Many people are searching for ways to make extra income on the side and the Redbox model is easy for people to understand as almost everyone I know has used one and they are super simple to use.   While Redbox is the most noticeable player in the industry and would be the best choice to franchise from since they are so well known,  Redbox does not offer opportunities to franchise, rather they offer landowners of high-traffic locations rental income for these kiosks.

While getting a Redbox unit placed is extremely difficult, one might assume there are alternative franchise opportunities.  There was one such business named DVDNow.  They offered a franchise start-up cost of around $25,000 for the kiosk and starting inventory. Unfortunately, they are no longer in business due to the strength of the Redbox franchise startup cost, there are alternatives for people who see an opportunity in their area to get in on the DVD rental bandwagon.

Keep in mind when looking at a DVD kiosk opportunity that you aren’t looking at it like you would a gumball machine.  You can’t just fill up the DVD kiosk and expect to make money.  Keeping the inventory at the correct levels in imperative.  How many of the new releases do you put in the machine?  Remember there is a limited amount of space in the machine and if you buy too many DVDs and they don’t rent, you don’t make money.  Many of the kiosk opportunity companies make it sound like you will make easy money but there is a lot of planning that is required as 20-30 movies come out every week.  The other issue you may find in this business is that you don’t get to talk to your customers to find out what they want to buy.  You will be guessing when you start and if rentals are low you will NEVER know the reasons why.

Problems will arise, people will steal movies, discs do get scratched, the software could crash. How are you going to handle these issues?  Make sure if you are looking at other opportunities to ask these questions and find out how much of your time you will really be putting in.  My guess is that it will be more than you expect.  So if you are basing a business or investment decision on the Redbox franchise startup cost, or DVDNow or any other company because Redbox makes billions in revenue consider this.  Redbox has a huge head start and is very well known.  People trust Redbox.  Do they trust these other no-name machines?  Also, Redbox has almost 50,000 units so they have huge economies of scale that you don’t have.  Before you base your decison on the fact that Redbox does so well is going to be misleading your decision since their results can’t be compared to what you can do.

The post How Much Does a Redbox Franchise Startup Cost appeared first on Redbox Franchise Cost.

Many people are interested in starting a Redbox DVD rental business as this company has exploded over the years.  Redbox was initially started with funding from McDonalds to place 11 kiosks in 2002.  McDonalds eventually sold the business to Coinstar in 2009 after passing 800,000 rentals and later became Outerwall.  Redbox has since grown to over 50% of the physical DVD market with over 48,000 machines which has really changed the dynamics of the movie rental market with notable Blockbuster and Hollywood Video filing for bankruptcy protection along with many mom and pop stores going out of business.  With Redbox’s aggressive pricing of what is now $1.20, advanced technology allowing customers to reserve their movies from their phones and much lower overhead than a physical location, many entrepreneurs want to buy a Redbox machine and make their fortunes.

While there is a lot of excitement for Redbox kiosks the unfortunate answer is that you can’t currently purchase a kiosk from them.  If you are a location such as grocery store, pharmacy, retailer, convenience store or fast food restaurant, you can apply to have a unit at your location.  The company will review your location and see if there is enough demand for them to place a unit there.  You as the property owner, will receive revenue through the rental of space.

The steps to get a Redbox are as follows:

1. Contact Redbox (Click Contact Us on the company’s website and send a message or call 866-733-2693. You can also email on questions@redbox.com and Redbox will send you an application to fill out

2. The application will ask you for your name, email address, state,zip code, location type, average daily traffic or business transactions, and location description. Add this information to the application form and return it.

3. A response from Redbox could take some weeks as they receive many applications each day so be patient.

4. Keep information on traffic numbers and and sales handy as Redbox will ask for those details to analyze your location.

While Redbox has a majority share that doesn’t mean there isn’t opportunity to get in on the DVD kiosk rental bandwagon.  Other companies such as DVDNow offer franchise opportunities to make money.  As it is complex to get licensing deals with the movie houses, finding someone to help get access to inventory is critical to your success.  There is currently a lot of opportunity in the smaller rural markets for DVD kiosks as Redbox focuses on the larger areas of the U.S. which means potential opportunity for entrepreneurs to get in before they do, as the smaller markets will not be likely to support multiple machines and still be profitable.  If you are considering this route, be sure to have the abillity to place several machines since each machine only makes a little profit as we discovered with our research found here.

While the company has produced impressive results, you won’t be able to buy a Redbox machine but there are alternatives through leasing them space or owning a franchise from a different company.

The post How to Buy a Redbox Machine appeared first on Redbox Franchise Cost.

For those that don’t know, Redbox works like other vending machines that dispense soda, candy, and other things but instead, it rents DVDs and games.  Redbox is the most visible company in the industry as their large red boxes are very noticeable but they also have over 50 percent of the DVD rental market.  Redbox prices are very competitive with movies at $1.20 over a 24 hour period.  You can return the movie to any other Redbox unit, which is very convenient for people traveling.

If you own a retail location with lots of foot traffic like a grocery store or convenience store and would like to try a Redbox DVD machine you will need to fill out an application online and they will analyze your spot to see if there is sufficient profit potential to place the unit there.  The upper end of revenue a store owner can expect is $500 monthly for really high traffic locations after electricity and internet connection.

Related Redbox Franchise Startup Costs

To start the application process click the link on the Redbox partner page and begin the process of discussing your location with the company and see if your location has sufficient traffic.

There are other opportunities other than Redbox for owning a DVD kiosk through other companies if you are interested in capitalizing on the DVD kiosk rental opportunity.  Renting DVDs from kiosks have been a popular and convenient way to rent movies since 2001.  Many locations have been tested since then but high traffic locations with retail foot traffic have been the most profitable.

There are considerable risks in starting a dvd kiosk rental business as you may be competing with Redbox directly and their brand name, low prices, and technology are going to be hard to beat.  In addition, there is considerable logistics to consider such as getting the licensing from movie distributors to rent the movies, the technology to dispense movies, and collect payment from customers and rotating the inventory.   Another concern is after making this investment, whether people will continue renting movies from kiosks instead of downloading in their home.

