HOW TO START AND RUN A SUCCESSFUL VENDING MACHINE BUSINESS || DONALD LUXAMA || EPISODE 087

The Code To Winning

Entrepreneur Donald Luxama shares his journey from college side husties to building a massive vending machine empire. He details the specifi

Key takeaways

• The 'Golden Rule' of vending is to never buy a machine until you have already secured a location.
• Ideal locations should feature seclusion, long hours (24/7), and high foot traffic with at least 40 people present.

Main topics

• Vending machine business fundamentals
• Location scouting strategies

Notable quotes

Don't buy the vending machine unless you have the location.

Conclusion

A practical guide for aspiring entrepreneurs on leveraging low-cost ph

Transcript preview

Speaker 1 (0:00) So I was a college student and I was doing so many different side hustles. So I was doing couch flipping, water bottle selling, furniture flipping. And then somebody told me along the ways, one of my business partners at the time, she was like, oh, there's a business that you could do that if you have for 24 hours, you can make a million dollars. And that was vending machines. And this was a time where nobody was really doing it. There was only like one person on YouTube. His name is Jaime Ibanez. He was the only person doing like vending machines. And I'm the type of person, if you give me an idea, I just jump right to it. I don't need a lot of time to think. I'm just like, let's go for it. And that's when vending machines started. I was like, okay, we can start a vending machine business. And Speaker 2 (0:29) I Speaker 1 (0:29) jumped right for it. If somebody were to start right now, Speaker 2 (0:32) what's the expected amount per week and per month they're going to make from that vending machine? Obviously, location plays a big factor. But on average, what would you say is Speaker 1 (0:39) the Speaker 2 (0:39) amount? So the Speaker 1 (0:39) average vending machine makes $200. a month $200 a month right that's the average vending machine location so I know some people be like oh my goodness you're not gonna get rich for one vending machine but the location that you get mad for I'm doing like a vending machine world tour so since January of last year I've been traveling around the world to meet vending machine business owners I met a guy, he had eight vending machines. He made a million dollars his first year. The location was a, it was a microchip plant. His name is Cozy Vending. You guys can see it on my channel. His name is Cozy Vending. He made a million dollars his first year. It was a construction site, 10,000 employees, eight vending machines. They were clearing out the vending machines twice every single day. So they're filling up the vending machines twice a day and they're setting up like tables and chairs and they're selling out. And then do you do it yourself or do you end up outsourcing other Speaker 2 (1:19) people to try and help and put the snacks and the vending machines? How does that work? Speaker 1 (1:23) So right now I do it myself, but the only reason I do it myself. It's just because of I make videos. That's the only reason I do it myself. If I didn't make the videos, then I probably would have outsourced it. But the videos are, every time I turn on the camera, I make way more money from just putting the snacks in, if that makes sense. But Speaker 2 (1:38) the thing is... The code to winning. Insights you need today to seize the world tomorrow. If you are curious in learning a bit more about the Speaker 1 (1:50) side hustle and business of Speaker 2 (1:52) vending machines, and I've been looking forward to this episode for a while, and this topic has been very, very interesting and very curious to learn about that as well. This is the episode for you. We have a gentleman right now in the studio that's going to be teaching and breaking down the fundamentals and the business side of owning your own. vending machine and accumulating passive income through that as well. So without further ado, the man, the myth, the very legend himself, we've got Donald Luxama. How are you doing, brother? How Speaker 1 (2:19) are you doing today? How are you doing? I'm doing amazing. Speaker 2 (2:21) Awesome stuff. Thank you very much. Thank you. Appreciate the time that you took to come in the studio. And like I said, I... I literally, I think I reached out to you three years ago, right? Yeah, Speaker 1 (2:31) I think I saw, yeah. I began bombarded with messages and stuff. Sometimes I'm like, how did I miss this? And I missed the opportunity. Speaker 2 (2:37) No, so we reached out three years ago, but then I was temporarily short time in New York. And then I reached out again. I'm like, because I typed in vending and I'm like, it's so curious because I've had so many conversations with people about, I think yesterday or two days ago, I was on the phone with you. We spoke about like ATMs and multiple different stuff. vending