Escaping the Drift with John Gafford - Mastering Passive Income: Mike Hoffman's Journey to Vending Machine Success

Episode Date: June 25, 2024

Unlock the secrets to financial freedom with Mike Hoffman, affectionately known as Mr. Passive. This episode of "Escaping the Drift" promises to arm you with actionable insights into the vending machine business. From Mike's early days on a farm in rural Iowa to mastering passive income streams, you'll discover how simple, strategic decisions can pave the way to entrepreneurship. Learn how Mike turned everyday experiences, like running a lemonade stand, into a thriving vending machine empire.Get ready for a deep dive into the evolution of Mike’s vending machine business and the savvy strategies that led to his success. We explore critical decisions like selecting the right products and locations, understanding market demands, and leveraging cutting-edge technology such as AI-enabled vending machines. Mike shares his journey of scaling the business while juggling the commitments of a full-time job, offering practical tips on logistics, hiring help, and the importance of hands-on experience before delegating tasks.Finally, we take a closer look at Mike's comprehensive coaching services designed to guide newcomers through the maze of the vending machine industry. Whether you're seeking a DIY approach or a fully managed service plan, Mike's expertise offers a roadmap to financial independence. Learn how to secure profitable locations, the benefits of vertical integration, and the steps to sidestepping common pitfalls. This episode is a must-listen for anyone ready to escape the nine-to-five grind and embark on a path toward entrepreneurial success.Highlights:(01:14 - 01:49) Mr. Passive on Financial Freedom(07:04 - 08:55) Venturing Into Vending Machines(10:55 - 11:32) Starting Vending Machine Business Without Money(17:52 - 18:19) Combo Refrigerator Machines Selection Process(25:06 - 26:10) Managing Employees in Vending Business(30:48 - 32:38) Food Distribution and Shelf Space Strategy(36:07 - 37:31) Best Locations for Luxury Amenities(39:26 - 40:09) Profitable Business Opportunities Without InvestmentCHAPTERS (00:00) Mr. Passive(04:16) Vending Machine Business Growth and Success(14:44) Selecting Products for Vending Machines(19:58) Scaling a Vending Machine Business(30:48) Optimizing Vending Machine Location Strategy(37:31) Vending Machine Business Coaching Services💬 Did you enjoy this podcast episode? Tell us all about it in the comment section below! ☑️  If you liked this video, consider subscribing to Escaping The Drift with John Gafford 💯 About John Gafford: After appearing on NBC's "The Apprentice", John relocated to the Las Vegas Valley and founded several successful companies in the real estate space.➡️ The Gafford Group at Simply Vegas, top 1% of all REALTORS nationwide in terms of production. Simply Vegas, a 500 agent brokerage with billions in annual sales Clear Title, a 7-figure full-service title and escrow company.➡️ Streamline Home Loans - An independent mortgage bank with more than 100 loan officers. The Simply Group, A national expansion vehicle partnering with large brokers across the country to vertically integrate their real estate brokerages.✅ Follow John Gafford on social media:Instagram ▶️ / thejohngaffordFacebook ▶️ / gafford2🎧 Stream The Escaping The Drift Podcast with John Gafford Episode here:Listen On Spotify: https://open.spotify.com/show/7cWN80gtZ4m4wl3DqQoJmK?si=2d60fd72329d44a9Listen OnApple:https://podcasts.apple.com/us/podcast/escaping-the-drift-with-john-gafford/id1582927283

I just bought four of those. They didn't pull my credit. I got 60-month financing, 8.9% interest, and each machine is going to be a $170 payment. And my first month with them, we're doing over $2,500 a machine. And now, Escaping the Drift, the show designed to get you from where you are to where you want to be. I'm John Gafford, and I have a knack for getting extraordinary achievers to drop their secrets to help you on a path to greatness. So stop drifting along, escape the drift, and it's time to start right now. Back again, back again with another episode of Escaping the Drift, the show that gets you from where you are, man, to where you want to be. And today, I got a good one. I got a great guest today. This is a guy that, if you listen to this show sometimes, we talk about some pretty high dollar concepts.

