2007 Dealer of the Year: Family Matters
Treating customers, co-workers and vendors with equal levels of respect, Hockenbergs continues to use its self-described traditional Midwestern values to fuel a growth spurt that has seen the dealership more than double its sales volume in less than three years.
By Joseph Carbonara, Editor-in-Chief -- Foodservice Equipment & Supplies, 5/1/2007
If you ask Tom Schrack Sr. about the reason for Hockenbergs' success over the years, he will humbly attribute it to being honest and adhering to traditional Midwestern values. If only it were so simple. But those homespun values alone aren't enough to explain how Hockenbergs went from $25 million in sales at the end of 2004 to more than $56 million at the end of its 2006 fiscal year. Patience, persistence, partnership and knowing a good opportunity when one presents itself have helped this family-owned and -operated dealership expand well beyond its Omaha, Neb., home.
Thanks to the execution of a wellthought-out succession plan, through which Schrack continues to gift the business to his family, and a sound stable of branch managers, Hockenbergs shows no signs of slowing down anytime soon.
But it's not so much that Hockenbergs continues to grow, but the manner in which the dealership continues to achieve its success that earns it high marks from all corners of the foodservice industry. The dealership continues to invest in its people in the form of education and training opportunities. Each and every person at Hockenbergs remains unflinchingly honest and straightforward when dealing with customers and suppliers alike. They pride themselves on their ability to share their industry knowledge with customers and show an uncommon level of security and confidence when walking away from unprofitable deals that's rarely seen today.
Schrack speaks of his family, customers and vendors with equal and genuine tenderness and care, something one rarely sees today. To get a better idea of how Hockenbergs continues to grow profitably and responsibly, we sat down for a chat with Schrack.
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Key Dates in Hockenbergs’ History
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| 1908: Max Hockenberg goes into business in Des Moines, Iowa. That business eventually enters the foodservice industry and becomes what is today known as Hockenbergs.
1956: Hockenbergs opens a location in Omaha, Neb. 1973: Tom Schrack Sr. joins Hockenbergs from Pegler & Co. 1979: Prudential Properties purchases Hockenbergs from brothers Ira, Shep and Bernie Hockenberg. 1983: Godfather's Pizza buys Hockenbergs from Prudential Properties. 1985: Tom Schrack Sr. and partners buy Hockenbergs from Pilsbury. 2007: Hockenbergs named FE&S Dealer of the Year. |
Branching Out
Fueling Hockenbergs' continued growth is a series of regional sites that helps carry the dealership's values beyond the Omaha market. The individuals shown here continue to play a key role in establishing Hockenbergs in these markets.
FE&S: Why buy this business when you did? At that point time, Hockenbergs had changed hands several times in a short period of time. And you readily admit one of the business' caretakers wasted little time in running it into the ground. So, why take this chance? What did you see or think that you could do differently?
TS: I really felt for the company and the employees and for myself. I knew I could take the company and make it solid and profitable and grow. I did not think I was taking a chance. We had good people and good customers. I was in the right place at the right time and was lucky to have a couple of friends who helped.
FE&S: When you bought the company, you did so with two partners. Then toward the end of 1989, you bought them out and took sole possession of the business. Why not have them buy you out and retire
TS: When we bought the company, we did it with the thought that I would buy them out. That was the long-term plan. We thought it would take four to five years for me to buy them out and we did it in three and a half.
FE&S: Why didn't you change the name to Schracks?
TS: The boys wanted to but Hockenbergs is a well-respected name in the industry and it carried a lot of weight when we bought the company. I did not want to lose that and I knew if we changed the name it would not have felt the same. It would have taken a huge effort to bring the factories and customers up to speed.
FE&S: At the time you bought the company, the Godfather's Pizza chain represented 65 percent of the dealership's sales. One of your first priorities was to diversify sales and revenue streams. How did you go about doing that? And what percent of your overall sales do chains account for?