The post How Do I Start a Redbox Franchise? appeared first on Redbox Franchise Cost.

Welcome to the website that’s all about how to own a Redbox kiosk machine.

It’s not a franchise, but there is an application process that business owners can undertake to try and get a Redbox machine at their place of business.

Find out how to apply for a Redbox machine here…

What are the requirements for business owners applying for a Redbox DVD kiosk at their location?

Redbox requires that interested business owners supply them with the following information as a first step in the application process:

Name:
Email:
State:
ZipCode:
Location Type:
Average daily traffic (transactions):
Location Description:

“If you have any additional questions, comments regarding this issue please contact us at 866-redbox3 (866-733-2693) to avoid any further delay in resolving your matter,” says Redbox, who sent me the email from questions@redbox.com after I chatted online with redbox Customer Care via Redbox.com.

However, that doesn’t give us much detail about what their minimum requirements are for getting a Redbox machine.

Reader feedback about getting a Redbox kiosk machine…

Not sure if this comment came from an actual Redbox machine business renter, but here is what one person wrote to me about the process requirements:

“Hello Interested investors…

RedBox is a company that will pay you a commission based monthly income. Contrary to some beliefs RedBox is not a franchise style business. As a owner of a business you must have some prereqs before considering to apply for a storefront RedBox unit.

Some of the needs you must have: 50,000 worth in foot traffic (that’s daily traffic…), visibility, a prime location to place unit (around 12sq. feet).

If approved, a commission based on sales will be paid to you by RedBox.

So, what does it cost you? Well the unit will not cost you, what will is your location real estate, and you might need to work out a deal for power the unit. Any problems with the unit will be taken care of by the mobile techs of RedBox.

What does this mean to most…
Big box/ anchor stores will be the first ones to have these units Example: WalMart, Krogers, Ralphs, 7-11, and such. Don’t be discouraged if you can pull off attracting heavy traffic, well it is in the favor of both RedBox and you… Once again we see LOCATION, Location, location… hope this helps…”

Even if you don’t have the foot traffic described from that anonymous person who left the comment, go ahead and apply anyway, and please come back and leave a comment about your experience! Thanks!

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With the video store concept fading into a memory much like the typewriter, the opportunity for Redbox franchise opportunities would be a great way to monetize high-traffic locations.   Redbox video rentals are an excellent business model as the overhead and time to operate are very low. Plus, with over 30% of all DVD rentals taking place at a kiosk and that number expected to increase as traditional video stores continue to go out of business, video rentals may one of the best business opportunities at the moment.  While the opportunities for individuals to own a Redbox machine are currently not available, the company is still looking for areas with lots of foot traffic.  Business owners that have the right locations can apply to have a kiosk placed on their property.  To be accepted, you will first need an area with high retail foot traffic, which means a minimum of 1,500 people a day according to a company representative. If you own a location such as this, submit a request  and a company representative will discuss how their process works and analyze the location.  You as the business owner are merely renting a space for Redbox to place to the kiosk on your property which has its positives and negatives.  On the positive side, there is guaranteed revenue coming in.  We surveyed several business owners that started an LLC with their kiosk and they indicated close to $750 after paying for an internet connection and electricity for the highest traffic locations.  The downside is if you have this high-traffic location and could get a percentage of sales you could make significantly more income.    The other thing to keep in mind is that there is absolutely nothing to do to keep this money coming.  Redbox takes care of everything so there is no inventory management, money handling, maintenance, accounting or marketing to deal with, so $750 for no work is a pretty good deal as most business owners will tell you.

So, since there are no Redbox franchise opportunities, but you as a potential entrepreneur see the huge demand and potential for profit, how can guys that don’t already have high-traffic location capitalize on this opportunity?    With the rise of popularity in Redbox and the exploding number of locations they offer, some competitors have sprung up to try and take market share away from them.  The good news is that these competitors make the franchise model available so entrepreneurs can start and run this great business.

The leading alternative in the movie rental kiosk business to Redbox is DVDNow. They provide you with everything you need to get started as a DVD rental kiosk operator and kiosks operate in much the same way as Redbox. DVDNow is a franchise, so as an entrepreneur you have the opportunity – with some hustle to secure high-traffic locations with DVD rental kiosks and generate an income. A franchise is basically a business model that is available to purchase and put into your community. What makes the franchise model so great is the difficult part of starting a business is taken care of.  DVDNow’s franchise makes it easy to get started as they have built the kiosks,can get the inventory to you, and handle all of the record keeping, so you can maximize your time in finding new locations, rotating inventory and collecting the money.  One misconception of the difficulty in starting a DVD kiosk is that you can merely buy movies off the shelf and put them in the machine for sale.  The movie houses were smarter than that and as such require you to send them a small portion of your movie rental, thereby making the logistics of setting up a kiosk a difficult process.  Where DVDNow and you as an entrepreneur has a real opportunity is in the smaller communities that Redbox does not have any locations as they are deemed as not profitable enough for the company and their cost of servicing remote locations are too expensive  While the profit potential for Redbox may be too small, there is tremendous opportunity and profits for the entrepreneur as a well run kiosk can run the brick and mortar rental store out of business as the kiosk has a much smaller overhead and employee needs.  While industry experts predict that Redbox will eventually move into the smaller markets, savvy entrepreneurs who get a jump and establish a strong presence in smaller communities will be able to keep a virtual monopoly on DVD rentals.

The post Where Can You Find Redbox Franchise Opportunities appeared first on Redbox Franchise Cost.

There are still many spots that would be great to have a Redbox franchise machine, but how do you get one?  While there is not a Redbox franchise profit since the company does not franchise their machine, perhaps there is a way to profit from the DVD kiosks.  While there are not official industry figures as to how much an individual kiosk can profit but we have found a few clues through corporate SEC filings to help determine what those profits may be.