machines like i think this is not only giving me the first time i'm Speaker 1 (3:01) going Speaker 2 (3:01) to talk about this i want to talk about something else i want to do with you regarding that as well but let's just talk about like you know your very first vending machine when did that actually start for you so Speaker 1 (3:09) for me i started vending machine in college so i was a college student and i was doing so many different side hustles so i was doing couch flipping water bottle selling furniture flippings and then somebody told me along the ways um one of my business partners at the time she was like oh there's a business that you could do that if you have for 24 hours, it can make a million dollars. And that was vending machines. And this was a time where nobody was really doing it. There was only like one person on YouTube. His name is Jaime Ibanez. He was the only person doing like vending machines. And I'm the type of person, if you give me an idea, I just jump right to it. I don't need like a lot of time to think. I'm just like, let's go for it. And that's when like vending machines like started. I was like, okay, we can start a vending machine business. And I jumped right forward. And at the time right now, before I used to buy vending machines for like $500. But now like prices are going up, right? The easiest way to get your foot into vending right now, let's say you want to start like today right now is buying a vending machine route. A route is just basically a bunch of vending machines in a certain area on location. That's how I got like started, right? I bought that first vending machine for $3,000. And then the next deal, I bought eight vending machines for $3,500. Eight. Eight vending machines, $3,500. There was a guy, he was selling like 50 vending machines, 48 locations. And I asked him, hey, can I buy a piece of your company? It was like $50,000. At the time, I'm Speaker 2 (4:20) a Speaker 1 (4:20) college student. I'm broke. I don't have that much money. And I said, hey, can I break a piece of the route? So he ended up selling me eight vending machines, three locations, $3,500. And then a couple months later, I ended up selling one of those locations. It was an office with a factory building. I sold it for $4,000. And I got all my money back. Mind you, these deals kind of exist today. Still, you just have to basically work the numbers. But let's say I was brand new starting out my vending machine business today. I was going to go buy a route. That would be like the easiest way. But let's say that wasn't an option. I probably, you probably would need to spend about, I would say $2,500 to start your vending machine business today. That would include buying the vending machine. That would include finding the route. Because most people, like, if you're not going to buy the route, the best way I think is word of mouth. Word of mouth or you just buy the leads. Word of mouth is just telling all your family and friends, hey, I have a vending machine business. If your job or your workplace needs a vending machine, I could, I have vending machines and I could put them in. If you go find the location, it's easy to buy the vending machines. People are always selling vending machines for $1,000, $800, $1,500. You can always find a vending machine. That's the easy part. But the location is always going to be the hard part. Speaker 2 (5:26) And so with $2,500, how much would you say on average, if somebody were to start right now, what's the expected amount per week and per month they're going to make from that vending machine? Obviously, location plays a big factor. But on average, what would you say is the amount? So the Speaker 1 (5:39) average vending machine makes $200 a month. Speaker 2 (5:43) Okay. Speaker 1 (5:44) $200 a month, right? That's the average vending machine location. So I know some people be like, oh my goodness, you're not going to get rich for one vending machine. But the location that you get matters. I remember I was telling you before, I'm doing like a vending machine world tour. So since January of last year, I've been traveling around the world to meet vending machine business owners. I met a guy, he had eight vending machines. He made a million dollars his first year. The location was a microchip plant. His name is Cozy Vending. You guys can see it on my channel. His name is Cozy Vending. He made a million dollars his first year. It was a construction site. 10,000 employees. Eight vending machines. They were clearing out the vending machines twice every single day. So they're filling up the vending machines twice a day. And they're setting up like tables and chairs. And they're selling outside the vending machines. So location is going to play a big role in like the types of like the types of money that you're going to make. Speaker 2 (6:29) I Speaker 1 (6:29) always tell people more vending machines don't equal more money. It's better