New Tools, Open Minds Help Rust Belt Vendor Grow

To succeed in vending in today’s challenging economic environment, operators need to be at the top of their game. This means investing in state-of-the-art equipment, new technology, and the products consumers demand.

Sandusky, Ohio, a medium size city about an hour west of Cleveland, is a community in transition. Once a prosperous automotive economy-based community, this area, known as “Firelands,” has its fair share of abandoned buildings, but revitalization is evident as well. New construction is a more common sight, and the roads are busy.

Firelands Vending, housed in a 29,000 square-foot warehouse/office building in an industrial district in Sandusky, encapsulates much of this transition. The 15-route vending and foodservice operation grabbed a leading market position years ago, based on good customer service.

When the automotive economy took a hit, the company employed several new technologies to improve efficiencies and offer new customer conveniences.

As a result, Firelands Vending, founded by owner Steve Hall, Sr. in 1993, has enjoyed high single-digit revenue growth every year for the past six years. This in a geographic region that has shed nearly a third of its vending operators.

Firelands Vending has experienced strong growth in a challenging market by winning accounts from competitors and maximizing its sales per location by offering new products and services.

A reputation based on customer service

The company’s story is typical of many medium size operations. Founded by an entrepreneur who started out as a machine technician, Firelands Vending built a reputation for reliable customer service based on strong personal interaction and high technical competence.

What has set Firelands Vending apart from the pack in recent years has been its willingness to use new technologies to improve its efficiencies and offer new products and concepts.

Hall was one of the first operators in the area to offer glassfront vending beverage machines in the early 1990s. The company used the glassfront machine’s expanded capacity to offer more product variety.

Since then, the company has invested in DEX handhelds to improve its product mix in all categories, and has offered cashless transaction capability in close to a third of its accounts.

A story of two generations

Firelands Vending has been able to meld the experience of the past with the promise of the future due to the strong father/son relationship of Steve Hall Sr., 57, and Steve Hall, Jr., 27. Steve Sr., aided by industry veterans Tom Ries and Ron Baum, is well versed in the practices that created success in the past. Fortunately, all three have been open to the suggestions of Steve, Jr., who has immersed himself in new vending technology.

Steve Sr. worked in the maintenance department of a local vending company in the 1960s after attending vending technician training for one of the major machine manufacturers. He managed machine repairs at an auto plant.

In 1993, the company he worked for was acquired by another vending company. Then in his early 40s, Steve Sr. decided it was time to strike out on his own. The economy was growing, and he was able to land a 150-person metal plating account. In his first year, he had 20 accounts.

Humble beginnings

Steve Sr. worked out of his garage, and Steve Jr., then 13, helped his dad move machines and repair equipment. The small company provided snack, cold drink, hot drink and cold food machines.

It was two years before the Halls were able to move out of the house and rent a 4,000-square-foot warehouse. With three routes, they hired a full-time driver. This was a turning point for the company. Steve Sr. was able to devote more time to sales.

Glassfront machines bring growth

When the glassfront Snapple machine with 45 facings was introduced, Steve Sr. recognized its potential. “When I saw this, I said, ‘it’s a hit,” he said. “The sales were tremendous.”

The glassfront Snapple machines are remembered for being mechanically troublesome, but Steve Sr., being an astute technician, was able to master this challenge. He kept the machines clean and well lubricated, and inserted a glass bottle in the slide chute to add pressure to the dispense mechanism. “I had to figure out how to make this thing work; it was tough,” he said.

The Snapple machine was popular with customers, and it won accounts. “We were carrying anything we could get our hands on,” said Steve Jr., who was a teenager at the time.

The glassfront beverage machines have improved a lot since then, and they remain a cornerstone of the company’s service. The Halls noted that to the present day, many operators fail to utilize the cold beverage variety that is
now available in these machines.

