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Salad Vending Machine Business Plan Proposal


Introduction: Reason/Rationale

Ideas and Opportunities

It is recognized today that successful businesses start with a good idea. At an early stage of business development, it occurs to an entrepreneur what can be invented or created to address existing demand that is not sufficiently addressed, meet uncontested needs of certain customer groups, or create new demand (Ward 2016).

However, it should not be overlooked that ideas may not always be feasible, which is why more emphasis is placed in today’s business planning on opportunities, i.e. actual conditions in which an idea can become a reality. In the presented business plan, the idea is to provide more people with access to healthy snacks and lunches; the opportunity is the existence of many organizations and facilities in which people are deprived of such access despite their willingness and readiness to eat more healthily daily.

Creating Opportunities

Opportunities are not always existing conditions or settings; there is also the concept of creating opportunities, i.e. creating conditions for a business idea to be implemented. A major component of creating opportunities for a new business is exploring the demand, i.e. examining and assessing customer groups, conducting marketing research, and spending more time communicating with potential customers via various available media. Communication will be an integral part of creating opportunities for the implementation of the presented business plan, as it is recognized that more potential customers should be reached to be informed of the new service—the salad vending machines—and feedback should be collected from them on how the vending machines should be designed to address customers’ needs optimally.

Resources and Information Asymmetries

Information asymmetries, i.e. situations in which one party has more sufficient and more relevant information concerning planned transactions than the other party, are a threat to successful cooperation. Extensive communication is a way to reduce risk. In the presented business plan, the need is recognized to communicate constantly with suppliers, organizations that will host the vending machines, and customers. Concerning resources, it is necessary to establish strong relationships with suppliers because the vending machines are to be refilled daily. Also, an important resource is a workforce: it will be needed to hire people to maintain the vending machines, i.e. fill the jars, deliver all the products to the vending machines, and collect revenue.

Career-Relevance

The purpose of the proposed business is to provide customers with opportunities to have healthy lunch or snacks without having to stand in a queue or wait for their orders. Primary locations that will be considered for placing salad vending machines are organizations that do not have cafeterias in their buildings or food services around them, i.e. those organizations the employees of which may find it difficult to have lunch during their breaks and they, therefore, have to bring food with them (if it is allowed), order delivery, or travel rather long distances to have lunch.

Apart from organizations, educational facilities will be considered—first of all, universities. The vending machines will offer a variety of options. First, customers will be able to buy packed salad mixtures in glass canning jars or plastic containers. Dressings will be supplied along with the mixtures and placed under the lids in separate containers.

Also, customers will have options to choose different dressings. Further, there will be options for customizing the content of a salad, i.e. people will be offered separate ingredients, and the machine will provide them in plastic jars, after which a customer can combine them on his or her own in a plastic plate; any dressing can be chosen for these custom mixtures. Also, healthy vegetable-based snacks will be offered in the vending machines in smaller containers; they can be bought separately or in addition to the chosen salad.

One of the advantages of vending machines is that, unlike cafés or stores, they are available around the clock, which is why it is proposed that the vending machines are not disabled at any time during the day or at night. There is also the need for powering the vending machines constantly due to the nature of products contained in them: to be preserved in an appropriate condition, vegetables, and other ingredients need to be stored under low temperatures, which is why the vending machines will function as refrigerators, too; this is particularly relevant for hot countries. However, the around-the-clock functioning of the vending machines will not mean the around-the-clock availability of salads; the machines will be refilled daily in the morning, but not too early so that the products remain fresh by the time when the highest point of customer activity is expected, i.e. during lunchtime.

The proposed business plan describes a business that is to be launched and not an existing one. However, it is taken into consideration that similar services have existed for years in many places around the world (see Appendix 1). What is specific about the proposed business plan is that, along with addressing the universal need of customers that can be found virtually everywhere, i.e. the desire to have tasty and healthy food available for lunch, it will explore the local market of the United Arab Emirates and potentially the markets of the GCC countries to adjust the business idea to the context of these countries.

Description of Business

The proposed business is to be operated based on three major components: preparation stations, delivery, and vending machines maintenance. A preparation station is a place where products are received from suppliers, appropriately processed (washed, dried, chopped, possibly roasted, boiled, grilled, or otherwise cooked, and mixed) and packed into different types of containers. It is expected that one person will be capable of preparing all the necessary products to be supplied to one vending machine for one day.

