3-Prong Attack in S. Florida: Vending, Water, OCS

Aug. 15, 2007
Today’s state-of-the-art vending equipment offers exceptional product quality.

Today’s state-of-the-art vending equipment offers exceptional product quality, variety, and reliability. For an entrepreneur who knows what he’s doing, the new equipment offers a better opportunity than at any time in the industry’s history.

Andy Kartiganer has been involved with vending from childhood; his father operated a vending business in Poughkeepsie, N.Y. While Kartiganer’s career has taken many twists and turns over the years, he eventually returned to his roots and is deeply committed to vending.

In 2000, he launched his second vending business, Professional Vending Services Inc. in Deerfield Beach, Fla., near Fort Lauderdale. He is more optimistic then ever about the future of vending.

The company, now in its seventh year, offers full-service vending, coffee service, water coolers and paper goods, and has experienced double digit growth every year.

The caveat, as stated above, is that Kartiganer knows what he’s doing. Having recently turned 50, he brought an extensive business background to refreshment services, and he has made his share of mistakes. “I have learned through the school of hard knocks,” he said. “If there’s a mistake to make, I’ve made it.” Everything he has done has honed his expertise and commitment to refreshment services.

With three and a half routes, the company has carved a niche for itself in the Fort Lauderdale market, focusing mainly on automobile dealerships. Most of the locations are equipped with snack and soda machines, single-cup coffee brewers and point-of-use water coolers.

Spend time with Kartiganer, and his enthusiasm for his business spills forth. He is personable, articulate, and a compulsive story teller. Being a total “people” person, it’s easy to see he’s comfortable managing people and selling his service.

A long path to vending

While his father was successful in vending, Kartiganer wasn’t always sold on vending as a career. He earned a business management degree at Farleigh Dickinson University in Rutherford, N.J., after which he took a series of management jobs in several industries. After a few years, he went to work as director of operations for a restaurant franchisor, All American Hero.

Kartiganer spent four years opening All American Hero sandwich shops in shopping malls throughout the U.S. in the mid 1980s. Then he got the urge to own his own business, and bought three restaurants in shopping mall food courts.

Kartiganer found that being a business owner was a lot different than being an employee, and he found himself challenged managing finances. He sold the restaurants to relieve himself of debt.

First vending business: bulk vending

His exposure to shopping malls familiarized him with an up and coming business: giant bulk vending machines, which were being placed in shopping malls. He decided to try the bulk vending business.

Working by himself, Kartiganer placed giant gumball machines in supermarkets, game rooms, and eventually highway rest stops. This was a lucrative business, but very competitive. Bulk vending is highly commission driven and many customers do not place a premium on good service. When someone unexpectedly offered to buy the business three years after he started it, Kartiganer sold it.

Remembering his father’s success in full-line vending, Kartiganer decided to give it a try. He purchased two locations – a car dealership and a detention center – from an operator in South Florida.

His initial luck was good; the car dealership quickly opened three new locations and the detention center asked him to service a “canteen,” a retail shop where inmates purchase consumable goods using credit vouchers. The detention center also opened additional locations.

An auspicious beginning in full line vending

The early 1990s was also a good time to be getting started in a service business in South Florida. The area was growing rapidly. Kartiganer was able to find locations for snack and soda machines without too much difficulty. He knew the importance of providing good service from his father and from his own business experience.

But finance continued to be an issue for him. In four years, he was doing more than $300,000 in sales, but he was carrying a lot of debt.

In 1999, a competitor once again made him an attractive offer, and Kartiganer again sold the business.

Relieved of his debt, Kartiganer took some time off before thinking about other business possibilities. He had investment capital from selling the company.

He was aware of the countertop, single-cup coffee brewers that were being introduced in many offices. He reasoned that offering single-cup brewers in conjunction with vending made good business sense. In his mind, there was a natural synergy between the two.

“I knew I really wanted to do the coffee,” he said. Crane National Vendors had just introduced the Crane Café line. “Right away, I saw that it was a really strong coffee center,” he said.

New approach: water, coffee and vending

Kartiganer reentered the vending business in 2000, but with a new plan. He would offer OCS and water coolers along with vending machines. He invested in new equipment and a new box truck.

By offering OCS and water service with vending, Kartiganer reasoned, he offered a greater value to the client. “I try to get as much as I can,” he said.

South Florida was and is a highly competitive vending market, but Kartiganer found that by offering coffee and water systems along with vending, he had more leverage with customers. He could offer to barter the coffee if the customer agreed to little or no commission on the vending, and/or higher prices in the machines. “In order to be successful, you have to package,” he said.

