LAS VEGAS - Few operators have had such a significant impact on the bulk vending industry as The Amusement Factory's Fred Simon. This is true both in regards to the size of his business as well as his influence within the National Bulk Vendors Association.
Known as one of the toughest competitors in the business, Simon has also shown equal enthusiasm as a tireless advocate for the bulk vending industry. We recently sat down with Simon to discuss the expansion of his operations and to elicit his opinions on the upcoming NBVA convention in Las Vegas.
VT: Your company, The Amusement Factory, is arguably the largest bulk vending operation in the country. Is this correct?
SIMON: I don't know if it's arguably or not; I think we are. We can argue about it, if you want, but I'd probably win that argument.
Can you give me a rundown of how many states you operate in today? Is that an accurate measure of Amusement Factory's size?
We operate in 40 states and have 16 satellite offices. I'd estimate that we probably have 28,000 locations, which total about 300,000 coin mechs.
Is it accurate to say that nothing like The Amusement Factory has existed in the bulk vending industry? Twenty years ago, there were no large companies like The Amusement Factory. What led to its formation?
I don't know how accurate that is. There is at least one other company that is similar. I don't know if they are as diverse as we are, but they are similar in size. However, I can speak to you about my company's growth. When I first got into the bulk vending business about 20 years ago, I was moved aside in my first couple of weeks. My equipment was moved to a less desirable part of a location and there was someone else's equipment in its place. I couldn't understand how people got to do that. Why would another operator with different equipment be able to move my equipment to a poor spot within the location? That experience stuck in my mind. Finally, I realized that instead of being the "vending machine guy," I should become the "real estate guy." I had the space , the account , and if I did the right numbers for that account, it would let me put any kind of equipment that I wanted to in that space.
Did this play a role in your company's growth?
I thought that was an important factor because all the companies out there were one-dimensional. It seemed to me that an account would be more apt to let one company supply all of its machines as long as that company did a good job. It was a better arrangement for the location because rather than working with five different operators, he'd only have to deal with one company. There would be one check, one phone call for service and one route driver who didn't bother personnel in the store. But I always knew we had to do a good job in servicing all of these different types of equipment or it wouldn't work.
Much has been made of you going in and buying smaller routes. Was your strategy for The Amusement Factory solely growth through acquisition?
I think it was growth through internal expansion and acquisition. It's a 50-50 thing. Here's how I would explain that to you. If you buy a company that has a bulk vending rack in a particular location, and then you put in a crane machine, kiddie ride and sticker machine, does that qualify as internal growth? Absolutely. You bought the bulk vending company, which was an acquisition, and then you grew that company by adding equipment. That's internal growth.
Was that key to your expansion and acquisition strategy?
Absolutely. If you look at all the companies we acquired over the last five years , 15 or 16 of them , I would say that in the majority of cases we added additional classifications of equipment into those existing locations. It was the locations that were important, not necessarily the equipment in those locations.
How would you describe the strategy?
Density, density, density. We look to achieve density within our routes to become more profitable. That means density within the location by bringing in additional and different kinds of equipment, along with density within the geographic market with additional locations.
It has also been suggested that, aside from the acquisitions, your success can be attributed to your deep pockets.
I've heard that a few times and anybody who thinks that way is obviously not thinking clearly. It doesn't matter how much money you have if you can't operate your company efficiently. If you can't operate in the field, then you start losing accounts and you can't pay the debt off. Every good operator knows this is a very difficult business. This is not throwing gumballs into gumball machines. And it's not throwing plush into boxes. You need to refurbish kiddie rides; you need to merchandise bulk vending machines; you need to buy the right kind of plush; you need to have a great field operation that works smart and efficiently; and you need to micro-manage your business, whether it's a huge operation like Amusement Factory or a small route. Things haven't changed here since we've gotten larger, in fact, we still can talk about our stores in Chicago, our stores in L.A. or our stores in Lafayette, Indiana. We can talk about any location you want and I'll tell you what equipment is in that location and what products they hold. I'll tell you when that product has been rotated and when the equipment has been rotated. You still have to be a good operator no matter how large your business grows.
So, all the money in the world won't help you, if you're not a good operator?
Think for a second. Why would anybody give you all the money in the world unless you were doing a good job? If you had all the money in the world, would you give it to some goofball? Listen, the good operators won't lose their edge just because someone has more money than they do.
What about those operators who say that you're going after their small locations, their mom-and-pop accounts?
I have not gone after any small or mid-sized operators' locations. I'm so busy that I don't have time. They aren't talking about me when they say that; they can't be talking about me. The small operators who I know I'm proud to call my friends, and I admire them. We talk all the time. I like the small operators. I learn more from those guys than I learn from competitors my size.
What about the current trend in consolidation, with mid-sized operators buying up smaller operators? Is this a good thing or a bad thing? And does it mean that we've seen the last of the small operator?
I don't know if it's good or bad. I think it's a change. Time will tell if it's good or bad. If they can do it and make enough money to buy the next one, then it was a good move. But the customer is ultimately the decision maker on whether it was good or bad. As for the demise of the small operator, you can judge that by how many people show up at the bulk vending show. People always say, "The reason Joe isn't here anymore is because Fred bought his company." Then you turn around and there are five more Joes. There have been more people than ever before at the bulk vending shows since my competitors or I started acquiring companies. I remember when I was president of the bulk vending association three years ago, we had the 50th anniversary and there were more people there than in the history of the association. And those levels have been maintained in the last three or four years.
Are you still in acquisition mode?
Switching topics. When you became president of the NBVA, one of the first things you set out to do was make it a more inclusive association. Do you think it's more inclusive today?
I can't take all the credit for that and it wasn't just when I was association president. That's what me and a few other guys started 20 years ago. Many people in the industry today don't remember when there was no membership list sent out. They don't remember when the rules were made by a very few people. They don't remember when operators weren't invited into the association or you wouldn't be recognized in a meeting if you didn't know Roberts Rules of Order. It's open now.
So, you were gratified when people stood up in meetings and yelled at you?
I think it's terrific. One of the best things that ever happened to me at a meeting was when a New York operator got up and started yelling at me and said, "Fred Simon, the problem with you is you don't think outside of the box!" That's all I ever tried to do, since I became a member of the association, was think outside the box.
So, you're gratified with the new members coming in and taking an active role?
Absolutely, but I would like to be one of them again. Now I almost feel like I did when I was a new member. There were just a few of us young guys and nobody would talk to us. We just sat in the back of the room and talked among ourselves.
Do you still invite smaller operators to talk to you?
You know that I do. I love that stuff. That's what you do. There are smaller operators out there who I have gone out of my way to try to talk to and help. But people are a little bit afraid. Just like I was a little afraid to talk to the large operators.
What kind of convention are you looking forward to?One that isn't boring. One that has new, fresh ideas with smart business people who change the industry with new products and can help bulk vendors maintain the edge that they've always had over other kinds of vending machine people. And people who have that entrepreneurial spirit and want to exchange ideas with one another. I hope that doesn't go away. I hope someone gets up at a meeting and starts shouting at somebody.