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Issue Date: Vol. 53, No. 11, November 2013, Posted On: 11/29/2013


Doing It Right: Full-Line Vending Is A Growth Business, According To Prestige Services' Scott Earl


Emily Jed
Emily@vendingtimes.net
TAGS: Scott Earl, vending operator, full-line vending, waste management mogul, Prestige Services, Eddie Hicks, Chris Earl, fast-growing vending company, office coffee service, vending routes, Clifton Park vending company, food service, micro market, fresh food vending, vending entrepreneur, American business success, healthy vending, vending technology, vending management innovation, Crane Co., Crane Payment Solutions, MEI, Lightspeed warehouse automation, cashless vending

Prestige Services, vending operator, Scott Earl CLIFTON PARK, NY -- Anyone who meets Scott Earl would take him for a seasoned vending operator with decades of industry experience under his belt. But the waste management mogul turned vending operator burst onto the vending scene only two years ago, purchasing upstate New York's Prestige Services and gobbling up more than three dozen more operations across four states since then. He has a passion for the industry, the drive to become a leader in the rapidly expanding territory he serves and the deep pockets to make it happen. Joined by his son Chris in the fast-growing venture, Earl appears to be on his way to achieving that goal, with 47 vending routes and four OCS routes serving 7,000 machines in the field.


PHOTO:Scott Earl (standing) and son Chris (r.) of Prestige Services strategize with director of operations Phil Kyme about next steps for fast-growing upstate New York vending company.

With headquarters in Clifton Park, just outside New York's capital, Prestige's team of 400 employees serves accounts in New York, Pennsylvania, Massachusetts, Vermont and New Jersey.

Earl's hands-on, roll-up-your-sleeves management style is what drove the company he founded in 1990, County Waste and Recycling Service, to become the largest independent trash collector in the Albany region.

He sold the New York waste management giant in March 2011 for $299 million, and ventured into vending; he still owns trash companies in Virginia, Pennsylvania, Georgia and Maryland, as well as a landfill near the Florida-Georgia border.

As the operator tells the story, he sold his trash business on a Friday. By force of habit, he headed out for his morning cup of coffee on Monday -- and was confronted by the reality that he had nowhere else to go. So he drove to a friend's office, where the two brainstormed about the possibilities for his next business venture.

"I had always said I wanted to get into vending some day, and my friend said he heard from the town supervisor that Eddie Hicks was thinking of slowing down, and I should see him about buying his business," Earl recalled. "He was right; and as it turned out, I sold my trash business in March and closed with Eddie on Prestige Services in July."

Earl had dabbled in vending the last few years that he ran his waste business. Out-of-order and sold-out machines were the norm at his facilities, which prompted him on a whim one day to purchase his own machines and try his hand at operating them.

"We had a vending company come in with a fresh food machine and our employees cleaned it out every day; they were starved for it, but the company wouldn't keep it filled, and we couldn't find anyone who would," Earl recalled. "I was in Sam's Club, and saw a vending machine. On the spot, I decided to buy it and try it myself at our main branch and at one of our recycling plants. We had 85 employees just tearing up the vending machines when I sold the company."

When Earl purchased Prestige Services, the full-line vending and foodservice company established by longtime operator J.E. "Eddie" Hicks in 1996, it was bringing in $18 million in annual revenue. That figure has doubled to nearly $40 million in two years, which Earl attributes to an aggressive campaign of acquisitions and heavy investment in technology that has boosted "same-store" sales.

Vending generates $24 million of the company's revenue; foodservice accounts for $12 million, and OCS represents about $4 million.

"At the end of the day, when we finish all of the acquisitions we have in the works, we will be a $90 million company in vending," Earl told VT. At the time of this interview, he was finalizing four multimillion-dollar deals, including purchasing an $11 million operation in New Jersey.

The operator's first priority when he took the helm at Prestige was to upgrade its equipment with state-of-the-art machines, all with cashless capability. "It's important to get the old machines out in order to get a new generation of customers excited about vending," Earl said. "If you invest in upgrading your equipment, the office 'talker' will talk up the vending for you."

Earl also set out to level the playing field with his retail competitors by removing the price displays from the shelves underneath the products in his machines. "If you're hungry and you want it, whether you're paying with a credit card or cash, you can punch the selection and see what the price is -- it shouldn't be the focus when you're making a selection," Earl observed. "Another change is that everything here moves in quarters, not in dimes and nickels."

Prestige Services customers also are more inclined to pay with high-denomination bills by means of another technological upgrade. Instead of pockets full of quarters, they now receive $1 coins and $5 bills through banknote recyclers, which are manufactured by Crane Co.'s Payment Solutions division and MEI.

