School Vending: A Primer For Success

There are different vending carrots for different industries. Hotel vending needs are quite different from factories which are different from sports facilities which are different from the endless cubicles at the white collar employers. Recognizing and understanding the specific needs of different vending categories encourages successful client solicitations and eliminates a lot of expensive, wasted marketing efforts. This is especially true for the vending needs of public schools.

Having worked intimately with close to a thousand vending companies as an equipment supplier for over 25 years, I am familiar with the fact that certain vending operators enjoy exceptional success serving specific industries. There are also categories of opportunities many vending companies avoid like leprosy. This has certainly been the case with public schools.

Vending companies have stayed away in droves. Admittedly there are some good reasons for that. The nutritional standards for school vending have progressively become more challenging, fueled by political correctness and a perceived obesity crisis.

Many presume that public school vending machines are trashed regularly, having heard exaggerated anecdotal testimony. Many presume this arena is simply a battleground for who offers the highest “pretend” commissions.

Some are concerned about making an equipment investment with special configurations and then being asked to leave after only one year for one excuse or another. Some worry about timer requirements decimating sales in expensive machines.

We hear the reports of the genius politicians that think the answer to obesity is to ban vending machines to Siberia. I particularly love that one. Have you ever heard the cliché about throwing the baby out with the bath water? And politicians wonder why people think they are senseless.

A vending machine is simply a store. One can put anything they want on the store shelves. Stores are not
the problem.

On the flip side, we could ask if we might just want to have vending accounts where hundreds and sometimes thousands of hungry young people with cash gather to eat on a daily basis. Their enviable metabolisms allow them to consume ridiculous amounts of food and beverages without showing it … Oh, the glory days of yore.

We could also point out that the competitor pool would shrink in our pursuit of schools, as many avoid soliciting schools, at least outside the very low volume teachers’ break rooms. The vending sales volumes in school cafeterias are invariably incredibly higher than business and industry locations.

Schools are our community centers where activities continue from before sunrise to well after sunset for six and even seven days each week. Sports, clubs, drama, adult education, community gatherings and regional events bring people to our school vending machines in addition to the six hours of public education for 180 days every year. Schools offer better than average opportunities for vending operators, but they are not without unique challenges. So when has life been easy?

Whenever we see opportunity, we will always face obstacles. Potential has no value if it will not be exercised. The key is knowing how to safely and profitably convert that potential into advantage.

I will be happy to define the tools and the realities we face in addressing the significant potential within school vending. This explanation would be valueless without credibility. What I offer is not conjecture or theory. I’ve been there and done that. You can too.

After having invested a great deal of money and time in the New York market, my vending equipment distribution company immediately lost $1 million in annual sales when the events of 9/11 stunned our country and the Northeast economy in 2001. When we realized the sales were not going to come back, we decided to offer full-line vending services to the school market which extremely few vending companies were addressing. The few that were offering these services were doing it rather poorly, due to the absence of any real competition.

We enjoyed quick and considerable success. In less than two years, as a part-time effort, we generated about $21,000 per school week from 70 machines in cafeterias and a half dozen more in the teachers rooms that we reluctantly accommodated upon request. Let’s address each issue and explain why that was the route we chose and what effect our decisions had on the return on our investment.

MAIN LOCATION FOCUS: CAFETERIAS

We wanted to put our vending machines into the cafeterias where the students came to eat and socialize. We wanted the brass ring, not the hallway or outside the gym. About half of all our sales came during the lunch periods. Any machines we reluctantly agreed to place outside the cafeteria always had lower sales.

Therefore, we chose to approach the district foodservice directors instead of individual school principals, superintendents or school boards. The district foodservice directors controlled the cafeterias.

We also found we could negotiate cafeteria pricing on items we also sold in our machines. We successfully petitioned them to raise the prices on certain a-la-carte items to match our vending prices, which had to have commissions built into them.

PROMOTIONAL PRICING

We also offered to artificially increase pricing on items that were less nutritious but more delicious, to encourage the purchasing of healthier vending items. We were selling some items for significant profits because of this.