Investment in manual feeding

The economy began to soften as the 1990s came to an end. When employers began paring work forces, Steve Sr. made a key investment that gave the company new capabilities by acquiring a portion of Martin’s Cafeteria Service, a catering/manual feeding operation. With this acquisition, Firelands Vending offered a manual feeding division, headed by industry veteran Ron Baum, who became general manager.

They also moved to a larger, 29,000 square-foot building.

The acquisition allowed Firelands Vending to increase its business at a time when the customer base was not growing. But the Halls knew they needed to continue to find new products and services in order to survive in a challenging business climate.

They expanded into frozen machines, which allowed them to offer ice cream and more name brand frozen food.

The company believes the frozen products have become more popular in recent years, but fresh food purveyors have also become more adept at offering more variety. Three fourths of the food machine offerings are fresh versus frozen.

They even added dedicated French fry machines, which are used in some of the larger machine banks. The French fry machine is also used in some of the manual food lines; it is easier to use than a batch oven and requires no exhaust hood or fire suppression equipment.

“Our food selection is incredible,” noted Tom Ries, sales manager.

The new dollar coin, introduced early in 2000, helped, bolstered by 4-tube changers and $5 bill validators.

Electronic technology brings promise

Fortunately for the company, Steve Jr. was on board full time at a time when electronic technologies were creating new benefits. Manufacturers were introducing MDB and DEX, and Steve Jr. was an avid student of these tools, along with vending management software.

Steve Jr. recognized the potential benefits of DEX handhelds, and began examining different packages. He felt it was necessary to introduce this tool, but his dad took some convincing. Steve Jr. noted that his dad was eventually persuaded when he was convinced DEX would improve cash accountability.

Getting machines to report uniform DEX fields was difficult. “It wasn’t as simple as it is now,” Steve Jr. said. Machine circuit boards had to be changed.

The company used some DEX retrofit kits from InOne Technology to make older machines DEX capable.

Fortunately, one of the software companies came forward and helped Steve Jr. unify the DEX reads from the different machines. In 2002, Steve Jr. oversaw the introduction of DEX handhelds for the then 7-route operation.

Steve Jr.’s interest in DEX was twofold: to improve cash accountability and to help identify better selling products.

On the cash control front, the DEX handhelds allowed management to compare cash collections with DEX meter readings.

“You can’t afford to have less money today,” Steve Sr. said. “Our bottom line is getting less.”

At first, drivers resist handhelds

The Halls acknowledge that the route drivers initially resisted using handhelds. They introduced them one route at a time. The drivers have since realized they are able to do their jobs faster and with greater efficiency. “It makes their job easier,” Steve Sr. said.

Steve Jr. believes that service has become more efficient, thanks to the DEX reports. Service schedules are adjusted based on sales history, and some snack and cold drink machines are not serviced as frequently. He admits this has created some new issues.

“We know when it needs to be serviced, but the customer doesn’t always agree with it,” he said.

The DEX reports allow the company to pre-kit totes in the warehouse, based on sales data. The drivers load their trucks at the end of the day and pick up totes and products from refrigerated and frozen coolers in the morning.

The line item reporting allowed management to identify the better selling products on an individual machine basis. Steve Jr. said drivers cannot know how all products are selling. He believes that location and individual machine variances are more than many people realize. He believes 40 percent of a location’s top moving cold beverage products are unique to the location. For the snack machine, that figure is about 20 percent.

Steve Jr. said it is important to review line item sales by individual machine because account populations are changing faster than ever nowadays.

Product selection crucial

Having the right product in the machine not only impacts one sale, but a companion sale as well.

For instance, Steve Jr. noted that energy bars, which carry a hefty price for most snack machines, are popular in certain locations. He said there is no demographic basis for this preference; it’s an individual choice that the vending operator can only learn through trial and error.

He has learned that energy bars are often purchased in combination with energy drinks, but the right energy drink is usually needed for the location. “You’ve got to have the drink to go along with their energy bar,” he said.

