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Issue Date: Vol. 43, No. 11, November 2003, Posted On: 11/11/2003


A&B Vending Co.'s Creativity Inspires Swift Sales Growth


Allan Z. Gilbert

One of my goals for this column is to periodically profile operators who, in my opinion, represent the best and the brightest in our industry. Although any level of success in this industry deserves recognition, I intend to write about operators who bring above-average levels of creativity, passion, intelligence, focus, intensity and/or talent to the job - all of which contribute to the success of the enterprise. I hope that other operators will emulate some of the successful practices employed by the companies I profile, since nobody has a monopoly on good ideas.
 ALLAN Z. GILBERT is a pioneer in the application of management analysis tools to vending. He founded New England Vending Corp. (Lowell, MA) in 1959, and led its expansion into a leading regional provider of full-line vending, coffee service and foodservice management. Seeing the need for faster, more detailed and accurate management reporting, Gilbert founded Data Intelligence Systems Corp. (DISC) in 1972. DISC supplied groundbreaking computer hardware and management software packages to vending companies at a time when most data processing and report generation was done by service bureaus. In 1972, Gilbert founded Lemon Tree Systems, Inc. (LTSI) to franchise a unique vending-and-cafeteria concept which eventually had franchisees in 31 states and Canada. He established Merrimac Financial Associates in 1984, and it made an initial public offering through the New York Stock Exchange in 1998. He then became managing partner of The Merrimac Consulting Group in 1988, offering services related to mergers, acquisitions, appraisal and management evaluation, exclusively to vending, amusement and OCS. A graduate of Boston University, Gilbert served as a guest lecturer in Entrepreneurial Sciences at Babson College (Wellesley, MA) in 1982 and 1983. Long active in industry affairs, Gilbert received the National Automatic Merchandising Association President's Award for legislative leadership in 1987. He is a past chairman and director of the Massachusetts Automatic Merchandising Council, and received its Chairman's Service Award in 1988. Gilbert also was honored by MAMC in 1990 for outstanding service to the industry, and has served as chairman of the MAMC Scholarship Fund since 1992. Merrimac Consulting Group is based at 462 Boston St., Ste. 7, Topsfield, MA 01983, tel. (978) 887-9633

On Saturday, the last day of the National Automatic Merchandising Association's National Expo in Washington, DC, I had the pleasure of sharing breakfast with Ed Dooley, president of A&B Vending Co. (Wakefield, MA). I met Ed and his brother John in 1987, when they started in the industry by purchasing the company from their father. At that time, the company's annual gross sales were under $400,000. I recently worked with Ed and John in their acquisition of C.C. Vending Co. (Laconia NH), which is expected bring the company's annual gross sales up to almost $12 million, and a bottom line that most operators would envy. In less than sixteen years, the Dooleys have built a successful company whose average weekly sales could soon surpass the total annual sales of the company they acquired in 1987. I know from experience that this level of success doesn't happen accidentally. To give you some idea of the kind of mindset it takes to make this happen, I must first tell you about our breakfast.

Ed was kicking back, enjoying a relaxing breakfast. The New Hampshire acquisition, which closed six weeks ago, was working well; business in general was picking up as the economy improved; for the past few days, everyone he knew on the show floor had congratulated him on the successful closing of the deal. He had already covered the convention floor on Thursday and Friday, and he was all packed to catch an early, afternoon flight back to Boston.

Over coffee, we were discussing the show and I asked, "What did you think of the Customer Service Center, shown by Advanced Manufacturing Co.?" Looking a little confused, he said, "I guess I must have missed their booth. Tell me about it."

The device is about the size of a bill changer designed to mount in a bank of vending equipment. It has a telephone handset and coin-return cup mounted on the front, and when a customer has a problem with a machine, he simply picks up the handset. The phone is pre-programmed to call the operating company, and someone from the service department takes down all of the appropriate information, such as the exact machine and selection that malfunctioned. The service center can activate the coin tubes in the device over the phone line, and the customer receives an immediate refund, in coins or tokens. I continued to describe some of the benefits:

* Immediate notification of problems/less down-time for the machine.