We wanted high schools as well as middle schools that had 500 or more students and did not have an open campus (students being allowed to leave the campus during lunch). However, we found that even smaller numbers could perform extremely well depending on income demographics and how much vending competition we faced in the cafeteria from bottling companies.

We chose to avoid direct competition with the bottler school vending programs. We did not seek to replace bottler machines (unless their machine quantities were excessive) but add to the mix with snacks, dairy and ice cream. We had no desire to buy any scoreboards for the sports departments or get into a bidding war with multi-billion dollar competitors whose corporate wallets waged war on behalf of corporate egos.

MAXIMUM PRODUCT VARIETY

We did not want to be another industry rubber stamp. We did not take advantage of any supposedly free vending machines from product suppliers who would limit our selections, thereby decimating our sales. We concentrated on how much we could make and not how little we could spend.

Many of us complain about equipment prices, but in reality they should always cost less than 8 percent of sales. Due to our high per-machine sales in our school accounts, our depreciation cost was incredibly lower than 8 percent. It really doesn’t take much additional variety to increase sales by 8 percent more than what we are limited to with a single brand machine.

We found variety to be incredibly valuable. Our refrigerated, glassfront, spiral-driven machines sold three price categories of milk, milk shakes, yogurt, string cheese, 16-ounce cider from a local orchard (a huge seller), fresh 100 percent juices in 10-ounce bottles, water, bagels with cream cheese, small cereal boxes (not the far more expensive bowls) and even a 12-ounce sports drink we purchased at very reasonable prices from a buyer’s club, along with the water, certain ice cream novelties, string cheese and soda cans for the teachers’ rooms.

We worked with every foodservice director in relation to nutrition limitations. We guaranteed them that offending products would not show up in their machines. Therefore, individual machine planograms were essential.

Our route staff was threatened with bodily harm (sure, it was a joke … but the point got across) if they ever violated the planograms. Our cooperative nutritional spirit developed into being awarded half a dozen school locations from the New Hampshire Healthy School Coalition for a 2-year test on nutritional vending in middle schools.

GLASSFRONT MAXIMIZES VARIETY

I understand I shouldn’t identify equipment manufacturers in a magazine that generates income from advertising. Let’s just say that we chose to pack the most variety and capacity into every glassfront. I only used glassfronts because they sold more product than any back-lit photo-front machine … by far!

I used glassfront dairy machines, glassfront snack machines and definitely glassfront ice cream machines. If I were to do this again today, I will definitely say I would avoid ice cream vending. The selection for ice cream novelties that satisfy the fat, sugar and trans fat limitations appears to be very slim. As we kept eliminating the top ice cream novelty brands due to nutritional restrictions, our ice cream sales plummeted dramatically.

We used locking outlet covers with plastic wire ties
so that administrators wouldn’t unplug our ice cream or dairy machines. We had no problems with the students doing this, just the principals and vice principals who
were offended by the slight volume competition to their delicate voices during cafeteria staff meetings. We used wire ties instead of little padlocks so as not to offend fire regulations.

We took advantage of a tray flexing feature from our preferred snack machine manufacturer. This allowed us to create more snack selections per tray, increasing the selections and capacity of our snack machines. We installed seven tray machines that could hold over $500 in retail product with a single fill.

When machines are being emptied every day to two days, this is a very real sales and productivity advantage. We would swap out augers to accommodate greater capacity for products that were top sellers.

GUARANTEED VEND AND $5 BILL ACCEPTANCE

We only used machines that offered a guaranteed vend system such as Sensit, Ivend or Surevend. We installed 5-tube coin changers in each machine so that we could always accept $5 bills and make change with dollar coins.

When we started this feature, our sales increased by an average of 6 percent. The $5 bills accounted for about 20 percent of the bill value we deposited each week. We were always pursuing the most money we could make, not the least money we could spend. Today, I would make sure the machines would accept $10 bills as well. You would be amazed at the money even middle school children carry around with them.

STORAGE AND TRANSPORTATION

Initially, we picked up used glass door refrigerated merchandisers for our warehouse cold storage. We were able to store about 700 cases of perishables in glass door coolers that had cost us less than $600. We were loaned two 8-foot chest freezers from an ice cream wholesaler, who also offered the lowest ice cream costs.