Apart from being supplied food products, the business will also require a supply of containers (glass canning jars and plastic containers of different sizes) and labels. The labels will display the name of an item, the business’s logo, and additional information, such as nutrition details so that a customer can track his or her consumption of calories, proteins, fats, and carbohydrates.

Also, detailed information on the content of a jar should be written on the label so that a customer can avoid consuming products to which he or she is allergic or of which he or she is intolerant. The same information is to be displayed on the screen through which customers will interface with the vending machines. Preparation stations are to be situated according to the network of vending machines’ locations so that one preparation station could service several locations, which will increase the speed of delivery and raise the efficiency of operation.

The delivery element of the business primarily involves transportation. Vehicles used for delivery are to be equipped with refrigerators to ensure that the food products are not affected by the heat outside and brought to the vending machines for refilling fresh and with all the nutrients preserved. Upon delivery, the person responsible for this part of the business should suspend the work of a vending machine, i.e. limit the access of customers to it, remove all the items that are about to expire, i.e. that will be expired by the next time the vending machine is attended by this employee, which is 24 hours later, and refill the vending machine by placing fresh items into appropriate rows. Items whose expiration dates are sooner will be placed closer to the upfront end of the rows so that they are dispensed first.

It is expected that some items will be more in demand, which is why the rows of products will not be equal, and there will be the need to prepare more of some mixtures or ingredients than other; this consideration is to be constantly monitored by assessing which items are consumed more, and which ones are often removed because they expire before customers buy them. For this purpose, the employee responsible for delivery and refilling will be asked to keep track of the consumption dynamics, i.e. to keep a record of those items of which the vending machines run out fast and of those which regularly stay in the machines until their expiration dates.

The maintenance of the vending machines will mostly consist in refilling and checking the technical performance characteristics; the latter is not difficult and can be performed by a person who is not a technical specialist, which is why this responsibility will be listed in the job description of the person responsible for delivery and refilling. However, the vending machines may have hardware- and software-related issues that will require the attention of specialists. It is not expected to have a technician as a full-time or part-time employee as part of this business. Assistance from technical specialists will be needed on the stage of installing the vending machines (apart from the stage of designing them), and occasional maintenance services will be carried out by outside service providers.

Product and Services

The products of the business are salads, dressings, breakfast dishes, and snacks. The service is enabling customers to purchase the products from vending machines that make the process easier, more accessible, and expectedly more gratifying. Concerning products, the proposed business mustn’t purchase ready meals from suppliers. Every item will be prepared in preparation stations according to approved recipes. To design the menu, nutrition and healthy food specialists need to be consulted.

Consultations are expected to be regular, as it is expected that the menu can be modified for several purposes; for example, different menus can be created for different seasons according to the availability of seasonal vegetables and fruits; also, the menu can be reconsidered according to customers’ preferences and feedback; finally, new items can be launched once in a while to attract the attention of more potential customers and increase the interest of existing and loyal customers. Not only ready meals will not be purchased from suppliers (but prepared in preparation stations instead), but also dressings will be custom; by preparing custom dressings, the business will, first, ensure their freshness and, second, create recognizable tastes; it is acknowledged that the recognizability of a product contributes to building customer loyalty.

Concerning services, the main aspect of introducing vending machines is increasing the availability of healthy food. The proposed business will not only supply healthy snacks and salads but also make it much easier for customers (especially those who may find it difficult to find a place to have lunch) to access those products. Apart from easiness, another aspect of customer experience that is expected to play a significant role in business development is the enjoyability of using a vending machine. In a café, people are served food by other people; in a store, people buy food—again, mostly from other people; vending machines, on the contrary, are pure self-service.

There has been a debate among researchers on what factors contribute to the customers’ choice between self-service and personal service. For example, it has been observed that such factors include ‘[p]erceived waiting time, perceived task complexity, and companion influence’ (Wang, Harris & Patterson 2012, p. 54). As part of such studies, it is emphasized that customers may find gratification in using self-services. From the experience of interfacing with a vending machine, seeing the automatic movements inside it, and collecting items, customers develop stronger feelings toward the products they purchase that way; they tend to feel that they ‘earned’ the product they buy more than they would feel from buying it from a store or ordering it in a café. This psychological consideration is important for understanding the potential mechanisms behind promoting the salad vending machines.