The water, like the coffee, gave him some flexibility with customers. In some instances, he offers free water service for three months as a bonus for signing up for the vending. He began with a point-of-use water system that includes a stationary, self-filling bottle, but switched to one that offered hot water in addition to cold water.

Kartiganer offers a no-obligation, 30-day test for his equipment. There is a minimum installation fee, refundable after 12 months. He does not believe in location contracts.

Single-cup brewers lead the growth

The Crane Café System 7, while costlier than traditional OCS brewers, was a great selling tool in South Florida offices.

However, he soon switched from the Café Systems to Brios and Colibris from Zanussi. These single-cup systems feature bean grinders. “The bean grinding means a lot to people,” he said. “I’m giving you the freshest cup of coffee you can get.”

The Brios and Colibris have been especially competitive against the cartridge-based single-cup systems. Kartiganer said the Brios and Colibris can provide a cup of coffee for 20 cents or less, which is highly competitive with the cartridge-based systems. “Price is always a forefront issue; if not today, in two months, it will be,” he said. “We always win because of the choice in the product and the ability to keep it economical.”

Kartiganer gives customers the option of using dairy and non-dairy cream in the coffee machine. He lets customers choose the creams, and most opt for the non-dairy on account of the price.

The Brios and Colibris also offer the advantage of not requiring any particular type of coffee, unlike the cartridge-based single-cup systems. “We’ve tried to leave choice to the customer and give as much choice as possible,” Kartiganer said.

Kartiganer typically offers several different coffees, showing price per cup and per pound.
He gets his private label coffee beans shipped the day after they are roasted. He finds that many customers are interested in learning about coffee. “I try to sell customers with little stories,” he said. “The longer the conversation goes, and the more interest I retain, the more I know I will win this customer. Product knowledge and pricing are critical to closing our deals quickly.”

Innovation: OCS coffee cart

Kartiganer is always on the lookout for a way to distinguish himself. Several years ago, a salesman knocked on his door with a coffee cart, consisting of a wood paneled kiosk on which a coffee machine sat, with a decorative header. Kartiganer reasoned that he could build such a unit himself that would display the single-cup brewers in a better way.

He knew a carpenter, and he asked him to build a cart based on his own design using maple wood. The cart features a tall, octagon-shaped dome that can also hold a DVD player with a flat, 15-inch screen. “I want to catch people’s attention,” Kartiganer said. “It will make them notice and drink more coffee. If you don’t do something innovative, what differentiates you from them (the competition)? We’re not a vendor with blinders. We’re trying to be innovative. We want to make it more than just vending.”

The coffee cart he designed has become popular with many of his auto dealers, and in some cases, it has won him accounts. Some locations have used the DVD player to promote their products and services. In some cases, he customizes the maple finish to the customer’s interior.

Kartiganer developed a Website that displays the coffee carts, www.coffeecartsusa.com.

Kartiganer has purchased all of his own equipment rather than getting bottlers’ equipment for free. This has proven beneficial in recent years as the soda suppliers have become very competitive in vending in his market. Vending operators that use bottler-loaned machines have found they are being forced to pay higher prices for beverages by bottlers who are often vending the same products at lower prices.

Kartiganer uses mostly “live display” cold drink machines that vend both cans and bottles. He prefers these to the glassfront machines. He acknowledges that the glassfronts generate more sales, but he has found they are easier to shake. He has also encountered some mechanical issues with them.

Internet helps win business

The Internet has played an important role in Kartiganer’s success. When he reentered the business in 2000, the Internet was just emerging as a business marketing medium. He noticed that not many vending businesses were advertising on the Internet, so he saw an opportunity to gain a foothold on the World Wide Web.

“I took my sales brochure and I mirrored it on the Website,” he said. The Website describes the services, the equipment, the 24-hour response company policy, and includes color pictures and specifications of the equipment.

Fortunately, he had a friend who was knowledgeable about getting good visibility for his Website on Internet search engines. When a prospective customer inputs the words “Vending South Florida” in a search engine, Professional Vending Service’s Website is usually among the first sites listed.

“At the time I started, most people (operators) didn’t know what the Internet did,” he said. “They didn’t know how to really tap it.”

Getting good visibility on search engine listings is a specialty in itself. Internet marketing professionals are adept at coming up with listing phrases that get good results.

Kartiganer launched four different Websites to advertise his company. He was able to get at least two of his Websites highly ranked on the main search engines. “If you’re not on page one, you might as well be on page 1 million,” Kartiganer said.