Before investing in a DVD kiosk franchise you may want to consider a few things before investing in the long term profit potential.   First of all will people continue to rent DVDs at a kiosk?  While at the current moment in time that seems like a distant concern, especially with the popularity of Redbox machines but they have been around for just over 10 years.  Once upon a time, a video store was touted as a great business decision but consider the same technological advances that ushered in the Redbox are bringing in an increased capacity of broadband and it may be a matter of time that instant movie downloads to the home that makes DVD kiosks a thing of the past.  Secondly loaded machines are reported to cost between $20,000 to $25,000.  With a movie rental at $1.20, you are looking at around 21,000 rentals to just pay off the machine and initial inventory.  Don’t forget that you will have to buy new inventory, pay merchant account fees to accept credit cards, pay someone to maintain the machine, pay for a rental location and possibly pay for electricity and an internet connection to transmit inventory and payment information.   Discussions with company analysts suggest that kiosks have an average monthly overhead of almost $3,500.

Back to Redbox franchise profits.  Redbox is owned by a parent company named Outerwall (Nasdaq symbol OUTR). Outerwall was previously known as Coinstar and is reported to have taken over 50% of the physical movie rental market.

Outerwall’s net income for the last 12 months were $2.28 billion, gross profit of $693 million and net profit of $175 million. The latest quarter showed 199.5 million rentals across their kiosks This income is a result a all of it’s automated retail solutions which include not only Redbox, but kiosks in coins, coffee, refurbished electronics and self-service photo booths.  While these numbers include all of the different kiosks, a reasonable assumption can be made that they should be close to the Redbox figures as Redbox makes up a significant portion of sales.  As such gross profit would be approximately 30% of sales and net profit (the amount they take home) is 7.67%.  According to B. Riley & Co. analyst Eric Wold,  the company generates $45,000 average revenue per kiosk, which was down from $50,000 the previous quarter making the argument that streaming videos are taking a big chunk of revenues and the long-term viability of the DVD kiosk may be in jeopardy.

Extrapolating the above numbers an average kiosk would bring a gross profit ($45,000 * 30%) of $13,500 or a take home, net profit of $3,452 ($45,000 * 7.67%).  While these numbers are estimates and the take home number includes the perks of the executives of the company and other corporate waste that is typical in large businesses, if the industry leader is bringing in only $3,452 per kiosk on average, there may be better business opportunities elsewhere.

The post Redbox Franchise Profits – Do They Make Any Money? appeared first on Redbox Franchise Cost.

There’s another new Redbox DVD machine I noticed in front of a small convenience store in a place in “The Valley” in Ohio, as we call it, that’s not even a store that has a ton of traffic — I mean, it’s no Walgreens or CVS or something like that, with tons of customers.

That proves that Redbox DVD machines are still growing by leaps and bounds.

So if you want to apply for your own Redbox DVD machine, the best way to do so would be to follow these steps:

#1 – Visit https://redbox.custhelp.com/app/ask in order to contact the customer service folks at Redbox directly

#2 – Choose the “Connect Now” link to chat live with a service representative from Redbox

#3 – Be prepared to give them an email address so they can contact you

#4 – Provide them with all the data they may require, such as your business name, address, phone number, customer levels, etc.

#5 – Thoroughly and correct prepare any of the required paperwork they send you, including a contract agreement, which will tell you that your store needs to transact a specified number of DVDs each month in order to remain active and to keep the Redbox system at your location.

#6 – Include the payment form that Redbox requires in order to buy the machine for your store.

#7 – Check your email or contact data that you provided to Redbox on a daily basis to see if your machine was approved.  Reports state that approved machines can be available in as little as one week.

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I call it secretive, because there doesn’t seem to be a set published criteria on the web for minimum requirements for getting one of these machines outside of stores, especially smaller stores that may not have as much traffic as larger convenience stores and grocery stores.

My plan is to ask an owner of a smaller store who currently has a Redbox machine what exactly did they have to provide during the interviewing process in order to get approved. I’ll be you they’ll want to see income numbers for the past several years, and they’ll want to know a lot about your store’s name, location and additional sales and expense data.

Most of my searches for more information thus far have only turned up people blogging about their local Redbox machine in terms of being a customer, not in terms of owning one. And although Redbox is not reportedly a franchise, it would help if more owners spoke out about how they got a Redbox at their location, what their annual sales figures are like and how long it took to get the DVD kiosk. Also, it would really help if they disclosed what kind of an income split deal that Redbox-owner Coinstar provides the owners who allow the machines on their property.

Stay tuned…

The post Where are all the Redbox machine owners? appeared first on Redbox Franchise Cost.

How much money does a Redbox machine make in a day?

“Redbox kiosks can make a few hundred dollars a day,” writes the ChaCha website. “It’s all about placement. If it is located in a busy area it can make up to a thousand a day.”

Now, this may be well and true — but if the ChaCha person answering the question didn’t speak with a person who owns a Redbox machine directly (or rather, someone who has a Redbox machine at their place of business) then they won’t know exactly how much cash Redbox machines average until Redbox owner CoinStar releases that specific information.

Redbox Automated Retail LLC was initially funded by McDonald’s Ventures, LLC, a wholly owned subsidiary of McDonald’s Corp. In 2005, Coinstar bought 47 percent of the company. In February 2009, Coinstar paid McDonald’s for the rest of the company.

And no matter how much searching has gone on online, until a Redbox owner begins to unveil their actually split of the earnings, we may never know. But I hope I find out soon…

The post How much money does a Redbox franchise cost? How much does it make? appeared first on Redbox Franchise Cost.

Getting funding to start a business is difficult and financing a Redbox franchise or other DVD kiosk rental company is no different.

When looking for financing, a bank is primarily concerned with your credit score and collateral.  The credit score should be in the 650 range.  Collateral is the assets both through the business and personally that the bank would take possession of should the loan go into default and they will sell to attempt to get their money back.  Banks loan against equipment like a DVD vending machine but since it’s a specialized piece of equipment unlike say a bulldozer which makes it more difficult to sell.  This means they will loan a smaller percentage against these types of machines.  This percentage will vary between lenders but expect to only borrow between 50 and 70 percent of the value of the unit. After researching used DVD kiosks and how quickly the DVDNow units depreciate, I can appreciate why as they do not hold their value very well.  The remainder of the collateral would need to be made up from personal collateral or additional cash.