Prestige also now has card readers on almost all of its machines, and no new machine leaves its warehouse without one. "Operators who can't see how credit cards will improve prices and drive up sales are missing out," said Earl, who noted that cashless payment accounts for about 30% of the company's vending transactions.

As a case in point, Prestige had been selling Red Bull for $2, while nearby convenience stores were charging $3 or $4 for the same product. "When we installed card readers, we raised the price to $3 and no one said a word; we sell it all day long and no one is complaining," Earl reported.

Prestige recently received approval to install card readers on the machines at 13 maximum-security prisons in New York State, which Earl said will allow the operation to merchandise higher-value items like personal hygiene products. Cashless capability has also been a boon in high-traffic public locations like rest stops, where fewer and fewer consumers are carrying cash.

The company also has implemented remote machine monitoring.

MANAGING THE MENU

Another immediate priority for Earl as he restructured Prestige Services was bringing product merchandising under management's control. "Drivers used to make 100% of our merchandising decisions, so if they had a bad day, the 22 machines on their routes had a bad day," Earl said. "With prekitting, we make 100% of the marketing and merchandising decisions based on line-item sales data. Prestige Services had a good name, and we've increased same-store sales by investing in new machines, technologies and procedures."

A year ago, the Upstate New York vending operation installed the LightSpeed warehouse automation system, which accelerated the accuracy and efficiency of picking route orders. The system guides Prestige's warehouse team directly to the products required for each "prekit" with illuminated signals displayed on the shelves.

Earl moved Prestige to its new 16,000-sq.ft. building in Clifton Park last November to accommodate its rapid growth, added 8,000 square feet for the prekitting operation and has begun streamlining the warehouse for more efficient truck loading. "Our trucks go to our 'cold' docks every night to drop product and cash, and to get loaded up for the next day," Earl told VT. "And we have four or five more on the drawing board." The company is also in the process of building a standalone prekitting facility in nearby Latham, NY. ]

The waste-management expert sells the mounds of cardboard waste that pass through his warehouse to a recycling firm.

Most of Hicks's employees remained on board after Earl acquired Prestige. "He was winding down, so they were winding down," he said. "We got them excited to participate in our growth with new equipment, technologies and procedures, and sales have gone way up. We have accounts where a Coke machine that was doing $8 a week is now doing more than $100."

Prestige has a well-established reputation in the region for the freshly-prepared foods made in its commissary. In addition to filling his vending machines with the meals, Eddie Hicks carved a niche supplying dining programs for senior citizens. Prestige is the largest Meals on Wheels provider in New York state, serving 14 counties and producing about 4,000 meals a day in its original Clifton Park commissary.

Earl regards fresh food as an essential component of vending, having experienced firsthand in his trash business the value of providing employees onsite access to meals. And it's an asset he continues to leverage and grow. He has ramped up Prestige's food-production capabilities by opening an additional commissary in Kingston, NY. It's the central kitchen for making meals that are shipped to Prestige's biggest foodservice client, General Electric in Rutland, VT, and served on steamtables to its 1,100 employees.

Not unlike most experienced operators, Earl is highly selective when it comes to placing fresh food vending machines. He has devised a new approach for marginal locations that fall shy of the volume necessary to support the company's traditional model.

"Every company wants a food machine and, with many of them, you go a week later and there's still food -- including wilted salads," he said. "Our new concept for smaller accounts is if you want a food machine, you pay $375 a month rent and we bill you for the expired product. Accounts need to participate with us for this service."

Micromarkets would seem a logical next step for Prestige to deliver its fresh foods to hungry workplace clients, but Earl has no immediate plans to move into the new retail model. "We have zero micromarkets; I've never been a pioneer," Earl said. "I see micromarkets and I acknowledge them, but I want to see their impact over the long-term. For now, I still think we can accomplish the same thing with vending machines."

Earl also made the decision to exit the $9 million K-12 school cafeteria subsidized-meals management business that Prestige's founder built, because it no longer made financial sense to continue serving the segment. "Margins were nonexistent or negative, and the state came out with new health initiatives that make it even worse," Earl told VT. "We weighed the risk of inadvertently not complying versus the rewards. It was clear that we needed to get rid of that business altogether."

Prestige still has a sizable school vending business. It also has been impacted by nutritional regulations that have forced Earl to make some changes to maintain his margins. "We serve many schools with vending, but it's only nine months of business with the summer off and snow days and holidays, and then there are the health regulations that limit us from selling many of the items kids really want," Earl said. "We've been cutting our service frequency at some schools, and pulling some machines to strike a balance that keeps schools happy -- and us profitable."

Prestige delivers nutritious options to meet its clients' demands, and identifies them in its machines through its Healthy Choices program. But the operator candidly admits that he's not overly smitten with the "healthy" vending movement, and does not go out of his way to push it.