Another important psychological consideration consists of the benefits of having the option of customizing one’s salad. By contributing more effort and more creativity to their lunch, people may develop certain attachments to the vending machines because using the machines gives them the gratification of preparing their lunch in a way, for which they may not have time or opportunities (Hrudka 2012). This principle of customer participation in the process of preparing food for his or her can, therefore, be a mechanism of increasing customer loyalty.

A particular aspect of the service provided by salad vending machines is the interface. The machines will have large touchscreens on which available options will be displayed in a user-friendly manner. The menu will be divided into categories: breakfasts, salads, snacks, custom dishes, and dressings. It should be noted that some dressings are placed in separate containers inside the salad jars, but a customer can order additional containers with dressings in case he or she likes more seasoned salads or orders a customized meal. When choosing a particular dish, a customer will see on the screen the contents of the dish, a picture of it, nutrition information, and prices.

When choosing the custom dishes options, a customer will be offered a list of available ingredients. It is planned that the system will be ‘smart’ in terms of advising certain combinations and calculating nutrition indicators. For example, after having a customer choose the first ingredient for his or her custom dish, the system will advise what ingredients go well with it. As the customer chooses ingredients, the nutrition information will be calculated in real-time, updated, and displayed on the screen with each alteration of the custom dish’s content (adding or removing an ingredient). When the combination is completed, the customer will also be recommended a kind of dressing that will fit the custom salad the best. The vending machines will accept cash and bank cards; for cash payments, they will be able to give back change.

Target Market

In launching a new product, market research is an integral component because it should be clearly explained how the service will meet the needs of customers and what demand it will address. For the proposed business, it is proposed to primarily target those groups of people who work in organizations that do not have cafeterias in their buildings or places where they can go for lunch near them.

It is expected that these people will help establish the business and the recognizability of the salad vending machines and will enable further expansion by introducing the vending machines to those organization the employees of which do have lunch options, and a new one will be provided to them; it is expected that salad vending machines will be capable of competing with existing food services. Apart from organizations, it is also proposed to place the vending machines in universities where students are also in need of more easily accessible options to have lunch.

What shapes the confidence that the salad vending machines service will be in demand and will be able to compete is that targeting is not based solely on geographical and logistical factors, i.e. the service will not be offered to people solely based on the consideration that, without this service, they would have to bring lunch from home, order delivery, or travel long distances to have lunch. Another important targeting and positioning factor is that the salad vending machines will offer healthy food.

The benefits of eating healthily are widely known, and it can be assessed that more and more people in the world commit to healthy food. Moreover, there is a shift described by researchers from viewing unhealthy food as something tasty (Werle, Trendel & Ardito 2013), i.e. more people acknowledge that healthy food can be tasty and enjoyable.

Using the benefits of healthy eating in targeting and marketing research is therefore pivotal. The proposed business will not offer people something to eat; it will offer something healthy, diverse, and tasty to eat. The benefits of this are most evident for office workers because their lifestyles often exclude active physical exercising, which is why many of them acknowledge that they should pay more attention to what they eat.

Another possible target group is people who want to lose weight: the service will allow them to consume balanced combinations of products in reasonable portions and with the consideration of nutrition indicators of each ingredient; all this will contribute to their healthier lifestyles and higher chances of losing weight. Marketing research, therefore, will consider two major groups that may overlap: people who have limited lunch options and people who are interested in eating more healthily.

Market Analysis and Entry Strategy

Market analysis and market entry strategy are closely connected to targeting explored in the previous section. Market analysis more closely examines potential customers and, apart from their interests, assesses their willingness, readiness, and opportunities to buy new products and services. It is expected that a major factor that will attract customers in the early stages of launching the proposed business is its extraordinary nature. Salad vending machines are rather rare, although they have been introduced in several countries around the world, such as the United States (see Appendix 1), it is still rather unusual to encounter a vending machine that dispenses salads, especially in the UAE. This initial interest is expected to boost further development and expansion of the proposed business.