* Happier customers (give them an extra token for a cup of coffee for making the call).

* Faster repair (mechanic knows specifically what machine and selection is down).

* Elimination of refund change banks at the location, and the person to administer them.

* Bypass the client contact when a machine is down (the customer will make the service call).

* Great PR tool for booking new business.

As I was talking, I couldn't help but notice the almost, immediate change in Ed's demeanor. His expression went from relaxed/expansive to intense concentration, in a heartbeat. His foot was bouncing up and down, and his fingers were drumming the table. Before I could finish my coffee, he stood up, threw some bills on the table and said, "C'mon, I've got to get back to the show floor to see this." He was too impatient to wait for a cab out front, so we half walked and half jogged the four blocks back to the convention center.

It required some effort to hide the smile on my face. Ed and John Dooley have always reminded me of those famous ducks. You know, the ones that appear so tranquil as they float across the surface of the pond. But, under the water, you just know their feet are paddling furiously. They still share the same passion for success in the business they had sixteen years ago when they bought in. They practice a work ethic that seems to combine equal measures of intensity and intelligence, in a continuing desire to be the best at what they do. And they have learned the art of team-building. The entire management team at A&B appears to have bought into the program. When I asked Ed to share some of the management practices and techniques that have helped to make A&B successful, without even thinking, he said, "It has to start with hiring the best people you can find for every job in the company, and training them to do the job at the highest possible level."        

RECOGNIZE, LEVERAGE TALENT

In 1993, while buying a computer at Staples, Ed was impressed by the attitude, enthusiasm and knowledge of a young salesman named Erich Markee. Ed convinced Erich to join A&B starting as a route driver. Since route people are paid on a base salary plus commission at A & B, the company has a policy that allows route people to "bid" for the best (highest volume) routes, based upon seniority. By definition, as a trainee, Erich started with the lowest volume route. Because he was smart and ambitious, Erich quickly learned every technique he could to improve his productivity. Within a few weeks, he was finishing his route earlier and earlier, and as the company grew, new accounts were added to his route. In less than a year, Erich was running the second highest volume route in the company. He was quickly promoted so that he could implement the same techniques on all of the other routes. Today, Erich is operations manager of the company.

THE TEAM TO JOIN

When you run efficient, productive routes, you can afford to pay the highest wages in the area. A&B's Route incentive program encourages the route people to "buy into" Erich's route productivity programs. The incentive program offers the driver a base salary plus a percentage of sales, plus a bonus of $100 per week, for every week the route's sales exceed $10,000. The program apparently works. According to Ed, the company's 23 routes, (including the new branch in New Hampshire,) presently average in excess of $11,000 per week, on non-holiday/non-vacation weeks, compared to industry averages of a little more than $7,000.

I should point out that you cannot generate these kinds of numbers by simply implementing an incentive program. First you need to learn the basic elements of route productivity that teach you how, and even more importantly, when to fill each machine. Then you have to train the route personnel and convince them to implement the program. That's where the incentive program helps. I'll discuss route productivity in a future article.

SUPERVISE AND TRAIN

According to Ed, most operating companies pay lip service to route supervision. They may employ supervisors, but the supervisor spends most of his time covering routes for absent, regular drivers. A&B, on the other hand, attempts to employ one supervisor for every five route people, and the supervisors report to Manny Silvera, A&B's able route manager. The supervisors do have to cover routes for drivers who are on vacation or out sick, but that will typically amount to less than three weeks per year, per route. With only five routes, the supervisor should be available to ride with, and train his people, 37 weeks per year.

Supervisors are also required to train new drivers. However, when the company can afford to pay at the high end of the local wage scale, employee turnover is kept to a minimum.