And you listen to this and you think, man, how would I get into that? How can I do that? I don't have $40,000, $20,000, $50,000 laying around to get into this deal. I don't have all this money. I don't have access to it, but I want to start down a path of entrepreneurship. I want to break out of the nine to five. I want to do something different. This is a guy that can help you escape today. This is a dude that is an expert. He has coined himself as Mr. Passive, actually owns mrpassive.com, which I give credit to anybody on such a good URL. That's solid. He is somebody that has made his fortune through the use of vending machines in simple, easy to operate businesses. And I'm excited to talk to him today because I'm sure we're going to get a lot of great information from him on how you can get started on a path to

financial freedom using the simplest, stupid businesses so guys welcome to the program here he is mr passive this is mike hoffman mike how are you buddy good john how are you thanks for having me glad to be here yeah man i'm doing i'm doing good so walk me through your story you know let's start this out with you as as a young guy i young guy, I want to hear about your, your, your coming up and like your first hustle. What, what was it? Yeah. First hustle. It probably was a lemonade stand as a, as a little teenage boy, just trying to, um, kind of find a way to afford those Jordan sneakers back in the day. Were you somebody that came from an affluent family or non-affluent family um definitely middle class for sure i mean my both my parents were

working back in the midwest you know we had a farm and um yeah it was definitely uh we had to earn everything for sure but i mean i wouldn't say it was one of those you know two parents that were hard working would kind of set the example okay so you said a farm where what part of the middle of the country was a farm what kind of farm was it yeah we're in a small rural town in iowa um right off i-80 right through the you know the flyover state, so to speak, the heartland. So town of 800, we didn't even have stoplight. It was an exit on the interstate. And I actually drove 42 miles every day to go to high school. Oh, wow.

And I'm guessing because you grew up on a farm, it was 4 a.m., here's your chores, let's go. Were you working on the farm with that? Yeah, exactly. We showed cattle at the county fair. And so we were washing our calves by 5 a.m. before he had to go to work. And so, yeah, it was a classic, you know, if you're going to go out the night before, you're going to regret it when the 5 a.m. alarm goes off.

Were you a distinguished member of Future Farmers of America when you were in high school? I was not, but all my friends were for sure. I was in 4-H. Were you a distinguished member of Future Farmers of America when you were in high school? I was not, but all my friends were, for sure. I was in 4-H. You were in 4-H. Yeah. I got recruited in my rural North Florida city, not son of farmer, son of attorney. I got recruited by the Future Farmers of America because they needed somebody to compete in extemporaneous public speaking.

And, yeah, that's so – I did not get – I never got my own corduroy jacket. But, yeah, I was – Oh, man. I was actually a future farmer of America. You see how that worked out. Yeah. Not so well. You know what cracks me up about the FFA is they have the one day a year at the end of the school year where they all drive their tractors to school.

It's like drive your tractor to school day or something. And all these tractors are in the parking lot. Dude, I, you know, it's such a different world. Like how old of a guy are you? How old are you? I'm 34. You're 34. So you're a young guy, right? Say I'm 52. And it's like, when I was going to school back in the day, it was not uncommon for like dudes to come rolling up in a truck with shotguns in the rear view on the gun rack right that was in the high school parking lot like you could never even think of doing that now but it's it's a much different world so from that world of of being growing up farmer's kid like that is it did you always aspire to other things did you always aspire to to maybe escape Did you always aspire to maybe escape your station

of Iowa? Is that something that was innate with you? Hey, this is Steve Simms, and I'm a proud partner of Escape the Drift Podcast with John Gafford, and I've got something for you for Simms Distillery. The community there is based on you, the entrepreneur, giving you the tools to be a better version of you. Visit simsdistillery.com. Use the word ESCAPE to get a $694 discount off of the community that you need to be part of when you want to demand a better version of you. Thanks a lot. Escape the drift and see you in simsdistillery.com.

I was definitely like independent and kind of the entrepreneurial mindset from the beginning, I think. But, you know, it wasn't the rebel child trying to get out of Iowa. Like, I think a lot of the kind of the core values of how I was raised is what, you know, I was the first child in our family to do that. And then, you know, I moved out to the Bay, um, as a, you know, broke making minimum wage guy that lived with four randoms in Palo Alto from Craigslist to make ends meet. So it was definitely one of those kind of some risks involved that most people wouldn't take. Dude. I love that because that's who this podcast, that's who my book that's coming out, that's who that's for, right? Because I was also that guy living with four other dudes, three other dudes working whatever jobs, you know, blah, blah, blah. I've been never having some moniker of great success until probably my early 30s. So this podcast is kind of a user's manual to my mid-20s self that I wish I would have had. So what were you doing? What jobs did you do? You

