Independents Say Management Firms Create Inequities

Being a medium-size independent (five to 20 routes) has never been easy, but recent developments involving vending management companies and possible purchasing inequities have squeezed the medium-size independent even more. As a result, many medium-size companies, which have traditionally prided themselves on good service, are seeking help from the established buying cooperatives, but wonder if the benefits they have long received from these organizations will be sufficient.

In the past few years, the competitive pressures have increased to the point that many medium-size companies fear they cannot remain viable. Many envision a future populated exclusively by extra large operations and very small companies. This, they claim, will be a world that will not offer customers the choices they have historically enjoyed and could possibly undermine the vending industry’s reputation for professionalism.

The forces contributing to this scenario have been many years in the making. Rising operating costs, more competition from alternate retail channels and a stagnant customer base have attacked the profitability of all sizes of vending operators. However, medium-size players note that the extra large companies enjoy the benefits of volume purchasing while the very small companies reap savings from reduced overhead.

A MORE UNEVEN PLAYING FIELD?

In recent years, many medium size operators have complained that the playing field has become even more unfair since the largest management company, Best Vendors Inc., was acquired by Compass Group, which owns the largest vending operation, Canteen Vending Services Inc., late in 2003.

This is not the first time that a vending operation and a vending management company have shared ownership. There are several other examples. This case is different, mainly in that the largest vending operation and the largest management company are owned by the same company.

It is also different in that in the Canteen/Best Vendors scenario, the service company is an active player in many of the same markets that the management company serves. This is not the case for all other operator/management company arrangements.

Several operators have claimed that due to its affiliation with Best Vendors, Canteen has been able to entice more independent operations to become Canteen franchisees, thereby further strengthening its market dominance.

VENDOR/MANAGEMENT COMPANY RELATIONS NEVER WERE EASY

Vending operators have long complained that vending management companies do not serve the interest of the vending industry.

Automatic Merchandiser, in querying operators nationwide on the role of management companies, found that some of the issues involving Best Vendors apply to vending management companies in general while others pertain specifically to the Best Vendors/Canteen relationship.

The role that management companies play varies depending on each individual market. The impact on operator competitiveness varies considerably, and there are few generalizations to be made nationwide.

Vending operators have long recognized some of the benefits that management companies offer in addition to the disadvantages. Management firms, by securing contracts with regional and national accounts with multiple locations, can provide a vending operator with many accounts very quickly.

Automatic Merchandiser has profiled several operators over the years who have claimed that management companies helped their business grow quickly. Some also noted that management companies offer a small company their only chance of servicing a national account.

The immediate downside here is that the operator can lose the accounts as quickly as he or she gains them. One operator in a big metropolitan market who was praising management companies 10 years ago has since stopped doing business with them altogether.

NEGATIVES OF MANAGEMENT FIRMS OVERSHADOW POSITIVES

The downsides of management companies have always outnumbered the upsides for most operators. The management company stipulates pricing, commissions, product mix and oftentimes the specific equipment to be installed.