ADOPT WHAT'S NEW EARLY

I wasn't the least bit surprised at Ed Dooley's reaction to Advanced Manufacturing's Customer Service Center. He loaded up on promotional literature and couldn't wait to run it by Bob Osgood who heads the service department. A&B has always attempted to be the first in its market area with new products or new technologies. According to John, "You don't need an MBA degree to understand that the early adopters get the most benefit."

A&B was the first vending operation in its market to test school milk vending, and it paid off big time. I'll be very surprised if A&B is not the first company in the northeast to have all of its machines DEX compliant, based upon the current rate of conversion. They have chosen inOne Technologies, USA Technologies, and Streamware as partners, and their corporate web site proudly proclaims, "We take credit cards." They can't wait to garner the additional sales and improved route productivity that will come from brand preference analysis, by machine.

All of the route people carry and use handheld computers, and when they return to the office, the information is downloaded to the company's server. By 4:00 PM, Maureen Woish, the office manager, can run all of the required reports, the same day, and the information can be accessed from any terminal. The information can even be accessed off site, using an enhanced PDA or cell phone. According to Ed, after 4:00 PM, he can punch up total gross sales, individual route sales, individual machine sales or even the number of "Snickers" bars sold by a particular machine, retrieved that day. And he can do it from anywhere (even a golf course) in the world. It would appear that A&B has leveraged Erich Markee's computer skills too.

The systems are impressive, and they're getting better every day. To date, the company has been paid by two major product suppliers to run market tests in their DEX-compliant machines.

The brothers are always open to new ideas and concepts. When we were discussing their potential acquisition of C.C. Vending in New Hampshire, and I described the costs that could be eliminated if they chose to run it as a depot, they jumped on it, and they were able to submit the bid that won the deal. (For a discussion of depot operations please refer to my column in last month's VT.)

ONGOING IMPROVEMENT IS GOAL

An old business axiom says you can't stand still if you're running a business. If you don't improve and grow it, entropy sets in, and it will begin to deteriorate and shrink. Ed apparently takes that statement seriously. He is a member of what he refers to as a mentor group, called The V.E.N.D. Group, which stands for Vending Executive Network Development. It currently consists of ten chief executives of operating companies from all over the country. They meet twice a year in a different member's home city for two intense 12-hour days to discuss operating problems, opportunities and solutions.

As described by Ed, the group, which is currently chaired by Steve Ross of Bertsch Services (Warsaw, IN) is not a simple discussion group. Rather, a precise agenda is prepared for each meeting, and the members are expected to do their homework and contribute to the group's collective knowledge. After each meeting, the notes are transcribed and each member receives a copy, which can consist of more than100 pages. It would also appear that personal growth is part of the agenda. The members are assigned a book to read before each meeting and the book is discussed. (The assignment for the current meeting is Execution, by Larry Bossidy.)  

WORLD CLASS COST MANAGER

Another business axiom states: If you add a dollar of sales, and you are a good manager, a few cents should drop to the bottom line; if you eliminate a dollar of cost, the whole dollar drops to the bottom line.

Managing costs doesn't necessarily mean paying the lowest price. For example, A&B Vending, as I stated above, probably pays the highest route wages in the area. However, when the average route delivers in excess of $11,000 per week, the route wage, expressed as a percentage of sales, has got to be among the lowest in the country.

John Dooley regularly combs every expense line item on the operating statement looking for savings. Although it pays to start with the big numbers, no item is too small. I happened to be talking with John shortly after the New Hampshire acquisition, and I asked about the changes he was implementing. The former owner of the branch was a bottling company with little or no experience in trash management. They were paying over $1,000 per month for the rental and the regular collection of a dumpster. Full-line vending, as we all know, generates lots of trash, and it was all going into the dumpster. Within two days, John bought a cardboard compactor/baler for approximately $5,000, and the baled cardboard is sold to a recycler. The new, smaller dumpster costs less than $200 per month.

As John said, "It ain't rocket science."


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