Business Opportunities: Avoiding Vending Machine & Display Rack Scams

Business Opportunity
Service a company-established vending machine/display rack route. Part-time. No experience required. No selling. Earn $5,000+ per month. 

You may find advertisements like this appealing, especially if you are looking for part-time employment to supplement your income. But be cautions. While some business opportunities servicing vending machines or display racks are legitimate, many are not.

What is a vending machine or display rack business opportunity?
A business opportunity may involve food vending machines, fax machines, amusement games, or display racks with items for sale. Typically, your responsibilities involve cleaning and restocking the machines or racks, making sure they are in good repair, and collecting the money from the machines.
Promoters may tell you that you will earn a specific level of income, guarantee minimum revenue, or provide income projections based on the average income of current distributors.

When is a business opportunity a franchise?
A business opportunity is considered a "franchise" if:

  1. You will sell or distribute goods or services that are supplied by either the company or a designated supplier.
  2. The company will help you by securing locations or sites for the vending machines or display racks.
  3. You are required to pay the company $500 or more when you sign the contract or within six months after you begin operations.
If the company's business opportunity constitutes a franchise, the company must give you a disclosure document before you sign an agreement or invest any money. The disclosure document must:

  • Identify the seller.
  • Inform you about any lawsuits brought against the company or its directors by franchisees, and suits alleging fraud.
  • Inform you if the seller has a cancellation or refund policy and the terms of the policy.
  • Say if the seller is making an earnings claim.
  • Provide you a list of references.
The seller must give you the document at least seven days before you sign a contract or pay any money.

Earnings claims statement
If a seller makes a claim about how much money a person can earn, they must provide an earnings claim statement. This must be a separate document.

This document must include:

  • The name of the person making the claim and the date.
  • The specifics of the claim.
  • The start and end date those earnings where achieved.
  • The number and percentages of people who got those results or better.
  • Any information about those people that may differ from you, for example, the part of the country where they live.
  • A statement that you can get written proof of the seller's claims if you ask for it.
How can I protect myself?
Taking certain precautions can minimize your risk of investing in a fraudulent vending machine or display rack business opportunity:

  • Check out the company with the Bureau of Consumer Protection and the Better Business Bureau.
  • Study the disclosure document, earnings claim statement, and proposed contract.
  • Listen carefully to the sales presentation.
  • Try to verify claims made by the company and the company's references. Visit existing locations and the anticipated locations for your machines or racks.
  • Call the Secretary of State in the state where the company is headquartered to determine how long it has been in business. In Wisconsin, call or visit the Department of Financial Institutions Corporations Division or call 608-261-7577.
  • Ask the company to substantiate in writing all earnings claims. Be aware that investors' incomes vary with location, usage; products sold, and the demand for the products. The fact that investors have earned a "high" income in one community or state is no guarantee that you will do as well in your territory.
Entering into any business opportunity may require a substantial financial investment. You may wish to consult an attorney, accountant, or other business adviser before you sign any agreement or make any upfront payments.

(Taken from the Bureau of Consumer Protection Consumer Facts "Business opportunities: Avoiding vending machine & display rack scams.")