01 May Phoenix area Newbies Use Telemetry To Gain School Clients
Mike and Jodi Glimpse didn’t know much about vending when they decided to get into the business in 2005. Hence, the Phoenix area, Ariz. husband-and-wife team made some mistakes that a more experienced pair would have avoided.
At the same time, not knowing what to expect allowed them to take on accounts that many experienced operators would have shied away from, such as school accounts with strict nutrition requirements.
Today, their company, Camelback Vending, is one of the fastest growing vending operations in greater Phoenix area. The company has taken a leadership role in serving education accounts with some of the most restrictive nutrition rules in the country. Camelback Vending also uses remote machine monitoring on all of its machines, an investment that many more experienced operators would not have made. As a result, the company has been able to offer a higher level of service than many of its competitors.
It has also given them the ability to operate more machines with fewer routes than in a traditional vending operation.
Hanging on the wall in their office is a quote from Steve Jobs, founder of Apple Computer, “Stay hungry, Stay foolish.”
Mike and Jodi Glimpse, who are in their mid 30s, have proven that vending continues to offer a viable business opportunity to committed entrepreneurs, thanks to the new innovations in both products and technology. They are on track to achieve their 5-year goal of $5 million in revenues.
NOVICES IN VENDING, BUT NOT IN SALES
While they were new to vending, the Glimpses were accomplished business people, and they brought a high level of business savvy when they bought a small route back in January of 2005.
Each of them spent close to 15 years at Cutco, a cutlery manufacturer that sells direct to consumers nationwide. The Glimpses met each other while working for Cutco during college.
Mike was already a division manager overseeing 49 Cutco offices before he was 32. They were making good money and were on track to retire by the time they reached 40, but Mike wanted to spend less time traveling and more time with Jodi and their three young children.
Like many young couples in their position, they began looking for ways to make money that would allow them to have more time at home.
FORAY INTO VENDING BEGAN WITH BULK MACHINES
In 2001, Jodi came across a bulk vending business opportunity at a local home show. She decided to invest $50,000 to buy about 150 U-turn machines. She placed 40 machines in three months, each of which averaged about $25 in monthly sales. In one year, she was up to 130 placements, and was netting more than $30,000 annually while only working one day a week.
At this point, Mike decided to leave his fast-paced executive role as well. They reasoned that the bulk vending business would allow a sufficient income if they could place 2,000 machines. They had the capital to cover the investment, and the sales skills to achieve the placements. The downside was they would have to hire people and then trust them to collect the quarters.
After further research, they learned that full line vending machines have electronic meters and therefore provide better accountability. They decided to try full line vending.
They hooked up with a locator who promised to help them get their business off the ground. Working with this locator, they invested in some glassfront snack machines and were able to get some placements.
ONE STEP AT A TIME
It didn’t take long for the Glimpses to decide they didn’t need the locator. Instead, they hired one of Mike’s office managers from Cutco, Amanda Salazar, as a telemarketer to line up sales appointments. “Our saving grace was that we had capital to cover up our mistakes,” Mike said.
They began picking up accounts slowly, placing snack and soda machines. One day, while picking up product at Vistar, Mike saw a notice for a small ice cream vending route for sale on the bulletin board. He didn’t know much about ice cream vending, and after talking with some colleagues, he was unsure whether or not this was a viable business.
On further investigation, he learned that the route served an exclusive territory for M&M’s ice cream machines, which included some large retail stores and an air force base. The route included some M&M’s candy machines as well. Mike visited the owner’s operation in Columbus, Ohio and rode on a route to learn more about the business.
With the ice cream accounts already under contract with some locations and the affiliation with a well known brand, Mike reasoned that it was a good opportunity. “We had to have something to latch ourselves onto,” he said. “That’s what helped us get in the door to a lot of places; it gave us instant credibility.”
One thing that the Glimpses had going for them at the outset, in addition to strong sales experience and a fair amount of capital, was confidence in their ability to grow the business quickly.
The couple was willing to invest in technology at the outset. They realized that software would be important for managing vending routes, and asked an industry contact for some references. They were put in touch with Cantaloupe Systems.
They outfitted some of their machines with Cantaloupe’s SEED units on a test basis, and were pleased by the results. They were particularly concerned about being alerted in a timely manner about machine malfunctions since ice cream melt downs are very costly. Cantaloupe’s telemetry provided this ability.