TS: We had some good salespeople, but when he owned the company Bernie would not let me turn them loose. So, when I bought the company I did just that. We went after the street business that we were not pursuing before. And at the time, I felt we needed everything we could get our hands on to keep the business on an even keel. Right now, chains are still a big part of our business, maybe 30 percent to 35 percent, but the rest of it is schools, institutions and independents. To this day, we still do business with Godfather's. They've been a good, loyal customer. At one point Godfather's wanted to get into the equipment business but I talked them out of it. I told them that they would have to assume a lot of overhead, more than I was charging them. Luckily they agreed.
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FE&S: In 2004 FE&S named Hockenbergs one of its Dealer All- Stars. And at the time, you reported revenues of slightly less than $25 million. Today, just three years later, you report revenues of more than $56 million. What happened that allowed you to grow so much so fast?
TS: July of 2004 is when our Kansas City location opened up and we initially projected they would do $7 million to $8 million during their first full year. They did $18 million. Around that time in Minneapolis we hired Jeff Witt and it really started to roll. Right now, I feel we are in great shape with our managers. They do a great job and really know the industry.
FE&S: Were you ever concerned that the dealership was growing too fast?
TS: Yes, it caused us some concern. Six years ago we had to switch banks because our existing banker was a smaller operation and could not fund us the way we were growing. The new bank has stuck with us and has helped fund our growth. We are not a family with old money, so we needed that support. We're very honest. The bank sees that and is willing to grow with us.
FE&S: What was the trigger that allowed you to establish such a strong position in the Kansas City market?
TS: Mike Bainum was critical here. I've known Mike for a long time and bumped into him at a NAFEM show in 2003. He was not working with any dealership at the time and was not sure what he wanted to do. We talked a little longer and on March 1, 2004, he started with us, working out of his basement in Kansas City. In July, we opened a store in Kansas City and it really started to roll from there. Mike is a tremendous person and roughly 95 percent of the people he hired down there are from the old Smith-St. John people. Mike knew them and their capabilities and things are rolling. When you have got good people, it's amazing what they can turn up and keep going.
FE&S: In one article I read about your dealership, you were quoted as saying it's not enough to just make a sale, the transaction needs to be profitable for the dealership, too. How often do you walk away from potential non-profitable sales?
TS: We just walked away from a package worth over $200,000. A broadliner came in and low-balled it. The owner said, "Match it and it's yours." We walked away from it. We are not going to trade dollars or lose dollars just to take care of a customer. I tell our guys if you can't make any money on it and don't see future sales in it, just walk away from it. Just get back to work because there's someone down the road who will be amenable to what you are selling. You just have to cultivate your customers.
FE&S: How do you go about cultivating good people?
TS: It's hard to find good people and get them educated. It takes them two-to-four years to be comfortable in selling our business because there's so many facets to it. But if they can stick it out, they can make a good living.
FE&S: You've discussed location as being one element critical to Hockenbergs' success. That's normally something we associate with successful retailers. I know you have a sizable showroom. So the question is, is retail a big part of what you do? If not, why are the location and showroom so important?
TS: I take that with a grain of salt in that location means something and yet it does not. It's more substance than anything. Our sales floor does 10 percent to 12 percent of our overall business, but it's really substantial when we bring customers in to show them what we've got in inventory. They can see and touch and feel the products we carry rather than look at a picture. And we take it a step farther by having some local groups use our conference room for meetings and such. So, the location really acts as a showpiece for us.
FE&S: The growth of your dealership has been steady and unlike other dealerships, you have not had to wander down the acquisition trail to maintain your upward ascent. All in all, Hockenbergs' progress seems pretty well thoughtout. Is that really the case?
TS: It's not really a long-term plan. It's more thinking ahead about what we would like to do and then take advantage of those opportunities when they presented themselves to us. Omaha is a metropolitan community of about 800,000 people, so to grow we really needed to branch out. Our buying group affiliations have really helped. I had been familiar with ABC when I was with Peglers. So we joined ABC in 1988, which allowed us to buy right and really helped us spread out in the long term. I wanted to get into IFED because I thought that would help us grow more and it did.