While you cannot get a Redbox franchise there are other companies that make machines and access to movies.  On the upper end, DVDNow sells a unit with movies for around $25,000, which is a lot of money to come up with, which leaves someone to look for where to get funding.

The typical sources of funding a business come through the following five sources:

• Personal savings – The more you can put down personally the better as you have less money to pay back each month.

• Grants – There is very little money from grants to start a business and none for a vending business.

• Friends, family and fools – Many businesses have started with funding from these three and many friendships have been lost so proceed with caution.

• Credit cards – Are easier to get for small businesses than any other time than I have been aware of.  If you plan on keeping the balance on the card for a long period of time, be sure to look for a low interest rate card.

• Bank financing – What most people think of for acquiring funding when starting a business.  Make sure your credit score is good and put together a business plan.  There are free resources to help you prepare a business plan like Small Business Development Centers www.asbdc-us.org or SCORE

• Economic development loan funds – Hard to find but local agencies receive funds to lend to businesses to spur job creation and are typically not as hard to work with if you have credit score issues.  Businessloanfunds.com has a listing of these programs.

So there are several places for entrepreneurs to find funding to start their business.  While you won’t get financing for a redbox franchise since these types of franchises don’t exist, there are several DVD kiosk companies that you would need financing for.  Since you may be starting your first business be sure to utilize the free resources listed above to develop your business plan so you can get honest advice about the risks and rewards of starting this type of business.  

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Redbox Customer Service: Hi my name is Redbox Customer Service, please give me one moment while I review your question.

Redbox Customer Service: Thank you for waiting, store owner.

Redbox Customer Service: We appreciate your interest in Redbox

Redbox Customer Service: Redbox doesn’t franchise its boxes. All Redbox locations nationwide are owned and operated by Redbox Automated Retail.

Redbox Customer Service: Redbox does accept applications for boxes to be installed at your place of business.

Redbox Customer Service: I have some information for you to fill in and I can go ahead and submit the form for you today. Please provide the following information:

Redbox Customer Service: Name:

Email address:

State:

ZIP code:

Location type:

Average daily traffic (transactions):

store owner : Thank you so much

store owner : When I submit that information, isn’t there a fee or money order I need to pay prior to having the machine delivered?

Redbox Customer Service: All am can do is send in the information. Once that department reviews your information, they will contact you

store owner : Once I complete the contract agreement — don’t I need to submit a money order with that? I am trying to gauge the amount or range that needs to be paid prior to my application for a Redbox. Thanks…

store owner : Is there someone in the department that can give me a range of costs prior to my submitting the information?

store owner : Does the cost of the fee vary by store?

Redbox Customer Service: If  you can provide this information, I would be happy to submit it for you today

Redbox Customer Service: I do not have any cost information

Redbox Customer Service: Once they review your information, they will provide any other information at that time

Redbox Customer Service: If you would like, I would be happy to send this information in an email

Redbox Customer Service: Then you can just hit reply and send the information back

store owner : Okay, thank you!

Redbox Customer Service: I w ill go ahead and send it right away

Redbox Customer Service: Is there anything else I can help you with today?

store owner : I guess that’s it. Have a great day!

Redbox Customer Service: You are welcome,  store owner ! Thank you for chatting with Redbox and have a Nice Day!

Redbox Customer Service has disconnected.

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And for those who run websites, Redbox has just launched an affiliate program, paying people who are approved a flat fee of $0.25 for each applicable order that a visitor completes within one day of being referred through one of your affiliate links.

After reading the press releases about the event, this reporter applied to the Redbox affiliate program via their link on http://www.redbox.com/affiliates, and it sent me to an Impact Radius screen that allowed me the options of signing into my existing account or setting up a new one.

I signed into my existing account — thank God I had one and for remembering the password! — and I accepted the long list of terms set forth by Redbox, including the following, plus many more that you’ll see when you apply:

Online Rental
Payout
You earn $0.25 (Flat Fee per order)

Performance Bonus
None

Click Referral Period
Visitor must purchase within 1 days of referral

Action Locking
All actions happening in a given month are locked 15 days after the end of the month

Payout Scheduling
Approved Transactions are paid 30 days after they are approved

Recurring Transactions
For return consumers payouts apply to 0 recurrences

Media Partner Tracking Pixel
Advertiser does NOT allow media partner to fire their tracking pixel when the consumer action is completed.

I hope I get accepted to Redbox’s affiliate program

So all the movies that I watch and write about can gain me plenty of quarters upon quarters (which can really add up) in the long and short run, if enough people reserve Redbox movies through my affiliate links.

Impact Radius’ referral program wasn’t as intuitive as some of the others I use, like Amazon Associates, but once I figured out that my Redbox application was under their “Proposals” section — and that my act of accepting their terms way at the bottom of the pop-up text that showed the previous text and much more, I realized that’s why I couldn’t find “Redbox” under the Marketplace tabs of Campaign, Media Place and Agency Marketplace when I searched.

I’m glad when big, successful companies like Redbox open referral programs, appreciating the fact that those of us out here writing and bringing them customers are a profitable part of their business, and reward us accordingly.

Now — will they open a referral program for every cup of Seattle’s Best Coffee sold through their new coffee machines?

That could be cool. Or hot, actually.

I’ve got my routing bank account numbers all in my Impact Radius account and am ready to go!

The post Redbox launches referral program through Performics, now known as Impact Radius appeared first on Redbox Franchise Cost.

“Coinstar is kicking Netflix’s butt,” is the title of the CNN article describing how the innovation of Redbox-owner Coinstar is causing the company to surge beyond its competitors, especially in the wake of the news that Seattle’s Best Coffee machines will be meting out coffee from kiosks just like folks are used to getting their movies out of a kiosk.

I’m a living witness that Redbox movies can be easy to retrieve (the ones in stock, that is) and cheap to watch and return the next day. A family friend talked about her and her parents and siblings watching a recent popular movie on the cheap by getting it from a Redbox machine.

