WALLED LAKE, MI -- Leonard Daitch (pictured at right) of Sweet City here got into bulk vending almost by accident. Having founded and built a large chain of candy stores, which he started in 1973 and later sold, the accidental operator was discussing business opportunities with a friend, who, it seemed, had a problem. The friend wanted a business that his challenged son could run and from which the son could derive a steady income.
The pair hit on the idea of bulk vending. A simple route comprised of "giant" venders would offer the son an income, along with a job he could manage. It seemed like the perfect solution. However, the more Daitch learned about bulk vending, the more he liked it himself. He saw an opportunity to build a substantial business, but recognized some fine-tuning of traditional bulk vending would be required.
He formed a business partnership with his friend and they began placing machines, operating only in malls and installing equipment in custom-built kiosks. Their first experience with bulk occurred in the common spaces of malls of southeastern Michigan, rather than the vestibules of stores and restaurants.
"We started this business and it grew, and at that time there was nobody doing what we were doing," Daitch said. "We were going into malls and building attractive displays. At that point, we were very local."
That was 16 years ago. Since then, the business has grown notably, and Sweet City still operates entirely in malls. Using a wide variety of Beaver Machine venders and custom cabinetry, the company's bulk installations are known for style and cleanliness. "A typical installation includes a custom rack, Beaver machines filled with ball gum, candy and toys," Daitch explained. Machines are usually installed in kiosks, according to a mall's criteria. The kiosks can hold 12 to 30 heads, depending on available space.
The ability to provide the custom kiosks is Sweet City's chief strength. Kiosks not only impress mall management, Daitch said, but they also show vending machines at their best angle. "Nobody can do what we do," he said. "We have an incredible in-house design team, and because we can design and build, we can do things other companies cannot do without spending a fortune. We may make a prototype and throw it away if it doesn't work."
THE POWER OF INDEPENDENCE
Daitch says his previous experience running candy stores in malls has helped him succeed as a vending operator in them. He also credits a unique business model that he has developed. Alongside Sweet City, he has partnered with other regional operators to create affiliate companies. They include Sweet City 25, J&L Sweets, Quarters Vending, Treats & Co., Quarters Vending 55, Sweet Ideas Co. and TJ&L Enterprises.
Sweet City and Daitch's affiliates operate in malls as specialty lease tenants, who typically pay a base rent, along with a preset percentage of sales after reaching a negotiated break point. Space for a bulk-vending kiosk requires up to 36 square feet. When negotiating for mall space, Daitch tries to get as many years as possible.
Daitch and his partners operate in 25 states, where they are replicating his initial success in shopping malls. He is not the largest of bulk vending operators, but is among the most unique. At the center of these operations are Daitch's 5,000-sq.ft. headquarters in Walled Lake, MI, and a nearby 3,000-sq.ft. woodworking shop to turn out displays. The company employs nine full-time employees, not counting service personnel. He says each operation is structured as an independent limited liability company.
However, all of them draw on the strengths of the larger organization, from product testing and mall experience to custom cabinetry manufacturing that produces area treatments which can match any mall's décor.
And while all the different companies may have a somewhat similar look, Daitch stresses that the operation is not a franchise. Each company, he said, operates independently and typically services between eight and 15 malls. The largest partnership, Sweet City 25, is present in 46 malls.
Daitch's operating strategy seems to be paying off. He says his businesses are generating more revenue and operate profitably. And for two years in a row, Daitch has won the National Bulk Vendors Association's Operator of the Year Award. "We're striving for a three-peat," he told VT.
Daitch offers a classic example of luck defined by expertise meeting opportunity. His experience as a candy story operator in malls provided an in-depth knowledge of mall management and common practices at a time when they were just starting to open their doors to bulk vending. That retail expertise also provided a wealth of knowledge about malls and how to run a profitable bulk-vending service within them. Of course, his experience in the candy industry and a job he had building cabinets when in college surely didn't hurt, either.
"The landlords of malls are more sophisticated today," he said. "And I think that bulk vending has become a staple within malls. We're no longer trying to sell something they are not sure they want. Vending is no different than women's clothing or men's shoes. Years ago they weren't looking to do bulk; there was no specialty leasing. Now it's become a large profit center for the shopping center world. That happened within the past decade."
Daitch is looking to expand, adding names to his affiliates list. "Right now I'm interested in more partnerships; interested in people bringing certain proficiencies to the table, as I do," he said. "What we do on our end is the leasing, fixture fabrication, purchasing of equipment, installation, and in some cases, we still do the servicing."
His operating partners have a wide range of expertise, coming from candy, retail and wholesale sales, among other business areas. For Daitch, those skill sets have proven highly compatible with bulk vending. Whether he can replicate his current string of successes on a much larger scale still remains to be seen, but he is off to a good start.