A nybody who has had the pleasure of meeting John Newberry, a veteran route operator and equipment supplier, knows that his Virginia drawl and laid back persona mask an Energizer Bunny-like drive and laser focus. He’s grown his company, Venco Solutions, by investing and diversifying, while picking up new expertise along the way.
Newberry got his start in the industry in 1968 as a route operator, and he continues to operate ATMs, music and games to this day. In the mid-1980s, he began providing background sound for all types of businesses. For the past eight years, he has been operating and supplying ATMs, while also providing access to processing for his ATM customers through his role as an independent sales organization (ISO). Venco, based in Bland, Virginia, employs 37 people within its three divisions.
“Currently, we service 2,500 amusement machine on our routes,” Newberry explained. “We are a full-line amusement operator with jukeboxes, pool tables, cranes and games. In our sound contracting business, we sell and service background music systems, drive through intercom systems, on-hold messaging and camera systems.”
ATMs: A Closer Look
“The ATM business has been a great challenge, which we have enjoyed,” continued Newberry. “We started placing machines on our routes and saw a need within the amusement industry for growth. We sponsor over 5,700 machines nationwide through our role as an ISO with Venco operating 600 of those on our routes.”
Newberry remains bullish on the ATM sector, both as a supplier and an operator. “I think it’s still on the upswing,” he said. “The ATM still offers a really good return on your money, between 30-40% return on your investment on an annual basis. However, there is a lot more competition and pressure on the surcharge.”
Venco largely works with traditional route operators who own and service ATM machines on location. In order to operate an ATM, a route must take on the commitment to keep the machine stocked with cash and provide all service, including keeping the machine in compliance with all banking regulations and federal laws.
For an ATM operator, money management presents a crucial task because cash gets spread across four separate places at any one time: the ATM machine, the operator’s bank account, money waiting to go into that account from the processor account and staff on the route stocking machines.
In addition to making money on the transaction surcharge, some operators also earn additional income by way of a small fee on each transaction. This “interchange fee” is paid by bankcard issuers to the processor and the ISO. The total interchange fee can average as much as 27 cents per transaction, which is then split between several parties. Newberry notes that this amount has been steadily decreasing over time.
Operators must enter into an agreement with the ISO to participate in the interchange fee. Venco uses both Switch Commerce and World Pay for processors. Customers’ machines can be monitored either on line or on their cell phone for current activity and load balances. This gives the operator a great tool to know when machines need to be reloaded.
A typical ATM averages a so-called vault of $2,800, representing a moving average of the monetary commitment per machine.
Newberry reports that Fridays enjoy the highest weekly usage. The first of each month generally sees a high level of activity as users access direct-deposit paychecks, as well as state benefits, many of which are credited to a recipient’s debit account. In addition to traditional bank account cards, ATMs increasingly process transactions from re-loadable cards.
“Many of our operators do a huge benefits business,” explained Newberry. “People are standing there in line at 12:01 on the first day of the month because that’s when the money goes onto the card.”
Most operators load their own machines with cash, although some high-traffic machines may utilize turnkey armored car services if they handle enough volume. Newberry said a level of 300 transactions or more per month is what it takes to make such an option cost effective. The average ATM in Venco’s portfolio does 130 transactions a month, although 30% of those transactions are non-monetary, including balance inquiries, transfers and rejected transactions.
Venco’s ATM Route
On its own ATM routes, Venco monitors its machines daily. “Our staff monitors each route in order to transfer funds to the route manager’s account from our two main surcharge accounts,” noted Newberry. “Each route manager has a separate account to pick up funds and fill machines. The route manager will only be able to pick up the exact amount of funds that have been transferred. A list of locations and the amount to load in each machine are emailed to the route manager.
“The office staff knows how much money each route person is to load each day and tracks it from the bank when it goes into the machine,” Newberry continued. “The machines on the route are then spot checked to make sure of cash load. Our ATM vault amount and cash pool is verified monthly.”
According to Newberry, street operators benefit from placing ATMs in tavern locations because they produce revenue and keep the cash flowing for their own equipment as well as food and drink sales. Other good accounts include convenience stores, restaurants, hotels and motels with bars and restaurants on premise, malls and retail stores and any small business that does not take credit or debit cards. Thrift shops are also very good locations.
“The credit card industry and the ATM industry are apples and oranges,” said Newberry. “Credits cards cost you money for every transaction. The ATM makes you money for every transaction.”
As a special benefit for staff, Venco allows employees to purchase and operate their own ATMs along the firm’s routes. Venco, which shares in the employee’s surcharge fee, will even load cash for them. “We have several employees that have taken advantage of this program,” said Newberry. “It gives them additional income along with providing an investment in their future.”
Employees, and contract sales people, also earn both a commission and a share of ongoing surcharge revenue for each machine they help place. Venco’s sales people, who handle a variety of products, also earn commissions on other products from the firm’s portfolio.
“When training a sales person, we start them with a few products and then add others, depending upon how well they do,” said Newberry. “I always ask my people the following question: If a person goes into a hardware store and purchases a drill and bits, what did he really need? I get a lot of answers, but the real answer is simple. They needed a hole. I try to make my people think outside the box to figure out what the customer really needs.”
On the amusement front, Venco operates Internet jukes (TouchTunes and AMI), more than 1,000 cranes, as well as self-contained merchandisers, videos, pool tables, games and more. The route, with 2,500 pieces total, covers bars, small restaurants and pizza joints, convenience stores and the like. Venco just recently picked up some additional chain restaurant locations from what was formerly the national WinStuff route. Andy Dunford heads up operations across all of Venco’s divisions, while Todd Hoge serves as route supervisor. The company also recently changed over to the MCM Elements route management program, which lets collectors use their iPhones for collections. This program stores the information in the cloud, which means the data can be accessed back at the Venco office as soon as it is collected.
“The crane and self-redemption business has been good for us,” elaborated Newberry. “It is product driven. Our route personnel work each crane at least each week. It’s very important to keep fresh product in order to drive repeat play. We like our cranes to give out 35% at our cost. We go to the ASD show usually twice a year to find deals on product. You also need to run some high-end merchandise to ensure a good mix.”
Newberry said he was attracted to the ATM business because it was a good fit with his amusement route. Operators, he emphasized, are uniquely positioned to manage the challenges presented by running ATMs on the street. “As operators, we have always driven around with cash,” he added.
In addition to being bullish on the ATM business, Newberry and Venco have taken an aggressive attitude with their amusement and sound contracting route, seeing profitable opportunities on the road ahead.
“We go to game auctions once a month. We set up a booth and buy and sell equipment. It’s a good time, and it makes for a good weekend,” he concluded. “We are growing our route business. We’re buying jukeboxes and cranes.” Venco is also starting to operate credit- and debit-card-only air machines.
On another front, Venco is getting ready for the EMV changeover on all card readers in the U.S. (EMV stands for Europay, MasterCard and Visa and represents a global standard for authenticating credit and debit card transactions.) The date by which all ATMs should have this EMV security change to their card readers is April 2015.
To learn more about Venco Solutions, log on to the company’s website at http://vencosolutions.com.
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