FE&S: Shortly after the Des Moines branch got up and running a few years back, I read in an interview that you were pleased that its performance was on plan almost to the dollar. How do you go about planning for and implementing these locations that have allowed them to flourish as they have?
TS: We originally started opening the branches as individual companies. But when I began talking about gifting the business to the kids in the early '90s, we decided to make it all one operating company. As far as performance objectives, we just try to be realistic. We don't look for 25-percent growth every year. It's nice when it happens, but we try to project based on the people that are there, what they've done in the past and what my gut tells me they can do. And we try to be realistic from that point. I don't want to plan for numbers we know we can't hit. People get down when that happens.
FE&S: You've integrated a decent number of former Smith-St. John employees into your dealership in Kansas City. Some dealers would walk away from a situation like that seeing more potential harm than good. How has Hockenbergs made this so successful?
TS: We knew the people were good and felt very fortunate that they were available. It seems as if everyone who came over is happy.
FE&S: You've successfully transitioned the business to the next generation. Describe some of the steps you went through to make this happen.
TS: My dad died when he was 42, so planning for the future always concerned me. We started planning for the future in the early '90s by trying to figure out where the business would be in the next five or 10 years. So, then we got our ducks in a row. A lot of the people thought we were crazy but we started gifting the company to them. The kids now own 84 percent of the company and Mary and I own 16 percent. I had good advice from my attorney.
FE&S: What's it been like, as a businessman who built this dealership back up to national prominence, watching the next generation assume control?
TS: The kids are doing a good job. They enjoy it. And everyone at our dealership has signed on with the kids because they are not the kind of people who come in and expect everyone to do things for them because they are the owners. My parents taught me that and I tried to teach them that, too. They all have their niche in the business and I have to sit back and let them bump their noses.
FE&S: How do you feel as a father, watching your children continue to grow their influence over the business?
TS: The kids know we love them but we don't think about telling them how proud we are of them. They are all grasping and taking hold of things. We all make mistakes but they don't make too many.
FE&S: Describe your overall business philosophy. How do you approach your dealings with customers? Vendors?
TS: Basically, I want to treat our customers the way I would want to be treated. I don't care if they spend $1 million or $100. I tell our people to treat them with respect. With respect to factories, when we get a spec we will not change out a piece of equipment unless the customer asks us to do so. And I think the factories respect that. We do not switch factories for cheaper deals. I try to sell stability. Relationships mean a lot more to me and our people than any quick turn of a nickel. And that's also the way we go about dealing with our customers. If you keep that relationship long-term, your business is going to grow and you will grow with them.
FE&S: How do you keep customers from making bad business or purchasing decisions? And what's it like watching customers walk away when you won't let them make a mistake on your watch?
TS: I won't pull punches with them. Some people will listen to you and others won't. Now, the chains are starting to look at things long-term and weighing total cost of ownership. They should have been doing it years ago. But a lot of people will listen to your experience and what you've learned over the years. You just have to keep trying and continue working with them. But it is important to never lie to a customer. That way you don't have to remember what you told them. I tell them what I think and then they can buy what they want.
FE&S: What did you learn from Bernie Hockenberg? TS: Make a profit. He was a stickler for making money. Every penny. It took me awhile to convince him to eat a little of a job once in a while. But he taught me why you need to make a profit and what you should do with that profit. Bernie was a gentleman. He taught me a lot about the business and even let me bump my nose a little bit. FE&S: After the Hockenbergs sold the company, you said it took the new guy running it only four years to run it into the ground. What was it like watching that happen and what lessons did you learn from it?
TS: The first year he had me bamboozled and thinking he knew what he was doing. He was a very smart, shrewd businessperson. But when you watch things go bad, it really tears you apart because you know what the company could do. He made all the decisions but did not know what he was doing. So, I learned that as a person you don't know everything and you have to listen to other people. Others come at it from another angle and see things you don't.
