Chasing Passive Income, Americans Turn to Vending Machines

With a brick of cash in his hand and a grin on his face, Jaime Ibanez shows his half-million YouTube subscribers a path to earning money without burning many calories: Vending machines.

In videos with titles such as “This Is HOW MUCH My Vending Machines Made IN 7 DAYS!!” the swoopy-haired 23-year-old Texan makes the rounds to his 51 machines, stocking them and taking the profits.

His channel promotes the idea that with diligence and luck, anyone can go from snacks to riches.

Vending machines might seem an unlikely candidate for trending investment of the 2020s, but the idea has captured the imagination of Americans dreaming of easier money. Some pursue chips and soda as a side hustle because their regular paychecks aren’t enough for them to get by. Others bet on vending machines as a ticket to upward mobility, to quitting their jobs and becoming their own boss.

The startup cost is low and the formula simple. Buy a used machine for $1,500, load it up with products from Costco , charge a 100% markup and let the crinkled dollars roll in. But turning a profit takes real work, and the machines can be a losing proposition when stuck in locations without enough hungry foot traffic.

There is a fair amount of competition, too. America has three million vending machines, an $18.2 billion industry, with the average machine generating about $525 in monthly revenue, according to the National Automatic Merchandising Association.

More than half of operators bring in less than $1 million a year, according to trade publication Automatic Merchandiser. Many are individuals who have other jobs.

Social media has fuelled the notion of finding financial freedom in vending machines. Between 2019 and 2023, the number of posts or comments mentioning passive income and vending machines more than tripled on X and increased by a factor of six on Instagram, according to Sprinklr, a social-media management platform. Google search interest in passive income increased some 75% during that same period.

“There’s a real sense that doing things the so-called right way won’t necessarily land you in the middle class,” said Lana Swartz, a media-studies professor at the University of Virginia who researches financial technologies. “If the old rules no longer apply, then there’s a searching for new rules to get ahead or to get by.”

Some vending-machine newbies say they are on their way to building an automated empire. Others’ dreams get snagged like a bag of Funyuns on a faulty coil.

Making sales while you sleep

Last spring Rob Smith, a 30-year-old truck driver in Orlando, Fla., spent $4,000 on his first machine, a credit-card reader and a load of snacks and drinks.

He recently acquired his fourth machine, which is at an industrial bakery. His first three machines take up three to five hours of his week and bring in about $1,500 a month in revenue, which works out to roughly $750 in profit.

“I’ve made sales at four o’clock in the morning, when I was sleeping,” he said. “That machine is still working whether I’m there or not.”

He hopes to scale up to 30 machines and quit his job.

Smith started looking for extra income because his goal of buying a house felt out of reach with only his day job’s pay. He chose vending specifically after he witnessed a colleague complain about a malfunctioning machine at work and then use it anyway.

“He still put his $2 in,” Smith said. “I was like, ‘I need to get a vending machine as soon as possible.’ ”

Some budding vendors pay $300 or more for online courses to learn the trade. Smith relied on YouTube, Instagram and Reddit to get going.

At one point, he stocked a machine with orange soda against the advice he got in an online forum. When it didn’t sell, he and his family had to drink three dozen cans themselves.

Empty calories

Tom and Missi Hakes of Midway, Ala., started vending after Missi, 40, saw videos on YouTube about the business. The idea seemed more appealing than their stints driving for Uber, shopping for Instacart and trying to make it as YouTubers.

The Hakes, who both have full-time jobs in health insurance, scouted out locations in Atlanta, the closest big city and two hours away. After their best lead fell through, they paid a woman they found on Facebook Marketplace $500 to find a location for them.

She sent them to two spots that didn’t work out, including a cheerleading gym. The manager there was on board until she learned that the Hakes hadn’t operated a vending machine before.

Tom, 48, posted on a forum wondering how to address questions about their industry experience. At their next meeting, with the owner of a gym, they reluctantly followed some of the forum’s advice: They lied and said they had a few machines.

“We didn’t want to get another no,” said Tom.

He then spent a month repairing a used machine they bought for $1,400, staying up on some nights until 2 a.m.