went to college. Where'd you go to college? I went to University of Kansas. Okay. University of Kansas. And then after that, you said you moved to the Bay Area. What job did you get? You said it was- I worked for a startup in Menlo Park, not even a block from Facebook at the time. And this is before everything continues to blow up there. But yeah, I lived in a rough part of East Palo Alto with four random roommates from Craigslist Post. You know, classic house hacking type. And the crazy thing is one became a senior role at apple another one became you know it's just a bunch of startup grinders that were trying

to to make ends meet so at what point did you realize you know maybe i need something outside of the salary i'm getting from these startups to make to make my my life complete at what point? Yeah, well, I started down the path of real estate initially, a little $70,000 home in St. Louis, renting it for $900, like cash flow in $200 to $300. But then I realized I can't, at the time, I couldn't keep affording another down payment on another rental and try to parlay that. So I actually read an article in the

Wall Street Journal about Warren Buffett and a guy that was working 20 hours a week making 20 grand a month with vending machines. And that's when I went down the serious rabbit hole. And people don't realize this, but the vending machine business is so archaic. And it's like the wild, wild west when it comes to you don't even need any money down to get a machine with these manufacturers so like your capital can go way further than just like real estate and so uh that's kind of what led me down that path plus my passion and and human performance and health and longevity and you've seen vending machines in the vegas airport you know they're not the healthiest things that are selling cigarettes and whatever. So it kind of was a

perfect storm of interest for me. Well, it's funny. One of the reasons I wanted to have you on was I'm a huge believer in the lessons you can teach through the ownership of a vending machine. My kids actually own the vending machines in my businesses and have since they were little kids since they were like eight. And that's how I taught them inventory and marketing and accounting and all of these things of running these businesses. Now, their silent partner, my wife drives to drive them, help them buy stuff to put in it and handle all of that. But, um, it hurt most correction. My, my kids unpaid silent partner, my wife drives them, has driven them around. Now my son's 16, so they can make their own runs, which is great. Uh, but yeah, I found that to be great. And the one problem I had with this, with kids,

with kids, honestly, was they probably made too much money. Probably made more than I would have liked them to make at that age because they thought, man, money's easy. Like I can just sling it around like crazy. Yeah. Yeah. I mean, that's a good problem to have for your kids, but you're right. I keep coming back to there's no way, no better way to teach economics 101 to your kids than a freaking vending machine.

I mean, we have some vendingpreneurs that will literally give each kid a different vending machine. And then they compete against each other about what products to put in it, what to set the prices at. And they're just competing on whose machine is doing better. And I just love that kind of concept of like supply and demand. Yeah. My favorite lesson that they learned was the, cause they have a con they have combo machines, right?

So they have the snacks up top, it's on the bottom. And then the refrigeration went out on the bottom and we had to pay a guy to come, right. I had to pay a guy to come fix it. And it was like, it was like $180 from the come out and they were like,

Oh, Oh, what, what, how's it, nuked them for like two months? And I'm like, that's, that's the business. That's life, right? Sometimes things happen. And you're either out of business or you got to fix it. I have a choice. Yep, exactly. Oh, that's awesome. So how long ago did you get started in this? Right before COVID. So 2018 so um is when i kind of made the plunge okay and you said you mentioned something really interesting which was you don't

need any money to get vending machines from the manufacturers yeah so most of them i didn't know this when i got started but um you know when you start doing your research and you start talking to these folks they're just it's literally like the wild wild west the best kind of analogy is it's car dealers and you go to one car dealer versus the other and a lot like now the financing these days are 60 months no money down and i i typically try to use profits to have them paid off in the first year okay so what's so you they'll finance it to you do you have to have immac off in the first year. Okay. So what's, so you, they'll finance it to you. Do you have to have immaculate to get this? I mean, is this like 580 credit score? What are we talking about? This is going to blow your mind for one of the companies that does a lot of these

smart machines with AI cameras, and you actually don't push any buttons to order a machine. You just put your, your phone on the door, unlocks, whatever you grabbed, AI cameras, charge the card used or your phone to unlock the door. I just bought four of those. They didn't pull my credit. I got 60-month financing, 8.9% interest, and each machine is going to be a $170 payment. And my first month with them, we're doing over $2,500 a machine. Holy smoke. What company was that? The company was 365.