Once the Websites were launched, Kartiganer got inquiries from businesses looking for refreshment services. He averaged 1,100 hits a week and two to five phone calls per day.

“Information is important,” Kartiganer said. “It’s easy for me to tell them (a prospect) everything (with the Website). Most of the time I’m talking to you, you’re looking at my Website. Usually, we iron out the deal then and there.”

Having good verbal skills is especially important when talking with prospects on the phone. “You have to hear their questions and answer those questions and allow them to think and see everything,” Kartiganer said. “If you’re hemming and hawing on the phone, you’re going to have a problem.”

In recent years, Kartiganer said more vending and OCS companies have become Internet savvy.

He tried paid advertising on Websites, but did not find it to be useful.

An auto dealer specialist

From the beginning, Kartiganer focused on car dealerships, serving both employees and walk-in traffic.

Once he had a few dealerships, he had more credibility with other dealerships. He marketed himself as an auto dealer vending specialist.

Most of the dealerships did not require food machines since there are many food options available, Kartiganer said, such as mobile caterers.

Two years after launching the business, one of the auto dealerships asked if Kartiganer could also provide paper products. He sourced paper products at an OCS distributorship and a membership warehouse club. This has proven a profitable part of the business.

Finding good employees

In six months after reentering the business, Kartiganer had 12 customers. While he could easily have served these accounts alone, he hired a full-time driver who he trained so that he could focus his time on sales.

He hired his second driver after one year.

Kartiganer pays his drivers straight salary in addition to free lunches, paid 1-week vacations after one year that extend one day for each additional year, monthly savings bonds and paid holidays.

He gives each driver a cellular phone. He instructs them to tell the customer that they can call him (Kartiganer) directly at any time they wish.

Finding good help is as challenging for Kartiganer as anyone. He has screened about 35 applicants for his driver positions. “Vending is a very funny business,” he said. “One wrong word or a bag backwards (in the machine) will have ramifications. I want my job done perfectly.”

It takes an average of about four weeks to train a driver to service vending machines. It takes a bit longer to train them to service the single-cup brewers.

By the end of his third year, Kartiganer decided he needed some help with sales. He realized this was a more demanding position, and he did not have the funds to hire an experienced person. Fortunately, he had an acquaintance – Jackee Shields – who was working as a waitress and was willing to come on board on a commission basis.

Shields, like Kartiganer, is a good verbal communicator and was successful at bringing in new business. She has become operations manager, continuing to handle sales, but she also acts as the route supervisor.

Investing for future growth

The company recently moved into its own condo warehouse in an industrial park.

The trucks are loaded by the warehouse staff every night, except for the soda. The drivers are given a list of what soda to take, and they load it themselves.

“When they’re out in the field, they don’t have to think much, they just have to ‘do,’” Kartiganer said.

Drivers record machine meter readings and collect cash.

Like most operators, Kartiganer has struggled with prices, which have increased dramatically and with greater frequency in recent years. He has not had success with large single-serve products.

Instead, he has his eye on more gourmet type snacks. “In the market lately, there has been a proliferation of items that should go for a dollar,” he said.

He continues to get more requests for healthy snacks, but he does not see these products as great sellers. He has tried soy-based chips and 100-calorie packs. Most of these items require a higher selling price than other products, and they do not sell as well. He tells customers that he stocks the products that sell, and that he will test what they request, but will only restock it based on sales.

To get customers to agree to higher prices, he provides them with copies of letters from suppliers and articles from publications.

The soda and candy costs have increased the most recently, and these are the hardest items to raise prices.

He is trying to move his can soda from 60 cents to 75 cents, and his bottles from $1.00 to $1.25.

Fortunately, the coffee, water and paper segments continue to be profitable. “I’d hate to be just a vending operator in today’s market,” he said.

The rising fuel prices have recently caused some drop-off in the business. In addition, the economy in South Florida has suffered from rising taxes and insurance costs.

Goal: market dominance

Kartiganer’s goal is to become a dominant player in South Florida. He recently was named to the board of directors of the Automatic Merchandising Association of Florida.

He has considered buying other vending companies, but he has not seen any that would be a good fit. Most of the operators looking to sell have too much older equipment.

In order to grow, he realizes he may need to add more employee benefits, such as health insurance. His existing employees all happen to be covered through their spouses. He has a retirement plan; a savings bond that employees receive for free every month.

Kartiganer loves the business. One thing that’s special about vending is that an operator can experience genuine gratitude from a customer. This was something he seldom experienced in the restaurant business.

He also likes the challenges. “Every day is a new day,” he said. “There are a lot of challenges in this business.”