locations. So I'd rather have one location that makes me $1,000 a month than have 15 locations that I could barely scrape up like $1,000. Does that make sense? Okay. Speaker 2 (6:40) So obviously the average one makes $200. How many vending machines do you have currently right now? I have Speaker 1 (6:45) 10 vending machines, 11 vending machines right now. Speaker 2 (6:47) And what would you say is the average of each collectively? What's the average of the amount? So Speaker 1 (6:51) right now I'm making about like $30 to $50 every single day from those 11 vending machines. I just got a Pokemon one. That was kind of like brand new. Like I placed it like a couple of days ago. So that's going to be a little bit more because I'm selling the Pokemon cards a little bit higher than like my normal snacking, drinker, AI vending machines. Speaker 2 (7:07) Okay. No, that's fascinating. But now I think people are very curious into finding out like location wise. That's a very big, that's a big important part, whether it's like a school or a factory or a work site or barbershops, you know, like I. You got a nice feed right now. I Speaker 1 (7:25) got it for this. I got it for this. I got it for this. So I Speaker 2 (7:29) would assume all these locations are of utmost importance. How do you go about selecting a specific location for like placing a vending machine? Speaker 1 (7:39) Okay, so there's three things that make up a good vending machine location. Seclusion, long hours, foot traffic. You want the place to be secluded, meaning that there's not a lot of stores around the building. You want it to be open for long hours, 24 hours. Amazing, right? You don't want it to be seasonal. Those places that are seasonal, terrible, right? Depending on the location. Because, you know, schools, nine months out of the year, they're closed for three months. So you have to account for those three months. And you want it to have a lot of foot traffic. A minimum, I tell people, of 40 people inside the building for you to place your vending machine there. You want people to be able to see the vending machine as well. A lot of people, they have good locations, but their vending machines is tucked away in a basement that nobody has access to. That's why online, I'm always telling people. If you put your vending machines in like a teacher's lounge, I think it's a terrible location. You want the students and the teachers to have access to the vending machine. So if you have those three things, it doesn't matter what the location is. It just has to fall into those three criterias. Foot traffic, seclusion, and long hours. And you want a minimum of 40 people in the building. Not people that work from home. People that are in the building that are able to walk past and see the vending machine. Speaker 2 (8:39) Okay. And then with that, though, do you give them a specific? cut or a rental fee for them having your vending machine at the store? How does that work? I don't pay any Speaker 1 (8:50) commission at any of my locations besides the Pokemon one I got. The Pokemon vending machine was the only place I paid commission at that vending machine location. The guy wanted 20 % commission. But mind you, what I tell people, if you ever have to pay commission, you just adjust it back into the cost of the goods. So for example, let's say, for snacks and drinks, I don't pay any commission anywhere else. But let's say the guy wants 10 % commission and I'm selling chips for a dollar. Now my chips become $1.10 to count the cost of commission. Or maybe it'll be $1.25 for a year. So you just put the commission back into the cost of the goods. Oh, all right. So basically offset the commission. Speaker 2 (9:25) Okay. If Speaker 1 (9:25) that makes sense. But I don't pay commission anywhere else besides that Pokemon Venom Machine location. And for people wondering, like, Donald, Speaker 2 (9:31) how Speaker 1 (9:31) don't Speaker 2 (9:31) you Speaker 1 (9:31) pay any commission? Remember, this is a service. This is like a win-win situation for you and the business owner. It's not like something where I'm only winning. These locations, they don't want their people to leave the building. They don't want their employees or their customers to have to go outside. If you go build like a store for them, and this is when you're pitching or when you're doing like your cold calling, this is how you're going to pitch to the people. You're going to say, hey, I'm providing a store inside this building. I'm providing luxury for your people, right? I have a vending machine at a church. Church has late services. One in the morning, sometimes you're leaving the church. All stores are closed. I'm going to bring a vending machine that people don't have to leave. Like, these are the things that you're Speaker 2 (10:06) going Speaker 1 (10:06) to bring up to places. And I think most people, they shoot themselves in the leg because they're like, oh, I'm going to