So Redbox is doing things right, apparently.

Read the CNN piece here…

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Coinstar, owner of the uber-popular RedBox DVD machines that prompt many inquiries each day from customers hoping to get their own kiosks outside their own businesses, is taking a serious leap into the coffee kiosk business.

The Seattle’s Best Coffee brand already enjoys more than 50 of the strikingly new machines in cities like Seattle, San Francisco and Washington, D.C.

By the end of 2012, they expect about 500 of these coffee kiosks to be in operation, passing out that hot and piping and newly and freshly ground coffee to curious and caffeine-craving customers.

That’s the big question.

With the specialty coffees running from a buck to a buck-fifty for a 12-ounce cup, entrepreneurs can definitely spot the earnings potential per year for trying to get one of these franchises, just like folks have tried to get RedBox machines outside their stores for years now.

However, the targeted retail locations of these new coffee kiosks are approximately 50,000 mass merchants, supermarkets and drugstores, and each kiosk is expected to bring Coinstar approximately $11,000 to $12,000 each year in sales.

So business owners who want to try their hand at getting a coffee kiosk outside their businesses might do best to contact Coinstar via the same application process spelled out at the link above that the wannabe RedBox DVD machine owners take.

After all, this automated retail business is obviously the hot new thing, what with cupcake ATMs and everything, and it would behoove us to get in on the new trend.

Read more about the new coffee kiosks.

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If you’ve recently applied to receive a Redbox DVD machine at your store, please comment below and let us know how the process went for you as a business owner — and whether you were accepted or rejected, and more details about the response from Coinstar.

Thank you for your feedback!

The post Redbox’s $100 million purchase of Blockbuster Express DVD machines — Will it hurt or help new Redbox business owner wannabes? appeared first on Redbox Franchise Cost.

I recently wrote an article outlining the likely earnings for Coinstar (CSTR) in 2012 based on the unit economics of its Redbox DVD rental division. The essence of the article is that if you look at the results of the average DVD kiosk over time, average monthly costs are consistently about $3,500, while the average revenue per kiosk per month has been steadily increasing. Because the costs to operate a DVD kiosk are relatively fixed, increasing revenues mathematically lead to higher profitability for each kiosk. In sum, a dramatic increase in profitability for Coinstar is likely to show up with a vengeance in 2012 and surprise everyone. (I estimated $5.40 in earnings for 2012).

I would like to take another look at the kiosks and see how they might be performing based on their age. In other words, we know that when Redbox first introduces an individual kiosk, it likely isn’t that profitable. After all, the expenses (as shown in the previous article) on a monthly basis are likely $3,500 but not many people have “discovered” the kiosk or use it regularly. Coinstar management said in their Q1 2008 conference call, “kiosks typically produce negative EBITDA in the first year as they ramp”. After it has been in place for awhile and “seasoned”, the results of that kiosk improve as more revenues are generated to offset expenses and over time lead to increased profitability. So, how do we go about looking at the profitability of the average kiosk based on age? Well, we can run a waterfall analysis where we “place” each cohort of kiosks into a model to find the average kiosk age at any given point in time. The analysis looks like this.

(Click to enlarge)

I made the assumption that the average kiosk was nearly 1.5 years old when Redbox first started disclosing kiosk numbers in Q4 of 2006 (only 2,200 kiosks were in operation at the end of 2006, compared to 35,400 now). From there, we can model the age by noting how many kiosks were put in service in any quarter and get a rough approximation for the average age of a kiosk. The results look like this:

2012 numbers are derived from adding management’s guidance of 5,000 new kiosks through year-end 2012. Note how the average age will continue increasing throughout 2012. At the end of 2011, the average age was estimated to be 2.69 years old. By the end of 2012, that number will increase to 3.29 if management sticks to its guidance of installing 4,000 – 6,000 kiosks this year.

So, we know the average age historically and going forward based on our calculations. Now let us compare those ages to observed results. Let us compare the monthly expenses, the monthly revenues and the EBIT margins of Redbox based on the average kiosk age.

When we model the monthly expense vs. the average age, we get an R-square of 34%, showing that the age only explains about 34% of the variation of monthly expenses. This is affirmation that costs are relatively fixed and not that dependent on age. Rather, expenses are more dependent on movie costs (and any management mistakes in over-purchasing titles) than simply time elapsing. The two aberrations are due to management mistakes in over-purchasing titles in Q4 of 2010 (see previous article) and the same in the latest quarter for games.

Here is a graph showing the very loose fit of a regression to expenses based on age:

With the two anomolies removed the R-square is down to %15.1%, or meaningless.

On the other hand, when we run a regression on kiosks for the average age vs. monthly revenue per kiosk, we get and R-square of 66%.

(Click to enlarge)

That means 66% of the variation in average monthly revenue per kiosk can be explained by its age, or “seasoning”. What this regression shows us is that the average box will have $2930 in monthly revenue at its introduction and gain $404 in revenue per year it is in service. The actual numbers likely look slightly different than this, but not terribly so. In fact, in its Q4 2007 conference call, management stated, “A Redbox kiosk that has been operating for at least one year generates revenues of approximately $40,000 to $45,000 per annum.” If we take monthly revenues of $2930 at time zero, add $404, we get $3334. Multiply that X 12 for yearly and that comes out to $40,008, or very close to what management stated in Q4 2007. So, as a DVD kiosk become seasoned, it does more revenue, about $4800 per year more, in fact.

Here is a chart showing the regression and expected results of monthly revenues vs. the actual observations:

Note the tight fit of the observations to the regression line relative to the monthly expenses. It shows that as the Redbox kiosks age, they should see greater and greater revenue. Just like in the last article I wrote, that means that profits per kiosk should go up as expenses are relatively steady. If we know that expenses are relatively fixed and revenues go up with age, then margins should increase as well!

In fact, the margins have an R-square of 63% relative to the average age of a kiosk!