When it was ready, Tom and Missi struggled to wrangle it into the 15-foot U-Haul truck they rented.

“Two people is not enough to move an 800-pound machine,” she said.

The Hakes spent about $2,500 on their vending business, as well as 20 to 30 hours a week for much of last fall.

They pay $50 a month to park it in the gym and it costs about $330 to fill up. It is currently grossing about $30 a week.

If anything, the income has been too passive, Tom said, “because it’s not really doing a lot of sales.”

If the machine isn’t selling more by summer, the Hakes will consider leaving the location, or perhaps vending machines overall.

Hit Facebook Marketplace, then Costco

Used vending machines of questionable quality sell online for as little as $500. More reliable ones cost in the range of $1,000 to $2,000, according to veteran vendors. A new machine with a touch screen and a robotic arm could cost upward of $7,000.

Many used machines have a maintenance issue about once a year, and they need to be cleaned. Cash is dirty, said Ben Gaskill of Everest Ice and Water Systems, a vending-machine maker. “Somebody digs around for coins in the bottom of their purse and it’s got grape jelly on it.”

Vendors shop warehouse stores like Costco and Sam’s Club to stock up. One machine’s worth of snacks or drinks can cost $200 to $300 a month. Owners then charge about twice what they paid for each product, or more. Prices of food from vending machines were up 10.6% year over year in January, according to Labor Department data.

The top-selling items in vending machines are cold drinks, snacks and candy, according to the latest data from Automatic Merchandiser magazine.

“No matter how healthy you try to make the machines, people are going to buy that Snickers bar,” said Lory Strickland, who sells courses and one-on-one coaching with her husband, Barry, under the name The Vending Mentors.

A never-vending story

Selling online classes and coaching can sometimes be more lucrative than a given moneymaking idea itself, said Swartz, the University of Virginia professor.

In online forums, she said, “there’s the joke that if there are people making courses about it, then it’s already oversaturated as a side hustle.”

To capitalise on interest in vending, some experienced operators started selling their expertise to supplement the income coming in from their machines. Some transitioned primarily to training.

Hyping the vending-machine dream predates the internet, though. The first machines in the U.S. sold gum and appeared on train platforms in 1888.

In the 1940s, media outlets cautioned about “get-rich-quick schemes” promoted by “unscrupulous agents involving vending machines.” In 1960, the magazine now known as Kiplinger Personal Finance warned of “vultures in the business” who promised “that an $800 investment may produce $200 a month, and that only a few hours of work a week are required to enjoy such rich pickings.”

You and a friend have a can’t-miss idea for a new business. You’ve got a great name, and the logo is perfect.

It is time to ask each other some hard questions.

Talking up front about tough subjects like how you work, how you deal with stress and your expectations for the business can save lots of headaches later. “Most issues are neutral when you discuss them ahead of time,” says Jane Brodsky , who ran a barre-and-spin studio with a partner for 10 years in Washington, D.C. “But in the heat of the moment, issues become personal and larger than they need to be.”

Here are crucial questions that should be settled at the start to help make the partnership succeed.

How did your family communicate?

Maybe you were raised in a family that talked through disagreements to find solutions. But maybe your partner grew up in a house where the loudest voice won. That could be a problem when issues arise in the business: Experts say that when people are under stress, they often fall back on behaviours that were imprinted at home—and different styles could clash.

At Happy Being, a company that sells nutritionally enhanced teas and drink powders, the three co-founders discussed communication style before they started the business. “We discovered that one partner gets triggered if he feels no one is listening,” says co-founder Dutch Buckley . “It goes back to an early fear of not being heard.” (For his part, co-founder Josemaria Silvestrini says that early on he “definitely needed the validation of being recognised and being right.”)

So, the three work at making sure everyone has a say in meetings, and they made a rule that no one’s work is ever belittled. On the flip side, when someone on the team accomplishes something, someone else on the team draws attention to it.

What does success look like to you? And failure?

