Coffee vending machine franchise: what the brand costs and what to check

A coffee vending machine franchise promises an easier start: a brand, a method and a network. In return, it takes its share through an entry fee, royalties and mandatory purchases, and that share weighs directly on the profitability of each machine. Before you sign, you need to know exactly what you are buying, what you will pay each month and what happens on the day you want to leave.

This article does not say that a franchise is a bad choice. It sets out the points to check so you can compare a franchise offer with buying a machine outright, with the figures in front of you.

What a vending franchise really sells

In self-service coffee sales, the word "franchise" covers very different offers. Some are genuine franchises: a brand, transferred know-how and support for the whole term of the contract. Others are brand licences, dealerships, or simply equipment sales with a little help at the start.

So the first question to ask is simple: what in this offer could you not buy separately? Depending on the network, the answer may be:

• the brand's reputation with host venues and customers;
• finding locations and negotiating with venues;
• negotiated purchase prices on products and consumables;
• training, technical support and management tools;
• national marketing.

If the answer comes down to the equipment and a few days of training, you are paying for a brand without getting much out of it.

What you pay, and when

The cost of a franchise is not just the price of the machines. It usually breaks down as follows:

• The entry fee, paid on signing, to join the network.
• The operating royalty, often calculated as a percentage of revenue and due every month.
• The marketing royalty, which funds the network's advertising.
• Mandatory purchases: products, cups and spare parts bought from the franchisor or from suppliers it designates, on its terms.
• The equipment itself, bought, rented or provided, depending on the network.

The point that matters most for profitability is that a royalty on revenue is paid on sales, not on margin. It is due even in months when the machine earns little. And a slightly higher mandatory purchase price on each drink cuts your margin on every cup sold.

To measure the effect of these charges, run the full calculation: revenue excluding VAT, variable costs, fixed costs, break-even point. The method is explained in detail in our article on coffee robot profitability. Run the numbers twice, with and without royalties and extra purchasing costs: the gap shows what the brand costs you.

The DIP: the document to read before any commitment

In France, a network that makes its brand available while requiring exclusivity or near-exclusivity must give the prospective partner a pre-contractual disclosure document, known as the DIP (document d'information précontractuelle). This obligation comes from the Loi Doubin (the Doubin Act) and is set out in Article L330-3 of the French Commercial Code (Code de commerce). The DIP and the draft contract must be provided at least 20 days before the contract is signed or before any money is paid.

Among other things, the DIP must present:

• the franchisor's experience and how long the network has existed;
• the general and local state of the market;
• the list of network members and the number who left in the previous year;
• the term of the contract and its conditions for renewal, termination and transfer;
• the scope of any exclusivity.

Read the section on departures carefully. A network that loses many members every year should be able to explain why. Call a few current franchisees and, if possible, a former one.

The DIP does not have to include a financial forecast. If you are given one, ask what assumptions it is based on (number of sales per day, average price, type of venue) and test them against your own locations.

The clauses that weigh on profitability

Beyond the amounts, certain contract clauses decide what you will have left.

Term and renewal. A long contract protects your investment, but it also ties you to the royalties for that entire period. Check whether renewal is automatic and on what conditions.

Territorial exclusivity. Without it, the network can place another member, or its own machines, right next to yours.

Exclusive supply. If you have to buy everything from the network, ask for current prices and how they change over time, and compare them with the market.

The contract with the host venue. This is the most important point in vending. Who signs with the train station, the shopping centre or the company hosting the machine: you or the franchisor? If it is the franchisor, you risk losing your locations when you leave the network. The clauses to negotiate with the venue are covered in our article on the location contract.

Exit. Can you sell your machines, and to whom? Does the franchisor have to approve the buyer? Does a non-compete clause stop you from carrying on independently, at the same location, after the contract ends?

These points should be discussed with a lawyer who knows franchise law, before you sign. Also think about tax and regulatory matters: they apply whether or not you are a franchisee, as explained in our articles on taxation and regulations.

Franchise or owning your machine: the real comparison

The question is not "franchise or not", but: does what the brand brings in earn you more than what it takes?

With a franchise, you pay for a framework and support. With a machine you own outright, you keep the full margin, but it is up to you to find locations, negotiate with venues and organise operations. A coffee robot also changes the picture compared with a traditional vending machine: it is a complete point of sale that prepares coffee-bar-style drinks, and its profitability depends above all on the location and the products on offer. Our article coffee robot, vending machine or franchise compares the three models in more detail.

With ROBOKAFÉ, the model is ownership: you buy the coffee robot or the ice cream robot and you operate it. The price, what it includes and margin scenarios are presented and kept up to date on our investment page. As with any machine, profitability is not guaranteed: it is built location by location.

Questions to ask before signing

Whether you are looking at a franchise or buying outright, ask the same questions:

1. What is the total cost in the first year, including the entry fee, equipment and royalties?
2. What share of revenue goes on royalties each month?
3. Are the mandatory purchase prices competitive?
4. Who holds the contract with each host venue?
5. What happens at the end of the contract, or if you want to leave early?
6. How many members left the network last year, and why?
7. Is the forecast based on locations comparable to yours?

If you are comparing a franchise offer with buying a robot and would like to talk it through, write to us: we will get back to you about your project, with no obligation.