FE&S: How has the business changed since you first got into it?
TS: The biggest thing is margins. When I first started, you could make a 35-percent or 40-percent margin on a job. Now, you can't do that. No way. And when I was getting started, the chains were not as big an influence as they are today. The internet is a big influence, too. Customers see they can buy things cheaper on the internet but what they don't realize is what we as dealers do next like uncrating, installing it and dealing with damaged freight.
FE&S: What are successful dealers doing today that they did not do when you first got into the business?
TS: The business itself is still pretty much the same, but the margins are tighter. So, you have to work closer with your customers. And customers are now a lot smarter than they were before. But we are working closer with the factories than we used to and it has benefited us both. We need good factories, good reps and good dealers. And we all need to work together. Working against each other does not do anyone any good.
FE&S: What will successful dealers need to do in the future?
TS: We have to stay on top of technology to allow us to operate more efficiently and keep us from running in circles trying to manage the flow of information available to us. We have so much information now we don't know what to do with it.
FE&S: You once said, "Spending money to make money is not a bad concept - you just have to carefully choose how you spend it." What goes into making those choices?
TS: Deliberate thought process. What's the goal? Can this opportunity help get you there? Those are the questions you have to weigh.
FE&S: When you bought the business from Pilsbury Corp., you certainly planned on being successful but did you ever imagine things would grow to this level?
TS: No way. [laughing] I was hoping we could get to $20 million or $25 million. Maybe $30 million. But nowhere in my wildest dreams did I see this happening. But fortunately, we have good people. And that's the key, right there.
FE&S: On a national scale, family businesses do not have a solid track record for success and yet here you sit defying the odds. Why get your children involved in this?
TS: It's a tremendous business and the relationships are something else. The friendships you develop over the years, with the customers and factories . in a lot of industries you don't have that closeness. I love the business so much and my kids saw that. My son-in-law Paul Parr is the only one who started out in the business and stayed. He came here after college, with the intention of staying until he found another job. My other sons, Tom, Tim and Dave, all held other jobs before joining the business.
FE&S: What have your children brought to the business that perhaps you could not have done yourself?
TS: I think they have helped us grow. They all have their own niche. Tom is an accountant by training and has taken over the business, accounting, banking and finance side of it. Tim has taken over the equipment side of it. Paul has taken over the contract side of the business. And David is a good salesman in his own right and has taken over the used equipment side of things. It has all clicked and we could not have grown to these levels without them. They are developing and expanding the business in their own ways. Hopefully, we gave them a good start and they are carrying it on.
FE&S: People in the industry praise you and your management team for a certain hands-on approach. They say it's not uncommon to find you working a forklift in the warehouse or cleaning up a spill in the showroom. Is that still the case?
TS: [laughing] The forklift is now out of bounds. They don't let me near it. But it's part of the game. It shows people that you care about what you are doing. I guess I learned that in the Army. Guys would sit around and smoke and talk when things needed to be done. But I could not do that. People respect you more when they know you are not going to ask them to do something you would not do yourself.
FE&S: In one article I read, you attribute Hockenbergs' success to "old-fashioned Midwestern values." Can you explain what that means? TS: Be honest. Treat people well - both your customers and coworkers. Don't look down on people. In my 50 years in the business, I fired two customers. One, we did business with him and his dad for years. One day, this guy came in and cussed out one of our salespeople. I came out and asked him to leave. Sometimes, you have to do something like that.
FE&S: You seem to have lots of long-term employees, which means low turnover. What's your secret?
TS: No real secret. Treat people the way you want to be treated. We try to be fair with what we offer salary-wise, vacations, 401k, etc. A lot of people portray small businesses as taking advantage of their people. Hopefully, we don't do that. We want them to stick around and grow with us because continuity means an awful lot.