Wow. And the machine is so like, I guess the advancements in this stuff is just going like crazy. That's $25 on one machine on her and seven. Well, what was your cost of goods on that? like crazy that's 25 dollars on one machine on 107 well and what was your cost of goods on that uh 35 40 but john this is the crazy thing because that location was doing 30 a day with the traditional combo machine that you talked about and and this is where the the new modern vending experience it's unattended retail so they're just opening up the cooler and instead of having to like enter in a code for a bag of chips and then enter in a code again and swipe their card again for a candy bar and a soda whatever they grab that one time so our transaction

values are over eight dollars more than what they were with just a traditional combo machine because they're grabbing more than one thing and it's more than one thing there's no friction oh man that's really good it's the same location that had a combo machine that was doing 30 a day we were doing about a thousand bucks a month and now the first month with this smart cooler is doing it did over 2,500 that's crazy so walk me through the steps to let's start a vending let's do it right now yeah in real steps to let's start a vending. Let's do it right now. Yeah, in real time, start a start a vending business. What is the first thing that I need? Well, I'm old school. So I'm, I'm, you know, don't create your website or your logo and have the whole paralysis and never get started. So the first thing you need is a little

initiative. And I would go to your local gym or your local apartment complex or the high-rise apartment being built across the street from where you work. I mean, you can't walk anywhere without seeing these apartments and condos being built. And I just walk in and ask the manager, hey, are you interested in putting luxury amenities like modern vending in here, no cost to the property. And I'm like, no cost to us as a revenue share. And you can be like, yeah, sure. We'll give you 5% if you intro us to four other sister properties. And then right away, now you got a route that is five plus properties that is going to replace your nine to five. Just off that one, just off that one call. Now now the thing that i like the most about this is a huge mistake that entrepreneurs make is they like you just said they put all this energy and all this time into building a product before they see if anybody wants it if you don't have

this you can put these things it is useless to go down the road of anything else like first thing you need is i got a guaranteed place that I need to place this. Is there a is there a location contract you would get the place to sign? Is there or is it a handshake? What are you doing? Yeah, I would in a perfect world. Absolutely. You want them to sign a contract, but it can work both ways. If the locations are done, and you now have a machine there under contract and you want to pull it for for a different location that wouldn't be a dad now you're stuck so i see both side i mean and we have locations that are under contract we also have many locations where they're like look if i have to run this up the corporate ladder it could take a year to get approval so let's just get it in and that was five years ago so you're

better off on the handshake correct probably yeah okay so better off on the head shakes and i now i got my location or a couple whatever it is that have said i can do this now i'm going to go and i'm going to look for the right type of machine and obviously you're not buying anything going forward except for these ai machines i'm guessing yeah it's or like smart refrigerators like basically a refrigerator you see at a 7-eleven where you go buy your your dr pepper they'll have a lock on the door you need credit card or apple pay to unlock the door it's the same concept as as the smart machines okay so same thing so they grab what they grab they're done they're out the door and off it goes um all right so you you now know your location you've

decided you want to get one of these ai machines. So like you just said, and there's more than one manufacturer that makes these things. Yes. Different ones. Correct. So now you're just leveraging offers against the other one. Oh, well, Bob at ABC vending said he would do this. What will you guys do? Well, we'll do this. We'll beat them. And then you go back and forth and just work the deal until you get the best, the best terms you can get. Correct. Yep. Now, do you think they didn't check your credit because you didn't, because you would have experience in this or just because they're just like, there's probably a tracker in the machine. They know where it is at all times. Anyway, they can always come get it if you don't pay. This company is probably one of

the biggest companies. So I think they're in a very gross mindset of let's get as much market share with these smart machines where there there's other companies that will definitely do a soft pull of your credit um it's definitely company like the credit pull thing is definitely company by company basis for sure okay um all right so now we've got that we've got that down. We've got our machine. We've signed the contract with them. And like you said, most of them are like 60 months, 8.9 is what they're doing right now, which gives you a payment based on these machines. You said about 180 bucks a month. So you better know you can do at least 180. So now I got to figure out now,

are these combo machines? Are they refrigerator machines? Half and half? What are they? Yeah. So it's going to basically a bookshelf with half drinks on one side, which is going to be refrigerated and then an ambient side on the other. So it's going to be kind of two doors. Do you want the drink side or do you want, you know, drink or fresh food? And then the other would be like snacks, candy chips type of thing. Okay. So you mentioned we're going to get this. So now you're deciding what to put in it, which is, which has got to be key to what we're doing. So how like spicy chips and a lot of you know pastries because they love their pastries and a lot of doritos sodas and stuff and then we have a fitness center where uh 90 is drinks and it's like the shake on your desk it's a bunch of um pre-workout you know c4