Steve Jr. claims Firelands Vending was the first vendor in the market to carry large size candy bars. “We’ve been doing dollar candy bars since they came out,” he said. Some locations have 5-ounce candy packages.

He has observed people spending $19 on impulse snack and refreshments at convenience stores. “We need to find a way to get that guy’s money,” Steve Jr. said.

Steve Jr. said product preference analysis requires a certain level of competence with the various reports that the software generates. This comes with experience, as well as support from the software vendor.

“You have to meet the needs more today,” agreed Steve Sr. “We’re not competing against just vending companies anymore; we have to compete against c-stores.”

“Everything is sales driven,” Steve Jr. said. “When you do that, you see it creates a significant spike in sales.”

Firelands Vending has more than 100 cold drink stock keeping units (SKUs) in its warehouse. “We wanted to push the edge on selections,” Steve Jr. said.

Ron Baum, the general manager, expanded: “You (as a customer) don’t have to have what we want you to have in the machine. We customize the plans for them.”

Steve Jr. estimated that an investment in DEX can be recovered in a few years.

The company also switched from medium size vans to big Hackney trucks with pull-down side doors. “You want to work with your drivers and make it easier for them,” Steve Sr. said.

Satellite-based vehicle tracking

The company has also equipped the vehicles with satellite-based global positioning devices. These provide an operator with up-to-date information on vehicle activity, including graphic annotation of service stops, excessive speed, variations from the route, and more.

The key benefit of the GPS tracking is to monitor the drivers’ activity. The DEX handhelds create an electronic record of how much time a driver spends at an account, but not where the driver travels. “The driver doesn’t always take the most direct route to an account,” Steve Jr. noted. “Today, we have to move efficiently with everything we do.”

Firelands Vending has also used technology to successfully combat external theft, thanks to electronic machine locks. Electronic locks have been placed on all machines in public locations.

Working with law enforcement and account managers, five vending thieves have been arrested in the last five years. External theft has been a major problem in the markets the company services. Some vending burglars have been apprehended from as far away as California.

In some instances, they have noticed locks glued by thieves. The thieves in these instances were hoping the company would replace the electronic lock with a more traditional one, which can be opened with a pick.

The company has also retrofitted machines with guaranteed delivery sensors and bill recyclers.

Big point of difference: cashless readers

One of the most important new tools has been cashless readers. For the past two years, Firelands Vending has introduced an offline, closed system, where consumers are provided small key-like devices that are loaded with credit which they can use to make purchases from the machine. The keyfob devices can be revalued using cash or a credit card at a revalue station at the vending bank.

The company must install readers and a revalue station, and it must provide keyfobs to the account. The keyfobs cost $6 apiece. Hence, the investment to install the cashless system is not insignificant. But the company believes it has paid off in every account to date. On average, the system lifts sales by about 15 percent.

Steve Jr. believes the company recovers its investment in a cashless installation in less than a year.

Customers like cashless readers

The company found the offline Zip cashless system very popular with employers. The machines also accept cash. The card readers are installed on all machines in the bank.

“The customers like it,” Steve Jr. said. He claims that 50 to 75 percent of the purchases are made without cash.

Such systems allow employers to reward employees for good performance.

Technology requires good workers

Technology allows Firelands Vending’s employees to be more productive, but employees also need to be able to learn how to work with computers, electronic locks and cashless readers. Hence, the company sets high standards for prospective hires and compensates accordingly.

“As you grow with the new technology, it takes more management to watch things,” Steve Jr. said.

Employee compensation important

The company offers health, vision and dental benefits in addition to competitive wages and performance bonuses.

Firelands Vending has found that it is necessary in today’s vending business to continue testing new products and services. Industry veterans Steve Sr., Ron Baum and Tom Ries agree that these are the most challenging times they’ve lived through.

Fortunately, the company has the benefit of seasoned veterans who are open minded and a youthful heir who keeps up with new technology.