Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, December 20, 1993 TAG: 9312200045
SECTION: VIRGINIA PAGE: A1 EDITION: METRO
SOURCE: LESLIE TAYLOR STAFF WRITER
DATELINE: LENGTH: Long
We see a gumball machine. We drop in a penny or nickel, hoping for anything but the licorice-flavored. We notice that our money is to benefit a charitable organization.
But will it?
Be careful with your kind heart, cautions Fran Stephanz, executive director of the Better Business Bureau of Western Virginia.
A large number of charity vending devices are in fact owned and operated by professional vendors who pay charities as little as $1 to $2 a month - regardless of the amount of money collected - for use of the charity's name. What's left is the vendor's to keep.
"A store or retail business allows profit-making companies to put in machines, thinking they are helping the charity," Stephanz said. "But basically, the charity is getting very little money. It's known as `prostitution of the name.' "
Here's how a vendor typically works:
The vendor arranges a licensing agreement with a charity, in which the vendor pays the charity $1 to $2 a month per vending device for use of the charity's name. The vendor approaches a business owner who agrees, free of charge, to put a machine in his or her establishment. After paying the charity the agreed-upon fee, the vendor can keep the rest of the money collected.
"There used to be a law that you couldn't do that unless 75 cents out of every dollar given to the charity went to the charity," Stephanz said. "But that law has been watered down. The only thing you have to do now is register - and most of them don't do that."
The Virginia Division of Consumer Affairs has taken the position that under the state's solicitation law, individuals or organizations soliciting public donations must register with its office.
"Any type of solicitation, where the name of a charity is used in an appeal as an inducement, must register," said Michael Wright, manager of registrations and solicitation of contributions law.
The division is constitutionally restricted from regulating the percentage of contributions that actually reaches the hands of charities.
"If, in fact, the charity receives 10 percent, that is not illegal," he said. "In the vending box situation, most of the contracts we see provide charities with one to three dollars per box per month.
"The rest is kept by the vending machine owner. That is legal."
Pat Quick, who has 56 candy-vending machines in Roanoke Valley businesses, makes no apologies for the licensing arrangement she has with the National Federation of the Blind. She donates $1.50 a month from each machine to the Baltimore-based organization, regardless of the amount of money the machines collect.
"I just pay them a flat rate, regardless of how much money the machine gets," she said. "The amount varies. Sometimes it's less than a dollar; sometimes it's 70 to 80 dollars."
Quick, of Roanoke, argues that such arrangements can be a more lucrative way for charities to make money than for the vendors.
While she says she pays sales taxes, personal property taxes, plus maintenance and upkeep, the charity "does absolutely nothing, other than send me a statement each month and a newsletter."
The $1.50 per month per machine amounts to $87 a month, slightly more than $1,000 a year, she says.
A spokesman for the National Federation of the Blind declined to say how much the organization raises through vending devices. It has been reported to be about $700,000 a year.
Not all charitable organizations opt for such fund-raising arrangements. Some purchase and monitor their own vending devices. Others form partnerships with established vending companies.
The Kiwanis Club of Roanoke Valley maintains four small wishing wells in businesses, tended by club members. The wells bring in about $400 to $500 a year, which is used for the organization's projects focused on children 5 and younger, said Thomas Hahn, club secretary.
The organization purchased its own wells rather than enlist the help of a vendor - and for a reason, he said.
"If we do this with someone else, they would take a cut," Hahn said. "I don't see any reason why we should do that. It's defeating our purpose - getting money and giving to charity."
The American Association for Lost Children has candy and gum dispensers scattered across the state, some in the Roanoke and New River valleys. The Houston-based association raised about $200,000 last year through its vending program, representing about 90 percent of operating funds, founder Mark Miller said.
The association has licensing arrangements with several hundred vendors throughout the country, Miller said.
"They pay their own money to get involved," he said. "They buy them, then they put on our stickers."
Wilbur Thompson, president of Richmond-based Cavalier Vending Corp., devotes one-quarter of his vending business to small vending machines. He has contracts with four charitable organizations - including the American Association for Lost Children - in which a percentage of proceeds is donated to the organizations.
"Generally, percentages can go anywhere from 10 percent to 50 percent of gross sales," he said. "It depends on what you negotiate."
Thompson's company, for example, gives the association 50 percent of net profit from machines bearing its label. That has amounted to about $8,500 a year, Thompson said.
"We make about the same amount we pay the association," Thompson said. "If they hired someone to fund-raise, it would cost them at least as much to do it."
Thompson says a lot of vending operators are using unlicensed, unbonded or unregistered organizations.
And what happens in those cases?
"It's hard to tell," Thompson said. "No one knows where money is going."
That is, bottom line, what people need to know, Stephanz says.
"When I give money, I want to be sure it's helping the person I intend for it to help," she said. "Otherwise, I'm going to write a check to myself.
"Don't give blindly to a charity. I'm not saying don't give - but give wisely."
by CNB