and all these kind of pre-workout post-workoutout type shakes. And then we have bags of protein chips. I didn't even know we're a thing until we got this gym to sign up. So it's totally kind of location dependent. You know, if it's just an apartment complex, you got your standard like Celsius and Iwani or crushing it from an energy drink perspective. And then you can't go wrong with like Reese's and Snickers. It's still going to sell no matter what. Still still gonna sell just out of curiosity by kids what's the

best-selling candy what do you think what do you think it is oh right now uh these kids are crushing like these nerds gummies so you remember the old school nerds that you had a little you'd rip open the top corner and put like the little pops well now they're they're nerds gummies they're like almost like yeah and last night literally did you get them from a vending machine no i think my kids i think they got the dollar store i literally ate one last night uh promise i did i literally did that's why i was getting ready to vr with my son yeah i, I did. I actually did eat a Nerd Gummy. I've eaten Nerd Gummys last night. It's not helping the diet. Yeah. It's myself. But you mentioned something else though. You said that there's fresh food

involved with this. So now you're dealing with perishable stuff, correct? If you want. Yeah, absolutely. That's a whole other animal because now effectively you're running a restaurant because you've got shelf life on this stuff. Yeah. So back to these smart machines, the other thing that you can set with the pricing is dynamic pricing. So you can set the, so the one trick is, okay, Walmart super centers, they, most of them will replenish their salads on Tuesday and they'll have an eight to nine day shelf life. So if you go buy your machine once a week, anyway,

get your salads on Tuesday, go buy your machine. You're guaranteed at least a week of shelf life. And the great thing is you can actually set through the smart machine dynamic pricing. So if you get to the following Monday, you're a day or two out from expiring, you can actually have it, the price drop 20% off, 50% off. So your spoilage is very minimal. So like this is kind of the things that with these new modern machines that weren't around even in 2018 when I got into it. So it's just kind of disrupting the whole industry right now. Just leveraging technology, software, remote tracking to make your life easier. And then the second thing I'd just say is I would never start a machine with a ton of perishable items. We'll usually start with like one chef salad and one Caesar salad each. So we're

talking, you know, a 267 salad from Walmart, selling it for 650 and see which flavor they buy and if they buy them both and then we'll add maybe two and then four and we'd kind of go down that route with it. And you're just buying them from Walmart? Yeah, $2.67 and selling them for $6.50. So how many different places? Let's talk about where you buy your stuff. I mean, obviously, like in town here, we have one Sam's Club that's like the vending machine Sam's Club where they have all the big stuff that goes in vending machines in bulk.

It is not convenient to where we live, which is crazy. Where do you buy your stuff? Yeah, in a perfect world. Definitely. We start online. So Sam's Club has free shipping above 75 bucks and Costco has free shipping above free cost cash has free two day FedEx shipping. So if you order it Sunday, it'll be at your front door on Tuesday above $75. So like that's one box of Snickers and one box of Gatorade.

And they'll even deliver drinks like that. Heavy like that. Yeah. The case drinks. Yeah. They won't do like your 35 packs of Dr. Pepper, but we,

we all our fair life protein shakes delivered to our door. All of our Gatorades, all those kind of things. The in-store stuff is what they won't deliver, like your 35-pack of Dr. Pepper or Mountain Dew. So you're still going to the store to buy that stuff? Yeah. For our route now, it's big enough where we have a distribution company that will actually bring a pallet of items once a month. Okay. So how many units do you have? How many machines do you have now? Probably 35 now. I have a couple of rights remotely.

So you have 35 and I hate to put you on the spot and ask you net. Give me a rough number of what you're bringing in net on those 35 monthly? Um, net would probably be, uh, 25. Okay. So, and you work one day a week riding around dealing with these things. I have an operator that does. Yeah. Okay. So you, so you're, you're bringing in 25 and you're paying this guy to run, right? So you have just an employee that now that runs around and does this exactly all right well let's talk about scale then let's talk about from when you started with one machine because obviously it was you run around to do that yeah give me the scale give me this give me the scale plan the eos scale plan about when i expand and who i hire and when i make these hires and what i what do? Give me the number of your students. Yeah, that's a really good question. So back to kind of how you did it, we had a little landscaping shed next to our house.

We would get the product delivered to our door, throw it in the shed, then I'd have buckets and I'd just throw, okay, this machine needs 10 Snickers, 10 Reese's. Well, I think I got up to three machines and I was like, yeah, I still had a full-time W2 job and I was traveling a lot. So I posted an ad on Craigslist. I was like three hours a week, basically a half hour per machine to stock it. And then a half hour of drive time going to Costco once a week, blah, blah, blah. I had 40 applicants in 48 hours. I had literally 20 bucks an hour for three hours a week is what I posted. And I literally said, John, I don't care if you stock it Sunday, Tuesday, or Friday.