The ability to determine machine inventory needs based on real time machine audit was another obvious benefit. Many of their accounts were spread out across a large geographic area. Hence, return on labor is especially important.
Cash accountability was still another benefit they saw. The SEED unit is constantly pushing data, which includes how much money is in the machine at any given time. This information is relayed via cellular signal to the main computer, which allows the office manager to compare the cash audit against the cash collected at the end of the day.
A SENSIBLE INVESTMENT
The investment in outfitting the existing machines with Cantaloupe was hefty for the small company, but the Glimpses didn’t question the benefits of having all of their machines sending data wirelessly to their desktop computer. “I thought it was a great idea,” Mike said.
The Glimpses had no idea how fortuitous their timing was when they made the commitment to install SEED in all of their newly-deployed machines. Their small business was about to expand quickly, and with the efficiencies afforded by the SEED units, they were destined to expand in a cost efficient manner.
Each day, the Cantaloupe system gives them the amount of product needed to fill machines to par level when serviced. Since the schedules are made at the end of the previous day, it is sometimes necessary for the driver to make an adjustment to fill to par level when he opens the machine. This hasn’t been a problem for Camelback Vending; the driver simply notes the adjustment and reports it.
SCHOOL ACCOUNT BECKONS
Soon after buying their initial route, the Glimpses got a call from a school district that was having service problems with its ice cream vendor. This added another 10 machines to the existing 20-machine route. They selected the multi-selection Fastcorp machines. Jodi serviced the machines herself. At the end of the school year, the school district asked Camelback to bid on the snack machines in addition to the ice cream machines.
In 2006, many Arizona school districts were adopting the “35-10-35” nutrition standard, requiring products that are less than 35 percent fat, less than 10 percent saturated fat, and less than 35 percent total weight in sugar.
A NICHE EMERGES: SCHOOLS
The school district noted that its existing vending provider was not eager to meet the new standards. The Glimpses did some research on available products, and determined that there were enough snack items that could meet the standard. They won the contract, which covered 60 machines in 10 different campuses. In addition to snack machines, they provided milk and ice cream machines.
“That was our first big jump,” Mike said.
He noted that there are sufficient selections in all types of products to meet the nutrition rules. In the ice cream and milk machines, there are products with reduced sugar content. The milk machines also carry some teas, waters and sports drinks.
Most school locations include a closed-front snack machine in addition to a glassfront snack machine. They were able to get dedicated, Frito-Lay branded, closed-front machines made by Fastcorp at no charge from PepsiCo Foodservice. These are great in high volume accounts, Mike said. “We can extend our service (for these machines) by two to three days,” he said.
Many of the milk machines were provided free of charge by Shamrock Farms.
Other vending operators serving school accounts claim that the nutrition restrictions have decimated sales, but the Glimpses had nothing to compare it to. For them, the results were favorable.
MILK PROVES BENEFICIAL
For most of the school locations, the milk machines were an addition. “We were pleasantly surprised by the turns we got from the milk machines,” Mike said. The milk varieties include chocolate, strawberry and vanilla.
By having snacks, milk and ice cream machines in most locations, the Glimpses were able to maximize their return on labor.
Mike said the results for the snack machines have been the best.
After winning the school contract, the Glimpses hired their first full-time driver.
After a short time, they sold the bulk vending route. Other school systems learned of the success that their school district was experiencing, and began calling them. The Glimpses realized they had found a niche and were determined to capitalize on it.
As they added more school districts in 2006, the Glimpses soon recognized that school business carries a challenge; in the summer months, as well as spring and winter vacation, sales drop. “You have to run your business very differently than a traditional company that caters to B&I accounts,” Mike said.
During the school breaks, the Glimpses have the employees work on preventive maintenance, help move into new accounts, and cross train with the technicians. All drivers are told from the beginning that they will have other responsibilities during these breaks. Camelback also sets aside money to continue to pay the employees during the summer and holidays.
While the Glimpses were able to save money on the milk machines and many of the snack machines thanks to the manufacturer supplied units, they still incurred additional investment in outfitting all machines with SEED units at about $300 per machine. They also needed to supply metal cages for most of the machines (each costing $700 to $1,000), since they were located on school grounds.