(Click to enlarge)

Now a statistician will note that the P-value for the intercept shows it is not statistically significant. This is a minor issue for this exercise as we are more interested in the slope of the line (the amount of margin improvement for 1 year increase in average age).

As expected we see a tight fit and significant evidence that margins improve with age:

So, what happens when we put all of these results into an earnings model with modeled revenues and EBIT margins for 2012 based on our regression results? Note, I will adjust for the 20% price increase since all but Q4 data reflected the pre-price increase results in the regression model data and results.

(Click to enlarge)

Remember, in my previous article looking at DVD kiosk unit economics I came up with a reasonable estimate of $5.40 in EPS for 2012. This model, with a different methodology comes up with $5.91 for 2012 EPS. Given that Wall St. currently estimates earnings for 2012 of $4.09, it is safe to say I am very bullish on 2012 results for Coinstar. You should be too!

Source: http://seekingalpha.com/article/367921-coinstars-redbox-margin-tailwinds-are-blowing-hard-point-to-nearly-6-eps-in-2012

The post Coinstar’s Redbox Margin Tailwinds Are Blowing Hard: Point To Nearly $6 EPS In 2012 appeared first on Redbox Franchise Cost.

Coinstar (CSTR) runs two primary businesses: The coin machines you see in grocery stores that give you cash for your change, and Redbox, the DVD rental kiosk business. The Redbox DVD kiosk business provided roughly 84% of the company’s revenues in the last 12 months, ended 9/30/11. From the latest 10-K, Coinstar described the Redbox business as such:

 

We operate approximately 35,400 self-service DVD kiosks, in over 26,100 locations, where consumers can rent or purchase movies. Our DVD kiosks are available in every state, as well as Puerto Rico and offer our consumers a convenient home entertainment solution. Our DVD kiosks are installed primarily at leading grocery stores, mass retailers, drug stores, restaurants and convenience stores including Walmart, Walgreens, and McDonalds. Our DVD kiosks supply the functionality of a traditional video rental store, yet typically occupy an area of less than ten square feet. Consumers use a touch screen to select their titles, swipe a valid credit or debit card, and receive their movie(s). The process is designed to be fast, efficient and fully automated with no membership fees. [Figures updated as per latest quarterly results (2/6/12)]

 

The business sounds simple enough, and should be relatively easy to model. But, Wall Street plays their same old song and dance, and just applies trendline growth rates and margins to the current business to forecast what may happen in future years. That is the wrong way to go about estimating the future earnings of this company. A much more intuitive way is to look at the individual economics of a single (average) kiosk. This provides telling information about the health of the business and the underlying economic trends of the kiosks. Looked at through this lens, Coinstar’s Redbox business is currently hiding phenomenal and improving profitability. Since Coinstar breaks out the segment profitability of the Redbox business, we can do a deep-dive analysis of the individual kiosks.

Shown below is a chart with the number of kiosks Redbox averaged in the quarter, along with the revenue per kiosk per month that they generated from the average kiosk.

As one can see, the revenue per kiosk has been steadily increasing. Multiple drivers push this number up:

1. More people using the Redbox kiosk,
2. People renting more movies per rental,
3. Lately, more people have been renting games and Blu-Ray disks, which have a higher cost per day to rent
4. In the latest quarter, there was a price increase instituted, significantly propelling the revenue per kiosk per month higher.

These factors have driven significant “same-store-sales” for the Redbox kiosks as they mature. Redbox discloses their same-store-sales that highlight the growth of a group of kiosks that has been in operation for longer than a certain period of time. Here is a graph showing their same-store-sales:

Try finding a classic retailer putting up numbers even close to these “comps.”

Our “average” revenue per kiosk per month numbers from the first chart show less growth because brand new kiosks, which are relatively under-used by consumers, drag the average down. As these kiosks are “discovered” and draw more repeat customers, they contribute more and more to the top and bottom lines. As new kiosks become a smaller portion of the total kiosks installed, the average revenue line should increase further.

We have seen significant revenue generation capabilities of the kiosks, but what about expenses? The primary expense of the kiosk is, obviously, the cost of the movies (and more recently, games). These costs have averaged $1,570 per month per kiosk since the start of 2009. In fact, these costs have been remarkably stable around $1,600 per kiosk per month, excluding a blip in Q4 2010 and Q1 2011, and again in Q4 2012. What happened in Q4 of 2010 and Q1 of 2011, and in Q4 2011? In the words of management:

 

First, Q4 [2010] marked Redbox’s first holiday season with delayed titles. Based on our experience during the third quarter, we believe we had a solid indication of consumer rental patterns and expected stronger performance from the new 28-day delayed content during the fourth quarter. We purchased to this higher level of expected demand, and unfortunately many of these titles did not perform as we had anticipated. We are comfortable with the delayed deals we signed last year, and believe we can optimize inventory for these titles as we go forward.

[For Q4 2011, announced 2/6/12] As we said on our October call, there was a higher than average number of titles from lower margin studios in Q4 that would compress margins. Second, while video games continue to be an important consumer offering, we over purchased inventory for Q4 and also saw a decline in salvage value. Both factors negatively impacted product margin by a combined 2.1 percentage points. (Link)

 

In summary, Redbox was working with “new” products and tried to provide the best consumer experience possible. They wanted to ensure sufficient inventory on the “new” product (28-delay content in Q4 2010 and games in Q4 2011) and they subsequently over-bought. As seen below, at the end of Q4 2010, Redbox had $4,500 worth of movies in every kiosk, up from their typical $3,500. That greatly inflated their DVD costs in the next quarter. This makes sense, as the DVD Library Inventory is amortized (or used up) creating COGS in the subsequent one quarter, and sometimes two.

As these “new” products mature, I believe Redbox’s DVD and game cost per kiosk per month should be rather steady. They have to contend with no agreement with Warner Brothers Studios that could inflate costs somewhat. However, I think they will be able to keep the full-year kiosk monthly content costs closer to $1,750 without any problem.

