Hockenbergs Food Service Equipment & Supplies

Scale & Scope

Hockenbergs Food Service Equipment & Supplies in Omaha, Neb., is a solid, successful, family dealership with an intent to grow and a second-generation management team that is prepared to make the decisions necessary to secure its future.

CEO Tom Schrack Sr. now

owns the company along with sons Tom Jr., who serves as president; Tim, who is vice president in charge of equipment purchasing; Dave, who heads up the Used Equipment division; and daughter Mary Lynn Parr, secretary. Her husband, Paul, manages Hockenbergs' Contract division.

"Tom Jr., oversees all of our financial and computer activities and he's very good at that," said Schrack Sr. "Tim is an excellent salesperson. Paul not only handles the Contract division, but also receives all our contracts. And, in addition to managing the Used Equipment division, David sells, too. I'm very, very fortunate. Our next generation is excellent at what they do."

Hockenbergs currently operates five locations. In addition to its home base in Omaha, the company has branches in Lincoln, Neb.; Des Moines, Iowa; Minneapolis; and Kansas City, Mo. Four of these locations do walk-in sales, while the newest, in Kansas City, is nearly ready to do so, as well, said Schrack Sr.

Hockenbergs is a traditional dealer, "which means we do everything," commented Schrack Sr. "We're fortunate that we've projected a lot of growth ahead of us in Minneapolis and Kansas City. Both of those metro areas are larger than our home state of Nebraska. We grew our sales initially in Omaha by believing that we had to get everything, every bit of business we could get our hands on — bid work, school work, cash 'n carry, used, everything."

In all, the company carries approximately 7,000 SKUs and has 91 employees. Customers operate a wide range of foodservices and restaurants, including chain concepts and programs in hospitals and schools. Total sales last year, including walk-in business, were "a hair under $25 million," said Schrack Sr. "This year, we should end up a little over that mark." Hockenbergs has dealt in used equipment since 1980. Today, these products account for 2% to 3% of sales. Hockenbergs is a member of the ABC buying group.

With this model in place, Schrack Sr. said that he is more or less relinquishing management of the business and letting the next generation call most of the shots. "However, I step in when I think I have to," he added. He began gifting the business to his children about 10 years ago. The four of them now own 84% of the company.

Part of handing over the management reins to the next generation has been "letting them bump their noses," Schrack Sr. noted. "Over the last three years, I've pretty much let them do things on their own. I step in if I think they've done something wrong or if they should have done something another way. But I'm very fortunate; they've all got good heads on their shoulders."

A major goal for the year ahead is to improve sales margins, Schrack Sr. asserted. "Our margins are shrinking, as they are throughout the industry. Our goal is to try to get another point or two out of what we're now doing."

Histories & Founders

Hockenbergs traces its roots back to a Russian immigrant named Max Hockenberg, who arrived in the United States in 1897 at the age of 19. Initially, he worked as a peddler, traveling with a 100-plus-lb. pack on his back, visiting small towns within a 75-mile radius of Des Moines, Iowa. Eventually, Hockenberg opened a grocery store, paying a monthly rent of $5.

Before long, Hockenberg took his fledging firm into the furniture business and, later, began to purchase used restaurant equipment, often from restaurants that had gone out of business. By 1933, he had switched his interests entirely into the restaurant equipment and supplies business. It was at that time that he was joined by his son, Shep, and, later, by Shep's two brothers, Ira and Bernard.

In 1948, the Hockenbergs opened a second store in Davenport, Iowa. Eight years later, a third location debuted in Omaha, Neb. In the early 1970s, a new division, Hockenberg International, was formed to provide specialized service to emerging fast-food restaurant chains.

"I started work for this company in 1973 as a salesman," said Tom Schrack Sr., the dealer's current CEO. "Before that, I had worked for Pegler, a broadliner, which is now Pegler Sysco Food Services," a division of Sysco Corp.

Shep, Ira and Bernard Hockenberg "had a couple of sons who didn't want the business," Schrack Sr. recalled, "so they sold it in 1979." At that time, he explained, Hockenbergs was the 13th-largest dealer in the country. "They sold it to a very sharp individual in Des Moines, a 40-year old CPA, and in four-and-a-half years he ran it into the ground."

The company was getting ready to go bankrupt in 1983, Schrack Sr. continued, when he talked Godfather's Pizza Inc. into buying the Omaha location. "Godfather's was our largest customer here in Omaha and we were profitable with them. They bought the Omaha branch and, a month later, they sold out to Chart House, which ended up being Diversifoods. Then Pillsbury came in and took over the whole thing."

