Johnson also liked having an opportunity to move into management. “I liked the fact that I was going to use my brains and not just my back,” said Johnson.
Johnson reorganized the warehouse. He suggested some changes in product selection. He also suggested pricing changes.
With Johnson on board, Custom Touch Vending was also able to repair and move equipment for other vending operators. The company vehicle had a liftgate. These were important sidelines during that first year.
They also rented out storage space for other operators’ machines in their warehouse.
“After a while I was storing enough machines to pay my rent,” Cornelius said.
“I was doing everything I could to turn a dollar in this business.”
A FOCUS ON PRODUCT PRICING
Cornelius pays close attention to price and unit profitability. “You can’t sell price,” he said.
He gives his locations a 2-week notice before raising prices. “Usually, by the time it (the price increase) happens, everybody’s okay with it,” he said.
He has moved all of his salty snacks to large size snacks, priced from 80 cents to $1.00, and he has added tuna lunch kits for $2.25. Some of his candy/snack machines have all products priced at $1.00.
On the beverage side, he has cans priced as high as $1.00, and energy drinks for as much as $3.00.
Glassfront beverage machines have been particularly helpful, Cornelius noted. These machines allow him to offer more sports drinks and energy drinks. Glassfront merchandisers typically boost beverage sales by 20 to 30 percent.
Half of his beverage machines are glassfronts.
Bottled water remains a strong seller, despite concerns that some consumers have raised about bottles contributing to landfill waste. “It’s amazing how many people will choose water over soda,” he said.
Even during the recession, he said consumers are willing to pay a fair price.
PROFITS GRADUALLY IMPROVE
Cornelius developed a 5-year plan for the business based on what he was able to accomplish on his best day. He set himself a goal of $100,000 gross sales per month.
Getting the accounts to meet this goal took time.
His first year, the business lost $56,000.
But in the second year, with Johnson on board, Cornelius grossed $42,000 a month.
In the second year, he grew net sales by $156,000. In the third year, he grew another $161,000 in net sales.
The fourth year, 2009, was a tough year because of the economy. Locations were laying people off and some closed their doors completely. The company only posted a $36,000 sales gain in 2009. “It put me completely off schedule to hit my 5-year goal,” Cornelius said.
But 2010 has been better. The company has gained 18 accounts since January, and now has a total of 188.
This past October, Cornelius hired his second driver, Chris Tomasso.
Tomasso did not have vending experience like Johnson, but he did bring foodservice experience. He had been a waiter in a catering company. Cornelius regarded this as good background in customer service.
He said Tomasso knew the importance of always smiling and saying “hello” to people at the locations, and remembering personal information about customers at the accounts. Where Johnson, the older driver, writes these notes in a book, Tomasso stores the information in his cell phone.
“When you go in you can say (personal) things to them, and it makes them feel good,” Cornelius said. “I want my people to be able to build relationships with the customer.”
Both Johnson and Tomasso are paid a salary plus commission.
The drivers are responsible for selecting products from the warehouse, and they record machine meter readings manually with every service.
They are expected to wear clean black or blue pants, dress shoes, and a shirt with a pattern.
“I was able to get back focusing on running the business as opposed to running a route,” Cornelius noted.
He has been able to gain some accounts that are willing to subsidize the vending prices. In these cases, the account pays the difference between the sales in the machine and the product cost.
Subsidized and “free vend” accounts were more common during the Nineties in the San Francisco Bay area, but they never disappeared completely.