(Franchise Buy) - By Nick Leiber. Updated Jan 16, 2011

Vendors of healthful food target schools

Nick Leiber, Bloomberg Businessweek

Sunday, January 16, 2011

Jeff Lowell, an assistant principal at Interlake High School in Bellevue, Wash., normally dismisses the e-mails he gets from businesses trying to sell to his 1,500 students.

He was intrigued, however, by the pitch he received in September from Fresh Healthy Vending, a San Diego franchise operation that offers vending machines stocked with snacks and drinks it touts as alternatives to junk food.

'Everybody (understands) what eating right does for you and how much it ends up affecting your ability to think,' Lowell says. 'We decided we wanted to try it.'

Lowell signed a one-year contract allowing Fresh Healthy to park its machines near Interlake's gym in exchange for 15 percent of profits. In late November, Fresh Healthy installed three machines, featuring goodies such as Kashi granola bars and Stonyfield Farm fruit smoothies, next to older machines that sell Powerade and Dasani water. The top seller in the new machines so far: Pirate's Booty cheese puffs.

Fresh Healthy is one of more than a dozen small companies that aim to bring more healthful fare to school vending machines. To do so, they must navigate a tangle of rules created in the wake of a 2004 federal law that required school districts to establish local policies aimed at improving student nutrition and reducing childhood obesity. Those rules prompted the bulk of the 10,500 U.S. vending machine companies to avoid schools.

The National Automatic Merchandising Association estimates that just 10 percent of its vending operator members sell in schools now, down from about 25 percent a decade ago.

The hodgepodge of local policies will soon be replaced. Under a law that regulates schools participating in the federal school lunch program, the Agriculture Department now can impose nutritional standards on all snacks and refreshments sold in schools. The national guidelines will make it easier for vending companies to sell to many local districts. Producers are likely to be more willing to make foods suitable for vending machines if they know what requirements they must meet.

Small vending machine operators that specialize in healthy snacks are confident the new law will boost their business.

'I can't even tell you the response we're getting since this latest piece of legislation passed,' says Fresh Healthy founder Jolly Backer, who launched the company in May to sell and supply franchises.

He charges franchisees about $11,000 per machine, which they then manage, ordering from Fresh Healthy online and restocking once or twice a week. Fresh Healthy has machines in more than 2,000 locations, about three-quarters of them schools.

He expects revenue at the 22-employee company to at least double this year, to more than $10 million.

Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2011/01/15/BU531H8PVH.DTL#ixzz1NZqUVcDV