Hockenbergs "sat in limbo for a little over two years," Schrack Sr. recalled. "Our owners didn't know what to do with us. In December 1985, I bought the company from Pillsbury with the help of some friends." The purchase price was $941,000. During the first year of his ownership, sales were $3.3 million.

Clearly, the makeup of Hockenbergs' client base has changed dramatically over the years. As Schrack Sr. pointed out, "When we sold the company to God-father's, they represented 67% of our business. Now, they are under 10%. We look now to do business with everybody that we can, so we focus on no single chain in particular."

Why did Schrack Sr. want to buy the company during its "dark days"? "I loved the business. It was the only business I'd ever known. I worked part-time for another E&S dealer while going to the University of Omaha in 1953 and I just loved it. I wanted to get GI benefits, so I volunteered for the draft. Then President Eisenhower cut off the GI bill, but I still had to go because I'd signed up. When I got out of the Army, I went back to work in this industry, and I've been in it every since. I love it, I enjoy it and that's why I'm having a hard time backing off."

Problems & Solutions

Loose ends during projects mean time wasted, schedules blown and money lost. Customers turn to Hockenbergs to solve many problems, but one of the biggest is waste and loss caused by inconsistent handling of their projects.

"Over the years," said Tom Schrack Sr., "Hockenbergs has developed a reputation for doing a good total job." That reputation has paid off handsomely, taking Hockenbergs in new and highly profitable directions. One of them is working with construction companies.

Peter Kiewit Sons Inc. is one of the construction partners to whom Schrack Sr. referred. It is one of the largest construction and mining organizations in North America, with more than 30 district and area offices in the United States and Canada. Its business requires constant hands-on attention in order to function well.

"Six years ago, we didn't do any business with them," Schrack Sr. noted. "Now, we do all of their negotiated work and that's only because we've got people on staff who live with the jobs, who make sure they're done properly. They like how we handle things. They know we'll get the job done for them. We're not always the low bidder, yet we still get the business."

Another major player and partner in the construction business has been The Opus Group, which has offices in 26 locations around the country and 25-million-square-feet of commercial space planned or under development. With so large a scope, it only picks partners who also see the total project picture. It was its choice of Hockenbergs more than a decade ago that allowed one of its largest projects ever to come together smoothly and profitably.

"We work quite closely with Opus," said Schrack Sr. "For instance, Opus constructed ConAgra Foods Corp.'s campus in Omaha in 1992. We did their very first kitchen. We've also done every one since. We just completed one that was not quite $1 million, a new training kitchen. It was quite extensive. They must now have built six kitchens during the last six years. Some of them are employee cafeterias and the last one was a test kitchen."

While working closely with construction companies has paid many dividends, Schrack Sr. said that the single most productive venue for new business is "still our salespeople out on the street."

The ability of a dealer to handle a project in its totality means great continuity, better communication and fewer mistakes. That is why much of the work Hockenbergs is currently doing for former owner Godfather's Pizza is taking place on Air Force bases. The government looks to this dealership because of its staff's familiarity with the concept's total package.

"We handle the complete Godfather's [equipment] package at those locations," noted Schrack Sr., "the kitchen part and some of the dining part." The usual package, like those in standard Godfather's units, is about $150,000.

Hockenbergs' experience has also allowed one petroleum company to avoid costly errors in rolling out a large regional pizza program. Another large account for Hockenbergs is Hess Oil on the East Coast. "They're putting Godfather's stores into their gas stations," explained Schrack Sr.. "We've probably done 120 outlets on Air Force bases in the last four years."

In August, the company was able to keep costs way down as it completed a $700,000 project at Lakeside Hospital in Omaha. Despite that, Schrack Sr. said the institutional market "is kind of soft right now. Everybody is tentative, [asking] 'Where are the tax dollars coming from? What's going on?' Schools are not opening in this area like they used to several years ago. The states and cities around here are having a hard time."

Hockenbergs' penchant for taking charge of all aspects of its contract work has also led to three prison projects during the last three years. "Corrections is a growing market but, again, it's kind of tentative because nobody wants to raise taxes," Schrack Sr. commented. "A suburb of Omaha wanted to build a new jail recently and the taxpayers voted it down."

Concluded Schrack Sr., "We like to think we've worked with [consultants] successfully. We do our damnedest to do as they tell us they want us to do." Two of those with whom Hockenbergs has worked recently have been Ricca-Newmark Design in Centennial, Colo., and Roger Kruse Associates in Omaha, Neb.