What about other costs per kiosk? Other direct costs include rent paid to the host of the machine [Wal-Mart (WMT), Walgreen (WAG), etc.], field employees to rebalance inventory amongst machines in a given locale, bandwidth to connect the kiosks to headquarters, and other miscellaneous expenses. There are also general overhead expenses and depreciation of the physical kiosk. As can be seen below, these expenses are incredibly stable on a per-kiosk basis. Intuitively, this makes sense. As grows its base of kiosks, it gains leverage on local managerial and labor costs, and it can strike better placement deals with large retailers. Moreover, its physical, fully automated kiosks, never demand a pay raise.

_{*G&A and other direct costs estimated using wholeco figures for Q4 2011 as the 10-Q with segment breakdown was not available at the time of writing.}

As should be pretty evident, Redbox’s total operating costs per kiosk are relatively fixed. In fact, this next chart shows total operating expenditures per month per kiosk on a trailing-12 month basis by quarters.

On the other hand, Redbox’s revenues are steadily increasing on a per kiosk basis. Higher revenues and fixed costs mathematically leads to higher profitability per kiosk, as seen below (EBIT per average kiosk per month):

So, we have seen Redbox profitability increase greatly on a per kiosk basis over the last few years. But, what about recent events? Redbox recently instituted a 20% price increase on its standard definition DVDs (from $1.00 per night to $1.20 per night). Blu-Ray (7% of kiosk content) stayed at $1.50 per night, and games (4.6% of kiosk revenue) stayed at $2.00 per night. So, roughly 85% of their kiosk revenues increased in price by 20% on October 31st. What does this mean for Redbox’s revenue per kiosk in 2012? It means it should go up significantly! But, by how much?

As of Q4 2011, the trailing 12-month average revenue per box per month was $4,025. Again, there was a 20% price increase on its SD DVD content, which is 85% or greater of their total Redbox revenue base. Note, before the price increase, Redbox was already seeing average revenue per kiosk increase by 4-5% annually. So, we need to add (85% * 20% = 17%) to the 4-5% current trend rate to get to a peak percentage increase to average revenue per kiosk. We will call the peak increase roughly 21%. However, there is likely some amount of demand elasticity. Ie., fewer people rent Redbox DVDs because of the price increase, or they rent fewer movies each time they go to the kiosk. Let’s say this elasticity costs them 10% growth on the average kiosk. Also, two months of the 12 in 2011 included the price increase. So, let’s assume that we see roughly 9% growth (10/12 months * 11%) on the average kiosk as likely for next year. (I think this is conservative.) That leads us to revenue per kiosk per month of roughly $4,390, versus the trailing 12-month revenue of $4,025 as of Q4 2011. [I understand this is crude math but it is generally correct, in my estimation]

Therefore, total revenue for Coinstar, will likely look as follows (excludes any effect from new ventures, the JV announced with Verizon today, and the purchase of NCR’s DVD business, also announced today):

This closely resembles Wall St. estimates of $2,170mm in revenues for 2012. As per the price increase, and the elasticity of demand, people are mistaken if they think the elasticity will be as great as that witnessed with Netflix. First, $1.20 vs. $1.00 is psychologically not that powerful. To the human mind, it’s only $.20. On the other hand, for someone on Netflix’s one DVD mail program who got free streaming, the new program saw costs go up roughly $8.00. That is a much harder pill to swallow and caused much more backlash than Redbox will ever likely see. I believe the Q4 2011 results of Redbox announced tonight (2/6/12) proved this point in spades.

It is my belief that Wall St. has greatly underestimated the earnings power of the kiosk model. Remember total operating expenses per kiosk per month have consistently been around $3,500, and recently decreasing below this level. But, astute readers will know there is a small catch! The recently enacted Durbin amendment means that Redbox will be paying more each time a debit card is swiped to rent a movie. On their Q3 2011 conference call, Coinstar management stated:

 

On interchange fees, the way we’re looking at it and estimate for the quarter, they’re going to be between $10 million and $14 million for the quarter is what we’re looking at and that’s what’s in the guidance as we took a look through there. We are working to mitigate those. Some of those are things that we can do that cause – that we can do through making some technology changes. And some of those are through continuing to work with the card issuers to work on the rates and be able to mitigate those costs. So we’re working through that and have confidence that we’ll be able to do that over the next several months. And so again, what we have in there is between $10 million and $14 million for the quarter in costs. (Link)

 

Taking management’s number of $14mm in incremental interchange fee expense for the quarter, divided by the likely average number of kiosks of 35,000 for Q4 2011, and 3 months, one gets $135 in incremental expense per kiosk per month. So, if we took our $3,500 number for the per kiosk per month operating expense metric and increase it by $135, we have a new operating expense run rate of $3,635. Let’s be conservative, however, and assume that Warner Brothers Studio costs and other movie costs will increase (they did in Q4 2011). Let’s just assume that costs per box will jump from $3,500 to $3,800. Running this through our Coinstar model, gets us the following results. (I have assumed Coin Change Machines and new ventures provide $40mm in EBIT (which is less than any recent history), interest expense is $25mm for the year, and diluted shares outstanding stay at the Q4 2011 level of 31.6mm)

It is quite apparent how it is more than possible for Coinstar to achieve $5.00 in EPS for 2012. Moreover, Coinstar has said they will make diligent efforts to reduce the incremental $14mm in interchange “swipe” fees assessed by the credit card companies. So, $3,800 could be INCREDIBLY conservative in a best case scenario! Using this simplified model, we can understand a range of EPS results based on the Operating Expenditures per month per kiosk:

Looking at the graph below one more time, I can come to a quick conclusion on where EPS will likely be for Coinstar in 2012.

It is almost certainly above $5.00. Just for giggles, Wall St. consensus is at $3.86 according to Yahoo! Finance. On 2/6/12, Coinstar gave guidance that they would likely earn $3.80 to $4.30 for 2012. I believe they are being incredibly conservative. After all, they estimated that in Q4 2011 they would earn $.57 to $.67 in the quarter. The $1.00 they actually earned is 50-75% greater than what they estimated. Maybe the >$5.00 number I see them earning isn’t so crazy after all!