However, our trucks were another matter. I refused to transport perishables to our nation’s youth with Styrofoam containers packed with dry ice or chests with frozen plates and a tiny circulating fan.

We bought new 16-foot diesel box trucks. We had 6-foot, foamed-in-place, custom built refrigerated walk-ins installed in each truck. We had locked outside electrical connections so that we did not have to unload product each afternoon.

Yes, this cost a few thousand dollars per truck, to be expensed out over five to six years. However, this was a major selling point when it came to ensuring product integrity to safeguard the children.

One particular commercial advantage was that all of our beverages would be transported in this cooler, including water, juices, sports drinks and the perishables. We restocked our machines every day or every other day depending on volume. It was always pre-chilled drinks that were loaded. Our machines were frequently used immediately upon filling them. No one ever got a warm beverage from one of our machines because 100 percent of the beverages were pre-chilled on the truck. That would have been a real sales killer.

We racked up the refrigerated walk-in for beverages. We racked up the dry storage area for snacks and we installed an inexpensive, 15-cubic-foot chest freezer that ran off a 3,000-watt power inverter from the truck alternator to transport the ice cream. The freezer and big capacity inverter cost about $650 complete (four to five years ago).

COMMISSIONS ARE PART OF THE BUSINESS

Schools always need money. They never have enough. School vending cannot be offered without commissions. If that makes you nervous, you aren’t alone. My particular problem was that I refuse to lie … ever. Commission vending is like liar’s poker because vending sales audits are as rare as hens’ teeth.

We required audited sales. We didn’t offer it. We required it! At the beginning of every month our route staff would ask a school staffer to witness the non-resettable meter readings in each of our machines. They would initial or sign a form identifying the particular school, the machine category, its serial number and the meter reading.

They were free to make a copy at that time, but a copy of the witnessed audit would be forwarded to the foodservice director later that month with the district commission report and a check.

We showed the previous month’s audited amount on the report along with the current audited amount. We paid our promised commissions against that figure, less refunds and technician testing (if any). This was not only an incredibly powerful solicitation tool. It was impenetrable Kevlar against the aggressive sales solicitations from an angry competitor we repeatedly embarrassed with this program.

It quickly became standard procedure at our schools for the staff to expect to audit our machines. Everyone knew it and many participated. We were very respected because of our required auditing. Our competitors, with over-dramatized indignation, refused to ever audit their sales under any conditions.

Our pricing goal was to end up with a 42 percent gross profit after commissions were deducted from sales. We actually ran closer to 45 percent. Our dairy machine commissions ran from a low of 12 percent to a high of 15 percent of gross sales, depending on monthly sales totals.

Our snack machine and ice cream commissions ran from a low of 15 percent to a high of 20 percent of gross sales. When we replaced another vending operator (only about 35 percent of the time) our commission checks against our audited sales were dramatically higher, despite the fact that our promised commission percentage was without exception much lower.

We chose to use direct mail with an educational, slightly humorous newsletter format with a tear-off, postage paid, business reply card. This was very successful.

Anytime we wanted more accounts, we did a few hundred mailings, received back the sales lead cards, did our location research, made our proposals, closed the deals and installed the new equipment.

My company offers this direct mail program for vending operators anywhere in the U.S. looking to solicit the school market. These are colorful, quad-folded 8.5- by 14-inch mailers sent to the district food service directors in your service region with your personal contact information printed. We even offer the use of our Business Reply Permit or we will print it with yours.

Vending is just another retailing avenue. It is technology based and has a number of unique challenges but also offers unique opportunities. We simply have to understand that serving a wide range of industries and institutions will require some customization to draw out the greatest potential available in these different centers of opportunity. Schools are the perfect example. Go get’em, Tiger.

TALKING POINTS

- While schools have unique challenges for operators, they offer unique rewards as well.
- Foodservice directors understand the benefits that vending offers better than administrators and can be good partners in a successful vending program.
- Vendors must understand schools’ nutritional concerns and work with them; good products are available.
- State-of-the-art storage and transport equipment matters to school foodservice directors; vendors must be proactive in this area.
- Mandate machine audits; this will provide a win-win for both operator and customer.

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