Market analysis necessarily should take into consideration the local specificity of a given market, and entry strategies should be based on it. For the UAE, the main topic to be explored in this regard is people’s attitudes toward healthy food, as those attitudes largely shape healthy eating-relating behaviors. A major question to be asked in this context is ‘What can stop people from eating more healthy food?’

In asking this, an assumption is being made that more people should commit to eating healthily because this practice brings many benefits, but there are barriers. Those barriers have been studied, and, according to Musaiger et al. (2013, p. 1), ‘lack of information on healthy eating, lack of motivation to eat a healthy diet, and not having time to prepare or eat healthy food [are] the main barriers to healthy eating among both genders [in seven Arab countries, including the UAE].’ These three factors provide important market insight, as they can be used as the basis for building promotion strategies for the salad vending machines.

First of all, a lack of information is to be addressed through extensive communication with targets and potential customers. Social networking services campaigns will be integral for launching the proposed business, as it is recognized that more people should be reached and told the benefits of eating healthily so that their interest in the vending machines is higher. The third factor, the lack of time to prepare healthy food, is exactly the barrier that is particularly addressed by the introduction of the salad vending machines: people no longer have to prepare healthy food themselves or wait in line for it or go to places where it is served. Instead, they can approach a vending machine and receive a portion of healthy food, optionally customized, within a minute or even less.

The second factor, i.e. the lack of motivation, appears to be the most challenging one because even communication campaigns and increased accessibility of healthy food do not guarantee higher motivation to consume such food. From a psychological perspective, it can be assessed that increasing motivation is about demonstrating positive outcomes. It is expected that motivation can be raised by communicating different benefits of eating healthily to targets; for example, it can be done through personal stories from people who have committed to the healthy salad diet and thus improved their health, lost weight, or started feeling better and more energetic every day. These three components will constitute the basis of the market entry strategy for the proposed business.

Sales and Revenue

Each salad will cost differently based on the cost of ingredients. It is planned to sell salads in glass canning jars starting from 18 AED (approximately 5 USD); the average price will be 25 AED (approximately 7 USD). The custom salad option will cost starting from 22 AED (approximately 6 USD). Breakfasts and snacks will cost a little less due to their smaller net weight. The price of custom dishes will be calculated automatically and displayed on the screen in real-time as the customer chooses ingredients.

The cost of dressings will be included in the cost of ready salads; for custom options, however, it will be required to buy the dressing separately. Cutlery, i.e. plastic knives, spoons, and forks, will be placed in separate sections outside the vending machines so that customers can take them for free along with plastic plates needed to mix custom salads. All the information on products, such as nutrition information displayed on the screen, will be provided for free, too.

Revenues will be collected from the vending machines by the person responsible for refilling the machines every day; however, a certain amount of money will need to stay in the machine so that it can give back change. An additional source of revenue is the mobile application that will be created as part of the proposed business. Customers will be charged a small fee for downloading the app, through which they will be able to familiarize themselves with the menu and to create their stock, i.e. order certain salads or other dishes to be placed in the vending machine that they use. It is also expected that customers will be interested in downloading the application because it will provide them with special offers that will be available only to those who have the application.

Financials

Two types of financial documentation will be provided as part of the presented business plan: pro forma income statement (Table 1) and a pro forma balance sheet (Table 2).

Table 1: Pro Forma Income Statement for the Salad Vending Machines Business for the Year Ending on December 31, 2017 (in USD)

End of
2017
End of
2018
End of
2019
End of
2020
End of
2021
Gross Sales 300,000 1,440,000 2,160,000 2,880,000 3,600,000
Cash Discounts 5,000 24,000 36,000 48,000 60,000
Net Sales 295,000 1,416,000 2,124,000 2,832,000 3,540,000
Total Available for Sale 240,000 1,152,000 1,728,000 2,304,000 2,880,000
Cost of Goods Sold 200,000 960,000 1,440,000 1,920,000 2,400,000
Gross Margin 95,000 456,000 684,000 912,000 1,140,000
Salaries 28,000 134,400 201,600 268,800 336,000
Supplies 60,000 288,000 432,000 576,000 720,000
Advertising, Consulting, and Promotion 20,000 24,000 24,000 24,000 24,000
Delivery 2,000 9,600 14,400 19,200 24,000
Maintenance 2,500 2,400 2,400 2,400 2,400
Total Operating Expenses 102,500 458,400 674,400 890,400 1,106,400
Net Operating Profit (Loss) -7,500 -2,400 9,600 21,600 33,600
Income Taxes 0 0 0 0 0
Net Profit (Loss) After Income Tax -7,500 -2,400 9,600 21,600 33,600