give you guys commission. Don't even bring up commission. The guy that I was going back and forth at the Pokemon vending machine location, he was like, oh, 50%, 35%. And I just keep reeling him in. Also, too, I have social media. I'm playing a different game from most vending machine business owners. Because I have social media, I'm able to make money from the social media. on top of make money from the vending machines. Because every vending machine business owner, I think the best vending machine business owners, they make money in multiple different ways. They don't only have their vending machines, they sell vending machines as well. They sell snacks, they sell routes. There's so many different ways you can make money inside of vending than just... placing vending machines at locations. There's some people, all they do is just find people locations. There's some people, all they do is they buy routes and then flip it for double the cost. So there's so many different ways to make vending. And the best vending machine business owners that I know, they play multiple games at the same time. Speaker 2 (11:02) And is that where you at, at the moment right now? Do you sell vending machines? Speaker 1 (11:06) Right now, like I have like, I work with like distributors. Okay. So I let the distributors do that. Okay. Speaker 2 (11:12) Sorry, continue. Speaker 1 (11:13) Yeah, I just let the distributors do that. And then let's say I have some extra vending machines, I may sell on the side too. So that's what I do. Speaker 2 (11:18) Now, the interesting part is location obviously is important. Do you have to be, what's the close proximity miles you have to be close to your location? Because I mean, you're putting the stuff in for each vending machine that you're doing, right? Speaker 1 (11:30) Yeah. It depends what you sell in your vending machines. Because remember, vending machines are only snacks and drinks. I've seen ammo vending machines. You guys talked about the Pokemon vending machines. In Ohio, I met a guy that had vape vending machines. He had it in two different states. I met a girl. She had Lash vending machines across the country. Speaker 2 (11:46) So Speaker 1 (11:47) the stuff that you put in is going to matter, right? I'm going to do a series soon where I want to put a vending machine in every state. That's going to be kind of like a crazy little idea I had. But when you're starting out, I think it should be an hour proximity from every location. I met a guy when I was first starting out my vending machine business. He said that he gets vending machine locations all over because they might connect in an area. So let's say you get a vending machine very far out and then you get another vending machine that's pretty close to it. So now like over time, like your vending machine route was going to start to grow. But I think you should just focus on having the best locations in a one hour proximity to each other. Speaker 2 (12:20) And then do you do it yourself or do you end up outsourcing other people to try and help and put the snacks and the vending machines? How does that work? Speaker 1 (12:26) So right now I do it myself. But the only reason I do it myself is just because of I make videos. That's the only reason I do it myself. If I didn't make the videos, then I probably would have outsourced it. But the videos are every time I turn on the camera, I make way more money from just putting the snacks in, if that makes sense. Okay. But the thing is, the biggest problem that people have when it comes to like outsourcing is they're scared people are going to take their money. And this is why AI vending machines come into place. AI vending machines are really cool because there's no money involved. It's cashless. So all you have to make sure is that the product gets inside the vending machine. This is why, like, I'm thinking I could do it across the country because all I have to do is make sure that the snacks get into the vending machine. I don't have to handle maintenance. I don't have to handle money getting taken. It's less. It's more safer with the AI machines. Speaker 2 (13:13) Yeah, but then how would the AI work in terms of the merchandise and getting the snacks continually available for people? Because sometimes you see a whole screen and you do an Apple, but I use... hardest for everything you know that's why i constant in walmart like they don't like and the walmart Speaker 1 (13:28) apple i know i just went there and i was like where's people paying walmart so sometimes i've been seeing an aldi and i see walmart like i needed walmart but you know all these got like apple but Speaker 2 (13:37) like um because that's where the future is heading so how do you end up like making sure you have enough stock all the time if with an ai okay so Speaker 1 (13:44) there's inventory management so it tells you exactly what's inside your vending machine and shout out to vendera because