Elements of the 'vending subcontract'

For a period of 90 days prior to the expiration of the term of this agreement, the Contractor agrees to negotiate in good faith and exclusively with Sub-Contractor for a new vending services agreement. After the exclusive negotiations period, Contractor is free to negotiate with any other party. However, if Contractor receives an authentic offer from a third party for a vending agreement, the Contractor will notify Sub-Contractor and give Sub-Contractor 30 days to come to terms with Contractor which are no less favorable than those of the competitive proposal.

This can be a difficult clause to understand. It means that 90 days prior to the end of term, a renewal may be negotiated between the parties. Then, if no agreement is reached, the contractor can seek a different subcontractor. If the contractor finds a better offer, the existing subcontractor has 30 days to improve his terms to keep the contract.

The pouring rights agreements held by bottlers in accounts you serve do not exactly constitute subcontracting, however, you certainly do have someone between you and the location owner. When an operator recently offered an energy drink in the snack machine in response to a student request, he was quickly notified that the drink is a beverage. Don’t even think about trying to sneak a few selections of Red Bull into the food machine.

Such contracts will also prove useful when vending operators serve as subcontractors for vending management companies.

Vending management companies promise to make the location owner’s vending program more profitable than a traditional operator can by doing the following:

• Making sure the most optimal mix of equipment and latest technology exists at every location.
• Negotiating the highest possible rate of commission return on behalf of the location owner.
• Solving service issues quickly; no out-of-order equipment or empty columns.
• Micro-managing the collections so the location owner gets the correct commissions, on time, with no “R” factor.

I find it interesting that some vending operators complain loudly that they lose money on subcontracts that are unfairly structured, after voluntarily signing on for the job. Either they did not complete the necessary pro forma, didn’t read the contract, or they thought they could work the deal up once they got it. All of the foregoing are poor business practices.

Everyone would like to deal directly with the location owner and skip the middleman. That aside, there are many more success stories than failures in subcontracting. It can be very good business if you approach it with your eyes open.

About the Author

Tom Britten, NAMA Knowledge Source Partner, is, an analyst, intermediary and professional consultant with more than 30 years of industry experience. He functions as a full service resource available to all vending, OCS and food service companies large and small. Contact Britten Management Services, LLC for a free, and no obligation consultation at 813-469-5437 or via email: tombritten@msn.com.