Has to happen. Early morning, late night, middle of the day, doesn't matter. Once a week. It needs to be done. I don't care. You pick, whatever. So it was kind of like the DoorDash Uber-y type applicants that are either early risers or late night owls. And I found a guy and it's the same guy. He had a full-time job at the time.

And it's the same guy now that is my full-time employee that does it full-time. But it was, yeah, we did. We started with, once I got to three machines, it was like, I'm ready. You got to do it yourself for a period of time. I usually say 60 to 90 days because you can't delegate what you don't know you're delegating. And how did you manage that guy? What do you mean by how did I manage him? How do you make sure he did it? Did you say like, okay, send me timestamps, pictures of the machines being full? Because none of your machines at this point, they're not taking money at this point.

Everything's on the phone, right? Exactly. And I can track inventory from my phone. Even if someone does pay with cash, I can track right from my phone how much cash is in that box. Because even if it's a cash transaction, it goes through the reader to calculate the transaction value on the app. Wow. Okay. All right.

So you had the one guy. So now you're starting your shed. You got one guy, three machines. Yeah. What's what's what's level two? Level two is when you probably get to 10 plus locations, you need to start thinking about, you know, having a little warehouse or a storage space. And the great thing nowadays with kind of where commercial real estate is, as you can, can get some really scream it like on the other side of this wall behind me is literally walls of drinks and snacks snack stack to the ceiling. You can get some great deals. And this is just an industrial area. $350 a month. Not in Vegas. Yeah, Vegas is a different beast. No, not in Vegas. You can't.

For commercial is hard, hard, hard to hear me. It is. We had no inventory, especially warehouse stuff is forget about it. It's incredibly expensive. Anyway, cool. So you had 10 machines you need maybe a little mini storage place, maybe something there. And then you can, you can move your employee from your three hours a week and we still doing he's doing half an hour machine. So at 10 hours, 10 machines, he's doing five hours a week. Yeah. So yeah, it's an hour,

you're still like party with $100. Yeah, you're with $100 a week to go do this 400 bucks a month is your total. Plus, you're looking at, you know, call it 350 for a mini storage place. So now you're at 750 total overhead. And what is the sweet spot I'm looking at for machine as far as gross? What makes I don't Tom Bilyeu, I don't touch a location that doesn't do at least 1000 bucks a month. Like that was Yeah yeah on gross so um even with the combo machine we have a combo machine that only holds nine drink items i did fourteen hundred dollars in may

and so like i don't talk yeah just gross so um you know those 10 machines i would be expecting us to do 10 grand in gross let's say cogsGS is 40%. So it's four grand in COGS. We pay in the guy 500 bucks. We round up our office space is another 500 bucks right away. Our margins right at five grand on that 10K gross. Yeah. I mean, that's what I was going to add up to is about a 50% operating bottom line. For those of you that just heard him say COGS, I'm like, what does that mean? That's cost of goods sold because when you sell something for a profit, you've got to factor in the cost towards your P&L and figure out what it is. So like he said earlier, what he's looking for on most of his margins on machines is about a 35% cost of goods. Is that about right?

Yeah. Which honestly, in case you didn't know, if you're listening to this, a restaurant runs at about now 35%. So you could open a restaurant and what cost, what it costs them to actually make that food is about 35%. You're just doing it here with zero labor costs. I'm sorry, $400 a month labor costs, which put against your 10 machines at 10,000 is a 4% labor costs. Whereas I would venture to say most restaurants now are running 18 to 20. So pretty good margins there to get that done. Pretty good, pretty good margins. So now you're at level two, you got 10 machines, you got your warehouse, you got your 40 hours. This is just now the matter of just adding more workforce or adding more hours to what they're doing. Cause your guy,

now you got 30 machines. He's working pretty much full-time now yeah he's full-time yep are you sending are you sending him now to also to like walmart to buy your salads for the machines and your fresh food no no no we're actually so we uh do our food distribution now that's delivered so we don't um we're kind of steering away from the Costco's and the Sam's because we're at kind of bulk pricing and then we get into product rebates. So like if we order enough cases of Pepsi, we can now turn in some receipts and get a kickback from Pepsi. Maybe they'll throw us a free vending machine or a free cooler. So we're kind of at that next phase in the vending route where I can't have my guy spending five hours at Costco a week when we got the scale we got of locations. Let's talk about that. So at how many machines were you at