The general assumption made in the calculations is that ten salad vending machines are initially launched; their number by the end of 2018 is 20; 30 by the end of 2019, 40 by the end of 2020, and 50 by the end of 2021. Other assumptions are as follows: 50 items at the average price of 6 USD are sold daily from each machine out of 60 items put in each machine; the average cost of producing each item is 4 USD; items are mostly sold during workdays; salaries include payments to people who work on the preparing stations and deliver items to the machines; advertising, consulting, promotion, delivery (cost of transport), and maintenance are counted separately.

Table 2: Pro Forma Balance Sheet for the Salad Vending Machines Business

Opening End of 2017 End of 2018 End of 2019
Total Current Assets 55,000 250,000 440,000 650,000
Total Fixed Assets 65,000 200,000 250,000 250,000
Total Assets 120,000 450,000 690,000 900,000
Total Liabilities 111,000 408,000 615,000 790,000
Owner’s Equity 9,000 42,000 75,000 110,000
Total Liabilities and
Owner’s Equity
120,000 450,000 690,000 900,000

Organization

Until the end of the current year, it is expected to hire two people part-time, which is expected to be sufficient to operate one preparation station, which will service all ten salad vending machines, and the machines themselves, i.e. have an employee to deliver items to the machines’ locations. As the business grows, and ten more machines are launched each of the four upcoming years, it will be needed to expand the staff according to machines’ locations, which will be a consideration in launching new preparation stations and planning the logistics. A manager will be initially appointed to overlook the process on every stage.

Exit Plan

It is recognized that value can be lost due to inadequate exit planning, i.e. lack of proper strategy concerning the transfer process. Today, the role of intermediaries in the process grows to be more appreciated, especially for small businesses (Battisti & Williamson 2015). For the proposed business, it is planned to hire professional assistance in terms of consulting on successful exit planning at the early stages of launching, and the cost of such consulting is included in the expenses along with professional healthy eating consulting.

An integral part of exit planning for the proposed business is succession planning, i.e. planning from the very beginning who will manage the business in the future. However, further prospects should be considered, too, such as acquisition, e.g. transferring to potential buyers, including current employees. For this purpose, the business will be organized in a way that will allow transactions and enable hired managers for purchase in the future by providing them with appropriate instruments of currently managing all the aspects of the operation.

Reference List

Battisti, M & Williamson, AJ 2015, ‘The role of intermediaries in the small business transfer process’, Small Enterprise Research, vol. 22, no. 1, pp. 32-48.

Hrudka, B 2012, .

Musaiger, AO, Al-Mannai, M, Tayyem, R, Al-Lalla, O, Ali, EY, Kalam, F, Benhamed, MM, Saghir, S, Halahleh, I, Djoudi, Z & Chirane, M 2013, ‘Perceived barriers to healthy eating and physical activity among adolescents in seven Arab countries: a cross-cultural study’, The Scientific World Journal, vol. 2013, no. 1, pp. 1-11.

Wang, C, Harris, J & Patterson, PG 2012, ‘Customer choice of self-service technology: the roles of situational influences and past experience’, Journal of Service Management, vol. 23, no. 1, pp. 54-78.

Ward, JL 2016, Keeping the family business healthy: how to plan for continuing growth, profitability, and family leadership, Palgrave Macmillan, New York.

Werle, CO, Trendel, O & Ardito, G 2013, ‘Unhealthy food is not tastier for everybody: the “healthy= tasty” French intuition’, Food Quality and Preference, vol. 28, no. 1, pp. 116-121.

Farmer’s Fridge Salad Vending Machines in Chicago.
Appendix 1: Farmer’s Fridge Salad Vending Machines in Chicago
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IvyPanda. (2020, September 6). Salad Vending Machine Business Plan. Retrieved from https://ivypanda.com/essays/salad-vending-machine-business-plan/

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