concept?
 
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tastylildrink

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Actual costs

Well, in the past few months I have been researching quite a bit, and I have found a machine that is suitable for light commercial use, "as it is advertised". It is the Saeco Royal Professional Super Automatic Coffee, Cappuccino & Espresso Machine. So if anyone has any prior knowledge on this machine, let me know your opinion on what you think about it. It runs on 110v power, uses a water reservoir so prefiltered water can be used, and cost for each unit is $1,600.00. Total return on investment would be 4 months, again "IF" I can place 10 machines in good locations, and assuming that each machine generates at least 25 drinks per day. Annual net profit of approximately $45k could be realized. I am currently investigating the espresso machine to see if it can meet my high requirements for taste, quality, and efficiency in creating a drink completely in a timely manner, and that can be easily used by novice espresso operators. A lot of "if"s, but potentially something that could work. But since I have never owned any kind of vending business, and since few like this are out there (to my knowledge), I was hoping that posting this here would provide some discussion. And trust me when I say, I "DO" appreciate your feedback.
 

courtneybperez

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Nov 15, 2006
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Lubbock, TX
Good Luck

Just wanted to wish you well on your venture and your decisions. I think you have something here and if it will produce a good product, you shouldn't have a problem with 25 drinks per day. Good Luck!
 

cafemakers

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Re: Actual costs

tastylildrink said:
Well, in the past few months I have been researching quite a bit, and I have found a machine that is suitable for light commercial use, "as it is advertised". It is the Saeco Royal Professional Super Automatic Coffee, Cappuccino & Espresso Machine. So if anyone has any prior knowledge on this machine, let me know your opinion on what you think about it. It runs on 110v power, uses a water reservoir so prefiltered water can be used, and cost for each unit is $1,600.00. Total return on investment would be 4 months, again "IF" I can place 10 machines in good locations, and assuming that each machine generates at least 25 drinks per day. Annual net profit of approximately $45k could be realized. I am currently investigating the espresso machine to see if it can meet my high requirements for taste, quality, and efficiency in creating a drink completely in a timely manner, and that can be easily used by novice espresso operators. A lot of "if"s, but potentially something that could work. But since I have never owned any kind of vending business, and since few like this are out there (to my knowledge), I was hoping that posting this here would provide some discussion. And trust me when I say, I "DO" appreciate your feedback.

I hate to be the messenger here, but must tell you that the machine you are considering (or other consumer toys) will not withstand daily use in a commericial envornment, nor with they be capable of maintaining the temperature and pressure consistency necessary to output quality comparable to your clients' nearby Starbucks (or hopefully better). Call the manufacturer and ask if they will warranty your machines for your application - I think that we already know the answer.

The style of equipment that will be necessary to withstand regular use and dispense beverages of acceptable quality will probably start in a range of US$10k - before installation, maintenence, water treatment, staff training (they will need to initiate cleaning cycles nightly).

Additionally, I see some pretty lofty challenges with this business model. As the manager of a busy office, why would I allow someone to place a machine in-house as a courtesy? Other than being able to serve better coffee to employees - what's the financial motivation? Who is going to restock milk and supplies? Will employees actually purchase the drinks?

Please do not misunderstand my intent; I truly do hope that you succeed, but from my experience believe that the concept you have defined is not likely to do so. My company has been involved in a number of superauto projects deployed to courtesy lounges and commissaries; trust me when I tell you that this is a much larger undertaking that you anticipate.
 
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tastylildrink

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Excellent things to consider..

I agree with your analysis, but there are a couple of things that I need to clarify. When I said put in an office building, I meant putting in the deli located on the first floor normally of an office building. The deli owner would operate and sell the drinks. I'm estimating somewhere around 50 cups max per day sold. That would be considered light commercial duty, so that a $10k machine is not necessary for this low volume. I'm in one of these types of buildings and not a coffee shop close that you do not have to drive to, so no competition. But never the less, I agree if it cannot produce a quality drink, then I don't care if it is the only game in town, I personally would not buy it. That said, I'll be evaluating a different machine other then the one I mentioned earlier, cause since my last post, I have talked to the rep for these mahcines and he agreed that the Saeco would be too light duty. So we are looking at the Jura-Capresso IMPRESSA Z5 Coffee/Espresso Center. Final analysis to follow.
 

dant

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Feb 13, 2006
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Philadelphia, PA
I think it is really difficult to make much money as a retailer in the coffee business. I love operating my own business and providing a cafe atmosphere for the neighborhood but for all the work that goes into it the money really isn't very good. If I were trying to make easy money I'd do something else. So I'd say you should forget the idea that this will be easy money.

As others have indicated, there are many pitfalls that you will probably run into. Have you thought about dealing with the health department? Are these machines NSF approved? If not you've got a problem. I don't care what the manufacturer says, there's no way a $1500 machine will hold up and make quality drinks for a very long period of time. Making a quality drink is not simple--it requires quality water, a clean machine, good beans and most importantly a person who really cares about making a quality drink. There is a real art to making good espresso based drinks.

Also, if this is so profitable, why wouldn't the deli owner just buy his own machine?

If you really feel you are on to something I would urge you to forget the idea of installing 10 units and try setting up one. That will be a great learning experience. If it is successful, more power to you. If not will you will have saved yourself a lot of money and heartache.
 

cafemakers

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Nov 3, 2004
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I was searching for supporting information on another response and re-discovered this thread from last November. Any updates on what happened with this business?

I suppose that if the poster was successful, he or she must have dozens of those pro-sumer machines installed out at client locations. I'm wondering how it all worked out.
 

wandy.biz

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Dec 4, 2009
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Well, I believe that starting a vending business is really a good idea! Selecting the type of business that you are going to run is just based on the location and mode (full time or part time) you are looking for. Coffee vending business thought may be just a good enough idea but just try to be specific for your location. I had my friend set up his vending business in a neighborhood which really had no close snack shops and he is really earning quite a good amount from it. :)
 

JDuella

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Nov 30, 2011
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Keurig KCup Vending Machine

Something to consider if vending coffee is where your interest lies... A lot more offices and public locations are opting for a single cup maker like a Keurig. In our office, we have 30+ employees, and we sought out a better alternative to the pot coffee that also didn't break the bank. With a little research, we decided on a Keurig because of the simplicity and familiarity factor, as well as a KCup Vending Machine. The KCup Vending Machine has been a godsend as we easily made up the cost of the vending machine purchase and even bring in a bit extra each month now. It's worth looking into the KCup Vending Machine if Office Coffee Service or being a Vendor Operator is your business goal. The company we got it from also sells many other types of machines worth looking into as well. See KCup Vending . com (no spaces) for an example of what I am talking about.
 
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