Business Continuity Audit

The vending machine business is a multi-billion dollar industry where the opportunity for fraud abounds. Fraudulent businesses, run by smooth talking con artists, sell vending machine business opportunities with claims of highly exaggerated income potential to the unsuspecting and uninitiated entrepreneur. Not only do the entrepreneurs fail to realize the promised income but they also risk losing substantial portions of their investments in the process.

Not all vending opportunities are fraudulent and not all involved in the promotion of vending businesses are operating a scam. However, for those who are, the Federal Trade Commission (FTC) has been actively involved in investigating complaints against deceptive and dishonest vending business promoters. The FTC has charged some companies with misrepresenting the earnings potential; misrepresenting the ease and speed to which machines can be delivered, maintained, located and repaired; providing phony references and failing to provide key pre-investment information required by the FTC’s Trade Regulation on Franchise and Business Opportunity Ventures.

If you’re thinking about investing in a vending machine business opportunity, check the reputation of the business by requesting a list of previous investors as well as their addresses and phone numbers. If possible, visit a few of the investors on the list at the locations provided by the vending promoter. Do not just depend on acquiring this information by telephone as the person you talk to could very well be in cahoots with the promoter. You can also check on the reputation of the seller/promoter by contacting the offices of the Attorney General and the Better Business Bureau where the business is located and where you live to see if there are any unresolved complaints on file. Keep in mind, however, that the absence of unresolved complaints could simply mean that the promoter may be operating under a new business name and even under a new personal name.

If the seller makes earnings claims, ensure that written substantiation be provided. If the seller/promoter recommends a locator, ask for a copy of the market survey in your area. If you are contemplating buying an existing vending route, talk with the owner of the route and make it a point to accompany him or her on the route so that you can check the condition of the machines and observe first hand the amount of revenue generated. Also, talk with the people at the establishment where the machines are located or will be located to determine how many people will use the machine and what they might like to see in the machines as well as any complaints or concerns they might have about the machines already there or machines that will be placed there.

Finally, before signing any agreement or paying any upfront money, consult an attorney, an accountant or a trusted financial advisor for another opinion as to the efficacy of the business proposition. If the promoter/seller requires a deposit, an attorney can review the contract and establish an escrow account where your money can be maintained by a neutral third party. If the seller/promoter has problems with the arrangement, then it might be best to walk away rather than risk losing your hard earned cash.

By: Daniel Lambert