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The Unwritten Rules |
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Many companies today pride themselves on having well-documented vision and mission statements that they share with customers and suppliers alike. Since buying the company in 1985, Hockenbergs' patriarch Tom Schrack Sr. continued to mold the dealership in his own homespun image, creating a culture of respect, trust and entreprenuership among its many employees. This approach is something clients and other members of the foodservice industry have come to notice and admire over the years. Thanks to a well-crafted succession plan, Schrack continues to transition ownership of the Omaha, Neb.-based operation to the next generation of company leaders, which coincidentally is made up of mostly family members. What's not a coincidence, though, is their continued embrace of Schrack's self-proclaimed Midwestern values-based approach to doing business. When you visit Hockenbergs, you won't find any of these rules written down anywhere and yet somehow the entire company seems to follow them regardless. So, following are just a few of the Hockenbergs' golden, yet unwritten, rules. Be Truthful: "It is important to never lie to a customer. That way you don't have to remember what you told them." Be Open to Other Points of View: "Listen to other people. Others come at it from another angle and see things you don't." Know Your Costs: "I tell our guys if you can't make any money on it and don't see future sales in it, just walk away from it." Show Respect: "I try to sell stability. Relationships mean a lot more to me and our people than any quick turn of a nickel. And that's also the way we go about dealing with our customers." |
FE&S: People throughout the industry seem to hold Hockenbergs in rather high regard. In fact, when researching you for this award, we could not find anyone to say a bad word about your dealership. When you hear things like this, how do you react?
TS: Very humbled. I don't know what to say to that. I really did not know that too many people thought that highly of us. I am really humbled and it says a lot about all of our people. We teach people to treat others with respect and they will come back to work with you.
FE&S: Some years ago, you had started a golf tournament for vendors and clients alike. What's the story behind this?
TS: Dick Griffin was a salesman who worked for us for several years and he died of throat cancer. Charlie Becker, our manager in Des Moines, passed away from brain cancer a few years later. I had meant to do something to honor Dick but had not gotten around to it. But when Charlie passed, I knew it was time to do something. This June will be our eighth year for hosting the GriffinBecker tournament. We have raised $96,000 over the years and even give scholarships to the local community.
FE&S: Why go through this effort? Why not just write a check or something?
TS: It's really worth the effort. We really have a good time. It's relationship building. The factories come in on Sunday and head over to our cabin. We play horseshoes, grill some steaks and have a few beers. You get to spend some time with them in a way you might not normally. It has really grown over the years and is really gratifying. I just talk about it but Mary Lynn does all of the work.
FE&S: Your dealership has a staunch reputation for supporting industry organizations such as FEDA, ABC/IFED, The NAFEM Show and the like. During a time when many companies are cutting back on their support in the form of sending people to industry events, you continue to do the opposite. Why? What value does the dealership get? Your customers?
TS: A lot of people think I am crazy because it does cost a lot. But it's well worth the money spent. If you don't go to these things, you can't tell your customers what you've actually seen, making it harder to convey your expertise. Getting my people out to meet the factory people and build those relationships really pays off down the road. FE&S: Who have been some of the biggest influences on you throughout your career?
TS: My mom and dad gave me a good work ethic. My dad died when I was 20 and my mom had never worked before. We were from a poor family and so they taught me the value of work. Milt Kopecky. Don Pegler. And, of course, Bernie Hockenberg. He taught me a lot.
FE&S: With so much family involved in your business, do you ever find yourselves talking shop over Sunday dinner?
TS: We don't. We seldom do that. It's kind of off-limits at home. It's kind of a gentleman's agreement, so to speak. It's worked out really well. We talk about our families.
FE&S: Looking back over the years, what's the most important lesson you've learned that you try to pass along not only to your children but also to others in the industry?
TS: Hard work. And always give a little extra. Don't be afraid of it. I came from a poor background but we had a family. At times when we were raising our kids, I had to work three jobs to make ends meet. In the end, I was in the right place at the right time and I had friends help me along the way. It is a storybook kind of life.
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