I guess I was a little harsh with my words, I should have said "a lot of money". My father and I looked into vending routes a while ago, but no one was able to really show how much money was made. Not one person that we found that had the routes actually kept good books to show the take. Cash businesses are very hard to truly tell what they are worth. Like someone said you would need to ride the route with the person and actually see how much money is coming out of the machines.
Cash businesses have always been the 'cats meow' of self employed operators for a hundred years. For the longest time cash was king and so much of it went unreported.
The most desirable cash business back in the '70's & 80's were coin operated laundromats. That cash cow ended when the IRS began to monitor the water and electric consumption of the laundromats and began auditing the business for what they term 'reasonableness'. When a laundromat uses (just for instance, don't know the actual figures) lets say 200,000 gallons of water in one month and only reports monthly income of say $1,500, the IRS says that doesn't make sense. They might come up with a corresponding income of say $20,000 per month with water usage of 200,000 gallons. So under reporting cash became a lot harder to get away with.
I mention the laundromat because the IRS probably has a similar test for reasonableness with vending machine routes. When you make your purchases of snacks, soda, water, novelty items, etc. to refill your machines, the IRS probably has a formula for how much you are expected to make based on those purchases. We all know it isn't exact, but it sure gets them closer to their 'self imposed deserved' take.
The IRS has done the same thing for the cash business of being a waiter/waitress. Minimum wage used to be (in the '70's) what a waiter would report to the IRS as their income. This was ridiculously low because waitstaff were paid LESS than the standard minimum wage because they received tips to offset their salary. The IRS knew tips weren't being reported, so they began to monitor the amount of the receipts (checks) each waiter served during their shift (they required the restaurant owner to 'self police' this).
Bottom line is, cash businesses are obviously still great, but there are ways to determine how truthful (to a point) a route owner is being about their income on the route. Definitely ask to see their purchase records. If they have $250 of monthly purchases, don't believe they are making $7,500 month in cash income. You can apply the same determination of reasonableness that the IRS employs.
Russ