While these may seem obvious—like, the business either succeeds or fails—everyone’s definition is different, and they are surprisingly specific. Certainly, monetary goals or anything that can be enumerated will help partners envision each other’s goals. Is one looking to grow slowly with customers and suppliers in the community and get to better than break even after three years, while the other wants to be cash-flow positive in year one and scale quickly to sell the business to a larger entity after 10 years? There’s a lot of success and failure in between those two outcomes, depending on your perspective.

Silvestrini of Happy Being recommends hashing it out together on the whiteboard until everyone agrees on an explicit definition of success for the company. “Hopefully, it’s an easy 10-minute conversation,” he says. “Because if founders have different objectives, the boat is going nowhere.”

What does everyone bring to the table?

It is crucial to discuss what each partner is contributing to the partnership in terms of expertise, experience, network and money. Kathryn Zambetti , an executive coach specialising in founder relationships, recommends taking an honest strengths-and-weaknesses inventory of yourself and your partner and then discussing what you both bring to the table. The exercise will help delineate which responsibilities naturally suit each partner, and it will highlight areas that will require additional work or outsourcing.

The clearer the roles can be defined, the better. If you are opening a bakery, you and your partner shouldn’t both be good at just making bread. Someone needs to handle marketing, suppliers, leases and licensing, financials and hiring and managing employees.

Why are you doing this?

You and your partner need to be in complete alignment on your motivations. Does this venture need to support your family or merely add to your vacation fund? Are you doing it to prove your father or your high-school econ teacher wrong? Any answer other than unfailing commitment to the mission or the product is a red flag.

“Your north star has to be something bigger than money to succeed,” says Buckley. “People will go through things that test them, but if money is the only motive, that won’t be enough.”

What pushes your buttons?

Just like in a marriage, you want to know best how to support and protect your business partner. Understanding what puts each of you in a fight-or-flight mode can be key to getting the best out of each other.

Do you need to be consulted on all decisions, or just major ones? Do you need to be recognized as the leader and sit at the head of the table? Do you fear having to downsize your home if the business fails?

What does your workday look like?

Does a day at the office mean working 9 to 5? Can the work be done remotely and on your own time? If you work well at night and need rapid responses to questions, is it a problem having a partner whose phone goes on “do not disturb” every evening at 7? Having the conversation and understanding expectations is key.

When Buckley started Happy Being, the team learned that one of the partners got up very early. “I had to tell him, ‘We don’t want 6 a.m. calls.’ ”

Do you like taking gambles?

A penchant for lottery tickets, Las Vegas gambling or high-adrenaline activities like skydiving shows a potential partner’s tolerance for risk and whether that aligns with your own. There will be countless decisions early on in a business concerning risk, and the partners need to be on the same page.

So ask about it. You go into the venture planning and hoping for success, but how much money or time is your partner willing to lose if it doesn’t succeed? How much of their parents’ or in-laws’ money would they bet on the partnership?

Is the business more important than the friendship?

Many business partners start as friends. But would you each be willing to give priority to making the right decision for the business, even if it means possibly hurting the friendship? Would you each be capable of letting the other one go if it was better for the company? Most advisers recommend choosing a partner who has a common business goal and letting the friendship build from that, rather than trying to build a partnership on top of a strong friendship.

“Your business partner will be one of your most intense relationships, but it shouldn’t fulfill every role in your life,” says Amy Jurkowitz, entrepreneur and co-founder of branding adviser Bread Ventures. “You need to be compatible in how much energy you will both put into the business.”

If the partnership doesn’t work out, how will it end?

A co-founder relationship is a binding agreement with financial and emotional repercussions, just like a marriage. But starting a business has the added stress of having the company—the baby—arrive on day one. If there is a divorce, who gets custody?

The more specific you can be about potential breakups, the better. If you are both putting capital in at the start, would you expect to get that out if you exited? What if, several years in, one partner can’t continue to struggle without a regular paycheck and leaves—and the next year the company finally turns a profit or is bought by another company? Would the partner who left get a share of the money?

These discussions should help make it clear that the survival of the company—and not the partnership or the friendship—is the ultimate goal. Those who have been through a business breakup recommend involving a third party to help sort through these issues at the outset.