that level? And how do you contact these vendors about doing how do you negotiate those deals? Let's talk about that. Yeah, so there's a couple ways to do it. So I think we uh he came on full time around um 20 machines and so he was still doing the costco sam's club run once a week walmart um and then when we got to 30 uh you know we had uh he needed another day of stocking basically 10 more machines let's say six hours of stocking and drive time so that was another day day we needed, um, for that. So, um, that's when I started ordering distribution. There's definitely channels out there. Um, a common one in the vending industry is Vistar. Um, but you also, I mean, there's, there's all kinds of, uh, food distribution like Vistar would, would deliver to Vegas for, they would do anywhere

in the country. Um, and then on the backside of this, that's really fascinating to me. I didn't realize this when I got into it. But in grocery stores, these products are fighting for shelf space. And so now with the leverage of volume ordering now, all these product companies, you sign up with Vistar to get bulk pricing, but then you also go to the consumer and show the receipts of how much product you bought because they want your shelf space. So you can work Alani and Celsius against each other. Oh, you want the top row of our vending machines?

Or do you like, you know, you get into that whole space of, of kind of geo targeting. So now a lot of times we'll get, I'll get hit up on social media from beef jerky companies, from protein bar companies that are just trying to break into the market and, and get some shelf space. Are they giving you free product to do that? Yeah. At least to start test it out. And then they'll, yeah, absolutely. start test it out and then yeah absolutely and if it's free it costs you nothing so what do you care you're like yeah i'll give you a shot it's just pure as long as it sells yeah exactly yeah if it doesn't sell does it so how do you let's talk about inventory management as far as knowing what sells and what doesn't like

what is your what is your this is not going to work line what is that, what is your, this is not going to work line? What, what is that? What, what is that baseline for knowing a product is not going to, is just not working? What is it? So I'm pretty, let's get stuff out after the first couple of weeks and, and test something because you're going to, for us, it's totally location dependent. You know, it's not some people like Diet Coke at this location, some people, Diet Coke won't move at a different location, and the next location will sell a case in a day. So it's just totally dependent on the location. But usually within the first three to

four weeks at a location, I mean, we're pulling product that's not moving because it's just not hitting the mark. So what what makes so I mean, when you say not moving, is it it's just not hitting the mark so what what makes so i mean when you say not moving is it let's say there's there's 20 items in a machine yeah how many of those have to be gone in a week for that to be a successful product um probably like four or five so you need you need about a 20 you're for a 25% sell through on each thing you have in the, in the box minimum every week. That's what you, that's what your mark is. Yeah.

Unless we're talking, you know, the salad, the salads aren't selling and we're just not going to do so. Yeah. They just gotta go. Diet Coke doesn't sell for Jim does it? Oh, we didn't even try it. Yeah. Yeah.

No, you need chunky people to sell diet Coke. Yeah. No, you need chunky people to solve that. Yeah. But even that, that's a great example. This combo machine, it's a little different than, you know, the refrigeration on the bottom and the snacks on top. The whole cooler is refrigerated. So we were planning on three rows of drinks, two rows of protein bars, and one top row of protein chips. Well, those two rows of protein bars aren't moving.

So we just swapped those out with another row of water and Gatorade. I mean, literally we're buying this water for 10 cents from Costco and selling it for a buck. It's 90% margins on repeat. So that we've, we didn't plan on that in the first, when we first filled the machine, we audibled within two weeks. What do you do with the product that doesn't sell? You give it away? Do you throw it away? No, we have, we have enough machines now and that we just rotated like basically, you know, uh, what's the saying someone's, uh, trash is another one's treasure. So we'll just

take it to the machine down the street and see if it sells as long as it's not expired. You just keep it moving. What is your goal for how many machines you want to have? That's a really good question. I'm more about this next wave of kind of these smart machines is just going to disrupt the industry. Like we're talking, I just ordered two more today that have a giant led screens on the top. So we're talking B roll and so digital ads. And so you put one of these in a, I don't know, you put one of these in a casino and it's like, okay, well, do you want to target the, the gambler for cigarette ads? And then now you start talking, you want to talk about margins on digital ads

and it's, you know, okay, the A's are moving to town with the baseball team. Do the A's wanna run some ads on your screen? Cause they're trying to just get the word out or whatever the play there might be. But that's kind of where I'm going is more on the revenue. Is that something you're gonna to try to market yourself?