What Wall St. is missing is the massive operational leverage inherent in the Coinstar business model. Every $100 per month in operating profit per kiosk is roughly $.86 of EPS. Redbox’s recent price increase will likely fall to the bottom line much more than people estimate. In addition, they have exciting new growth opportunities with their new ventures (they regularly shut down new venture trials so it is obvious that these tests have been exceeding high hurdle rates for return on capital). Next, their recent JV announcement with Verizon will likely give Redbox higher volumes as Verizon rolls out its digital strategy – Redbox said it would be contributing movie nights from its kiosks to the product offering from the JV. In summary, given that Coinstar is flexing its pricing power, still growing, has international opportunities ahead, and far from saturation, I would give it a market-like multiple of 15 on its $5.40 in likely 2012 EPS. That’s an $80 target for Coinstar.

http://seekingalpha.com/article/346371-why-coinstar-will-earn-over-5_00-in-eps-in-2012

The post Why Coinstar Will Earn Over $5.00 In EPS In 2012 appeared first on Redbox Franchise Cost.

Indeed, my husband cancelled our Netflix DVD mail-in service after that — no more pretty red envelopes in the mail. Boo hoo. But we have Blockbuster blue DVDs in the mail now, and we still enjoy Netflix’s streaming on demand video service from time to time.

But today, Yahoo will discover more information about the new Redbox product, where a video-on-demand feature will be added via Verizon, in addition to the love all those folks have so much for Redbox physical DVD kiosks.

“The world has another potential Netflix-killer,” wrote Yahoo.

“Verizon and Coinstar, owner of DVD kiosk service Redbox, have announced that they’ll be launching a joint venture combining Redbox’s product with a video on-demand streaming and download service from Verizon. Planned for the second half of 2012, the venture joins the biggest provider of physical DVDs with Verizon’s massive network. Verizon will hold a 65 percent ownership share, with Redbox having a 35 percent ownership share at the outset,” they stated.

“We’ll have more details on the joint venture later. The companies have a conference call scheduled for 9:30,” Yahoo informed us.

Read the article…

The post Yahoo calls the Verizon-Redbox product the biggest Netflix-killer yet appeared first on Redbox Franchise Cost.

Redbox Automated Retail, LLC, a wholly-owned subsidiary of Coinstar announced a renewal agreement with Walmart to continue featuring Redbox® kiosks at more than 3,700 Walmart locations nationwide. The agreement extends the availability of Redbox kiosks and builds upon the companies’ more than five-year relationship.

So that answers the question that many Walmart locations are indeed big enough and have enough traffic to merit having a Redbox featured at their store.

In fact, I was driving past a store the other day — it wasn’t my local Walmart, but was either a Walgreen’s or CVS store (I guess it wasn’t a Blockbuster’s, huh?) and I saw two Redbox machines outside the location.

I thought to myself: That’s probably great on those Friday and Saturday nights when the Redbox machine lines are extra crowded and long — at least people don’t have to wait as long as they would have if there were only one Redbox machine at that store.

So check the link above if you want to apply to receive a Redbox machine at your location, and to find out further information from the Coinstar-owned Redbox company.

The post Redbox machines at more than 3,700 Walmart stores appeared first on Redbox Franchise Cost.

I love my local Ohio Menchie’s store — it’s a bustling and positive place, and I see why the YouTube video referenced below that shows an interview with a Menchie’s franchise owner proves that people in cold-weather states still love to eat froyo!

People in Canada even love eating cold froyo in their cold climates.

Thankfully, there’s information out there about the cost of a Menchie’s franchise that gives us a clue to how much one of these popular frozen yogurt stores may run you.

How much does a Menchie’s franchise really cost?

The Menchie’s franchise, a store first founded in 2007, could cost you anywhere from $170,000 to $574,790, reports Entrepreneur — and shows how much the froyo store has grown in popularity over recent years.

According to the magazine, the franchise fee alone is anywhere from $25,000 – $40,000 — with an ongoing royalty fee of 6%.

You’re going to need a net worth of at least $500,000 — and $120,000 in liquid cash available.

In 2009, there were approximately 12 Menchie’s stores (with three company owned stores) in the United States — and none in Canada. But by 2010, that number had more than tripled to 38 stores in the US, with four company owned stores.

By 2011, there were 95 Menchie’s stores (and five company owned) in America and two Canadian franchises.

Expect the number of Menchie’s franchises to continue growing in 2012, as witnessed by the plethora of folks who fill up the froyo store on weekends for their tart frozen yogurt fix — topped the way they like it.

My personal favorite is to mix the tart froyo with chocolate or any measure of the new and exciting flavors the store always has, like coconut or red velvet — and then I top mine off with lots of nuts and chocolate candies and brownie bits and cheesecake pieces. It’s no wonder people love this stuff!

Get more information about owning your own Menchie’s franchise

One Menchie’s franchise owner in this YouTube video explains why the “Have a smiley day!” mantra is very important in the Menchie’s experience, and how much the good feeling makes people want to come back.

“Welcome to Menchie’s!” is how customers are greeted when they walk in. And when they enjoy the Menchie’s radio — oh yes, they do always play great tunes that get me singing along — it all plays into the customer retention and word of mouth that makes people want to come back again and again.

If you want additional information, visit the franchise page on Menchie’s website and enter your name, email, phone number and click “request information” to learn more:

http://menchies.com/franchise.php

“Congratulations! You have successfully submitted your request and started the Menchie’s smiling process,” is what Menchie’s will tell you once you’ve submitted your information.

I just submitted my info, and here’s what they immediately emailed to me:

Thank you for your interest in becoming a Menchie’s Franchisee! A member of our Franchise Development Team will reach out to you. We look forward to learning more about who you are and how we can make you smile.

With Friendship,
Menchie & The Menchie’s Franchise Development Team

I’ll update this page with more info as I get it, and in the meantime, if you’re a Menchie’s franchise owner — or have applied to become one — leave comments letting me know how the experience was for you, and any additional info you discovered through the application process.

The post Menchie’s Franchise Cost appeared first on Redbox Franchise Cost.