ANAHEIM, Calif. - The steady increase in the number of work-places too small to support traditional full-line vending service represents a challenge for the industry. A panel session at the recent National Automatic Merchandising Association Western Expo provided an overview of the continuing search for solutions.

The workshop was moderated by Bob Purdy, LOBO VENDING; panelists were Peter Caragher and Mara Walker, Caramar Enterprises (Willits, Calif.); Ed Kline, United Vending Group (Minneapolis, Minn.); and Mike Kenefick of Savamco. Caragher and Walker got into the vending business by purchasing a route, and have built it into a successful operation specializing in lower-volume locations.

Purdy led off by asking the audience for definitions of a "small" location. Answers ranged from "one to 100 people," "fewer than 20 people," and "gross sales of $100 per month or less" to "it depends; you have to look at dollars not bodies."

The moderator agreed that different operating companies will have different definitions, and asked panelists Caragher and Walker for theirs.

"There really is no one definition," Caragher replied. "It depends on geography and on other factors."

"You have to look at the money," Walker explained. "You can have a location with 75 employees that does nothing, and another with five people that makes $150 a month."

Kline, who has operated both "honor-box" snack and small-location vending businesses, suggested that average gross sales represent the most reliable definition. He regards $120 per month per machine as a practical starting-point, and observed that this kind of volume tends to be generated by workplaces with employee populations of 50 or fewer (perhaps far fewer, as Walker had pointed out).

An audience member asked Caragher and Walker whether, if they could start over, they would start again by buying a route rather than building one from scratch.

"Yes," Caragher replied. "If you can buy a going business, you get off to a fast start. It's also a good way to expand."

Another seminar participant observed that, faced with the opportunity to add a location that will gross $30 per week, the decision to say yes or no will be based on the products that its population desires.

"Sure," Kline-concurred. "You have to look at shelf-life and margins and other factors. Ask them what they want, and find out what they'll consume. The larger your customer base becomes, the more flexible you can be."

Kenefick added that geography also is an important consideration; "a location that fits efficiently into an existing route can earn less and still be profitable."

"Right; a contiguous account can be smaller," Kline agreed.

Caragher noted that actual consumption almost always is different from the operator's initial estimate and the client's prediction, so it is best to install the smallest practical machine at the outset and watch its sales. "Then upgrade if you have to," he recommended. "But start small and build up."

Another important consideration is that a small location may be profitable if the operator is not required to pay a commission, but unprofitable otherwise, Kennefick added. "Also, a workplace that wants vending may be willing to participate in some kind of cooperative service, for example loading the machine," he said.

Kline agreed that this receptivity to mutually beneficial arrangements is a great virtue of smaller locations. "They are ignored by large operating companies, but they want vending service, and they want a good choice of products," he emphasized. "The machine you install in such an account may not be vending equivalent of a Mercedes, but it can work well."

An audience member explained that he is a bulk vendor interested in expanding. "I can get the machines," he said. "But I want to know how I can run a small-site business in such a way as to be able to afford someone to stop the truck."

"Fill the machines yourself," Walker suggested.

"I know; but you can't keep growing that way," the operator observed.

If there is an answer to this dilemma, it lies in the profitability of each account, Purdy and Kline suggested. They consider mechanical venders to be a good choice for many small sites, but advise against the countertop variety with seven to nine columns; these are so small that they require too frequent service, and offer insufficient variety. Kline considers a 27-select, 54-in.-high candy/snack machine and a small eight-select cold canned drink vender as a good solution for many typical small sites. In his experience, one can service these machines three times a month - every ten working days - and net $7 to $9 per machine.

Obviously, it's important to maximize machine usage when there are relatively few potential users on site, and the way to do this is to interact with customers so that they know their tastes are being taking into account. "Use questionnaires, asking account personnel what they want, and what they like and dislike about your service," he recommended. "You won't always like the honesty of the replies, but do it, and use the information you receive."

An audience member suggested that a good way to establish the initial machine load plan is to leave a menu with the account prior to installing the vender and follow it when loading the machine upon installation.

Another seminar participant explained that he has 1,500 coffee service accounts, and just under half of them appear to meet the criteria for successful small-site vending. He wanted to know the best way to expand into vending, to meet that market: "Should we start with 'honor boxes' or buy an existing operation?"

"You're in a really good situation," Kline replied. "I wouldn't advise getting into the 'honor box' business - and I speak from experience. We were able to keep our 'shrink' to less than 20 per cent, and there is a lot of money in it; but it's a pain in the neck. It takes a lot of training and psychology. I'd lease vending equipment, and go for it."

"What can the legitimate vending industry, and NAMA, do to police those '1-800-GET-RICH' guys?" a convention-goer asked. "I survived that, and there has to be a better way."

"No one can do much more than provide information; NAMA state councils, the association's website, and our LoBo website are sources for that information," Purdy answered. "But you certainly do see a lot of 'blue sky' on the Internet."

Kline added that NAMA is not in a position to enforce the law, so the problem is not one with which the association can deal. "It's the Federal Trade Commission's problem, and your state's Attorney General's problem," he emphasized. "Work with them."

Caragher offered a simple guideline: "Don't call 800, or 900, numbers! But, if you can, talk directly with a local person."

Purdy added that the federal government has been taking determined action against promoters of fraudulent get-rich-quick vending schemes. "They've put more than 300 out of business, and about 30 people have gone to jail," he reported.

An operator in the audience reported that he has been growing in small-site vending, building a business based on contiguous locations and working three days a week at the outset. This is increasing to a full five days a week. "And everyone tells me, 'Get into coffee service; it's more profitable.' Should I do that?"

"Sure," Kenefick replied. "And it will help lock in your accounts."

Walker concurred. "If you're already in there, put in everything you can," she recommended.

"And, if they already have an OCS, you can ask how well they like their present service," Caragher added.

Kline added a word a caution. "You can't get a pizza or a taco at McDonald's; no one can do everything," he pointed out. "Coffee service is very competitive, unlike small-location vending - although soft-drink bottlers have found out about small-site vending, and they can give you a fight. Coffee service can be good, but you have to learn the business, and you have to know how to fight."

"Where can I get an all-mechanical vender that people can't steal from?" another conference-goer asked.

"You can't," Walker emphasized. "They're not suitable for installation everywhere."

Kline and several other audience members recommended working with management to solve security problems, the basic premise being "We like you, but…"

"Right," Purdy agreed. "If the location won't help you protect your profit, what are you doing there?"