The wireless reporting has proved especially useful in the school locations, since it allows them to know how much inventory each machine needs the day before it is serviced.
Mike said there was no way they could have known how quickly some of the machines were being depleted without the real time reporting.
SERVICE BASED ON INVENTORY
Every evening, Jodi logs onto Cantaloupe’s Website and creates the next day’s service schedule based on machine sales reports. The Cantaloupe system has a dynamic scheduling module that schedules service based on sales, minimum intervals, and depletion percentage. Scheduling can also be done manually.
“We don’t’ have to hit everything at every account every time we go there,” Jodi explained. “It’s a big time savings.”
With accurate machine sales reports, they can load trucks with only the inventory needed for the given service period. There is no space wasted in the truck on products that aren’t needed.
The Glimpses estimated that with Cantaloupe, each driver services about 15 machines per day. Each of the machines has $150 to $200 when they are serviced. Some have as much as $400, depending on the preset parameters within Cantaloupe.
Mike said on average each of his routes generates over $400,000 per year, which clearly exceeds the $283,661 for a typical firm with less than $5 million in sales and even the $320,774 for a highly profitable, extra large firm, according to the National Automatic Merchandising Association (NAMA) 2007 Operating Ratio Report.
Without the wireless reporting, Mike estimated his current five routes would require eight routes.
It didn’t take the Glimpses long to decide that they would install Cantaloupe in all of their machines. “We just made the plunge,” Mike said.
CUSTOMERS APPRECIATE THE SERVICE
Not only did the wireless reporting allow them to fill machines more efficiently, the customers appreciated having machines in stock at all times, the Glimpses said. They have allowed customers to log onto Cantaloupe’s Website and view machine activity if they want to.
The bigger advantage from the customer’s viewpoint, according to Mike, is they know that most of the maintenance issues that a machine may have are dealt with proactively versus passively.
The SEED units gave them a selling tool to use in seeking other accounts. “We started realizing our customers really liked this idea about monitoring sales,” Mike said. “It’s a huge selling tool for us.”
MINIMAL ON-SITE INVENTORY
The Glimpses developed a unique product ordering system. Being located close to a Vistar cash and carry warehouse, they made arrangements to have their trucks loaded at Vistar at 5:30 a.m., before the cash and carry is open for business.
The driver fills out his next day’s order by 2:30 p.m. the previous day.
With the drivers filling their trucks at the cash and carry every day, there is no need to warehouse product. The only product the Glimpses warehouse in the 5,000-square-foot space they rent in an office park is some specially ordered goods.
While they enjoy significant savings by not warehousing much product, the Glimpses are not able to pre-kit their deliveries. Hence, their drivers must spend the extra time in the morning loading their trucks at Vistar.
As their business is growing rapidly, they have considered investing in a warehouse.
Because they don’t have a warehouse, the Glimpses have not had to use inventory control software. All of the reports they need are provided by Cantaloupe.
2007: SALES DOUBLE
In 2007, the company again doubled its sales. This necessitated additional trucks and more drivers.
Mike said that a small portion of the school business they picked up in 2007 was on the beverage side. He said the beverage segment is more challenging to get turns than the snack or ice cream portions. There are not as many options that the students have embraced on the beverage side. He said the removal of soda has cut beverage sales in schools by 40 to 50 percent.
The Glimpses have not yet felt any need to expand into hot beverage or cold food machines. To date, they have offered frozen food in some of their ice cream machines, and this has met the needs of accounts that want food.
The Glimpses’ business background has paid off well in managing their employees. They hold sales contests in which employees can win prizes, such as gift cards and airline tickets
While they brought an extensive sales background to vending, the Glimpses realized they needed to strengthen their industry expertise. In 2006, Jodi attended the NAMA executive development program at Michigan State University, which she claims was extremely helpful.
GROWTH REQUIRES CAPITAL
The Glimpses have invested about $500,000 of their own funds in the business, and have borrowed close to that amount. They said they didn’t realize how capital intensive the vending business was when they started out.
They believe that they need to diversify some of their account base into more B&I accounts.
Mike and Jodi Glimpse believe they have established the foundation to achieve higher growth. The remote management software has enabled them to provide high quality service in a cost efficient manner.
Source: Vending Marketwatch