"Everyone thinks they want a machine full of apple and banana chips. I look in the garbage can, and that's not what they're eating; and I show that to my clients," Earl observed. "We've had accounts complain that 15 spirals are empty, when meanwhile they're forcing the machines to be stocked with 'healthy' items that aren't moving and the No. 1 seller is doughnuts."

To satisfy some locations that require a large percentage of better-for-you products, Prestige has created a bill-back program to offset the loss of income from items that are not selling.

Earl was quick to add there is demand for an intelligent selection of low-fat and low-calorie alternatives in most machines; he reported that a few of the products he has found for this niche have become especially fast sellers. One of his customers' favorites is Medora Snacks's Pop Corners. "It is a great item because it's healthier than a fried chip and it tastes good -- and they were smart enough to make it look like a Dorito," he remarked.

OCS ENVIRONMENT EVOLVES

The operator also is taking a fresh look at his company's approach to serving the evolving office coffee service segment. "There's a huge market shift with the downturn in the economy, and customers are very budget-conscious," said Earl. "There's a fine line in placing a machine, when you know that they may go online to buy the K-Cups and not purchase them from us the next time. In the old days, we kept the breakroom stocked with what they wanted and charged them for it. Now labor is so expensive and margins are so tight that we're revisiting our approach."

Currently, Prestige calls ahead to see what its clients need before servicing each account. Route drivers spot-check during their visits to gauge location needs, and to assess whether the location might be purchasing products from another source. The company is looking at changing its system to forecasting the products it needs and inventorying its trucks with the optimal mix.

Many of the locations Prestige serves are grappling with pilferage of costly brew-by-pack coffees, and many are now using Multimax's K-Cup vending machine to control access by requiring office employees to purchase the single-cup packs for as much as 75ยข to $1. "We present it as a solution to save the client the expense of pilferage, and it's been going very well," Earl reported. "We put in a brewer and sell allied products, and the company pays for the cups, sugar, creamer, etc. And many also have pour-over brewers and purchase their coffee in fraction packs."

Speaking like a hardened vendor, Earl told VT that he regards commissions as the biggest thorn in the industry's side. "If it's above 15% it handicaps you, but the industry is plagued with fear; everyone's worried about losing a stop," he said. "Any human being with a brain can understand about the actual cost of a product, if you explain it to them; but you're lucky to even get a decent margin. And depreciation is an actual expense; in 10 years you need a new machine. And still, operators inflate commissions; I can't get over how hard people work to lose money."

Earl said his next endeavor is to invent an easy-to-read vending meter on the inside of the machine that's visible to location managers, so they can validate the sales figures on which their commissions are based. This will help keep his unscrupulous competitors honest, he emphasized. Prestige already works diligently to do that by supplying reports to its customers with each commission check.

The operator is also doing his part to help the industry in its fight against the legislative threats it's facing at the state and federal levels. "I come from an extremely regulated industry, because regulators see a lot of money in the waste business," Earl said. "Vending has not been as much of a target, but that's changing. We have to push back to prevent any more barriers to our struggling industry becoming profitable. Our goal as a company, and for the industry, is to be profitable and comfortable enough to get the business reinvigorated."


photo | GRAND TOUR: Scott Earl (standing left), who purchased Prestige Services two years ago, has steered the well-regarded full-line vending, office refreshments and foodservice operation onto a new course of dynamic expansion and technology implementation. Here, he and his son Chris (seated) greet National Automatic Merchandising Association senior vice-president of government affairs Eric Dell and senior manager of government affairs Pam Gilbert during their visit to the company's renovated 24,000-sq.ft. facility in Clifton Park, NY. Earl has found vending to be a growth business for which there's strong demand. At right, the Earls review features of state-of-the-art glassfront cold drink machine with the NAMA officials.


SEARCH TERM
photo | STATE OF THE ART: LightSpeed warehouse automation system guides Todd Farrell through prekitting process. At left, he displays a route order on the warehouse computer terminal; center, he follows illuminated signals on shelves to pick the specified quantities of the items required for the order. At right, Jim Fredenburg gathers totes prekitted for each machine on a route to be loaded into the appropriate delivery trucks. Earl, who is upgrading the truck loading docks at the company's headquarters, also has built an 8,000-sq.ft. addition to allow most efficient use of the the pick-to-light system, and also is adding a standalone prekitting facility in nearby Latham, NY.



photo | CHA-CHING: Technicians Ron Farr (r.) and Mike Male prep another vender in the company warehouse prior to installing it on location. Center, Danielle Needhammer uses high-speed banknote counter to process collections in Prestige moneyroom. At right, Chris Earl sizes up a professionally packaged bank deposit. Prestige uses note-recycling changers to enable patrons to use higher-value bills.


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