Are you going to just, are you going to parse that out to a third party marketing company that sells that? I would probably parse it out to start until I can actually learn it. Cause I'm, I mean, that's a whole new market that I just don't even, I have connections at a lot of kind of bigger companies, but I mean, where to start with regards to digital ads,

geo-targeting, I have no idea. Well, let's talk about one last question that I think is important that I kind of skipped over, which is what is the creme de la creme? What are the best locations? Give me the tiers and where they are all the way down to me. And you probably don't want to put one here. What's the best place to put these things? Yeah, it's so hard to say. The best locations are going to be luxury apartments with one main entrance. You know, they got the creme de la creme like pool and social lounge, and they're willing to pay four grand for a studio because they want their own space. And they're going to pay six bucks for a protein shake out of your machine. Because they don't want a DoorDash one for $20.

So it's going to be like that. Then you're going to have your foot traffic creme de la creme. Like an airport or even a fitness center if you can find the right one. And then I think the places I want to stay away from are going to be businesses that are nine to five and people work remotely on Friday and then they're closed on Saturday, Sunday, because a lot of your sales are going to be on the weekend. They're going to be after 5 p.m. when they got the munchies. So you're already taking that away before even starting with that location. Like this location. Maybe that's my kids.

They need to pull it out of here and move it somewhere else. All right. I mean, do you, obviously you got a website, Mr. Passive. Do you teach a course on this?

Do you, you walk people through it? What do you do? Yeah, we actually help kind of coach people along. And then we, I have kind of the vertical integration model. I had outsourced cold calling and email campaigning to locations to find people leads externally. And then

now I just brought that all in-house. So we have a whole team of full-time cold callers and email specialists where we not only coach people your kids, how to use a vending machine, but also we call in the businesses on their behalf to find them leads. So it's kind of a two for one lead gen and coaching. And then we obviously have the relationships with the manufacturers. I mean, the smart machine I was telling you earlier, I think our community has bought 200 since January. So we have some leverage with regards to discounts and things with some of these folks. And I'm guessing, is this an a la carte deal to work with you? Is it one cost serves all? How does it work? When you generate the leads for locations, are you looking

to JV with these people? How's that work? Yeah, it's more of an a la carte. There's more of a done for you and a do it yourself. You know, we can pull the leads for your market, let's say Vegas, for example, and hand them over to you. And, you know, you want your kids to go pound the pavement and go attack these leads and pick up the phone. You can do it yourself. Or there's more of a done for you type option as well. And typically it's kind of a six month plan. And then after six months, once people have a taste of kind of those phases we talked about earlier of their route now,

that might just be the marketing arm of their business, just finding them more locations. Yep, more locations. That's what it's all about. More locations. All right, dude, I gotta tell you, man, super. it look you just just said here's the business you can do you can get into it with no money down i mean they won't even check your credit some of these people i mean this is uh i mean i don't know what your excuse is if you're sitting around pounding the pavement it can't get out of your nine i don't know i don't know anybody's excuse would be for this i just why not to do it well and the great thing is you don't have to buy that machine until the location says let's move forward

like people do it backwards they'll say oh i got three machines i'll ask oh what's it doing revenant they're like it's sitting in my garage i'm like what are you doing this is part of my language this is ass backwards yep so dude well there it is if you want to dude if you want to get with mike have his team get you started on the world on the road to vending riches we'll call it mr passive are you are you on the gram mike can they find you on instagram somewhere i am on the gram yep it's just uh mike d hoffman underscore yep so if you look up Mr. Passive, you'll find me. Mike D Hoffman underscore Mr. Passive. Well, dude, thanks so much. It was enlightening. It was, yeah, dude, it was super informational. I appreciate it, brother. I do. So listen, man,

there's a plan. I mean, there it is. There's a plan for you. If you, if you're still just floating along with the currents of life, I don't know what you're doing. That's not a life raft. That is a bridge built out to where you're drowning and just carrying you back to land. But if you don't do this, then you got to do something. You can't keep drifting along. Get up and take charge of your life because nobody's coming to save you.

See you next week. What's up, everybody? Thanks for joining us for another episode of Escaping the Drift. Hope you got a bunch out of it, or at least as much as I did out of it. Anyway, if you want to learn more about the show, you can always go over to escapingthedrift.com. You can join our mailing list. But do me a favor. If you wouldn't mind, throw up that five-star review.

Give us a share. Do something, man. We're here for you. Hopefully, you'll be here for us. But anyway, in the meantime, we will see you at the next episode.