FE&S 2006 Dealer of the Year

VISION QUEST
Concept Services operates in the same intense and decisive image as its founder and owner Hal Schroeder. To get a better idea of what makes this dealership run, FE&S sat down with Schroeder.

By Joseph M. Carbonara, Editor in Chief

“We have a culture that requires focus, discipline and responsibility.” - Hal Schroder

Concept Services Chairman and CEO Hal Schroeder is quick to tell people that his company is different from any other foodservice equipment and supplies dealership. And he’s right. Spend only a few minutes at the company’s Austin, Texas, headquarters and it becomes rather obvious rather fast that this is not like most other dealerships.

For example, at the back of most dealerships one will find large warehouses consumed by a sea of inventory that’s either being staged for jobs or on hand to meet the replacement needs of customers. In contrast, when you visit the back of Concept Services, FE&S’ 2006 Dealer of the Year, you will find one of the sports cars Schroeder regularly drives to the office.

But saying that the noticeable lack of on-hand inventory is the main reason that Concept Services is different would be a gross oversimplification. The real reason this company remains successful is the fact that it is built for speed. Concept Services’ focus on the needs of its core market (chain operators), and relentless pursuit of meeting those customers’ needs, allows it to function at what would be a breakneck pace for some dealerships.

Much like the engine of Schroeder’s Mercedes, Concept Services continues to purr along operating at peak efficiency. And the reason for this is simple. As the chief engineer of the company’s design, Schroeder routinely performs diagnostic checks to ensure that nothing keeps his engine from reaching its potential. The 63 employees may comprise the pistons that have Concept Services firing on all cylinders but it’s Schroeder’s vision and leadership that serves as the engine’s structure. Focusing on EBITDA instead of top-line sales, Schroeder skillfully guides Concept Services through the unexpected twists and turns in the road that make up today’s foodservice industry.

Of course, saying that Concept Services’ model is superior to that of other successful dealers, is like saying a Mercedes is better than a Porsche. Both models are good and can get you to where you are going in fast and stylish manner, but which one you choose is a matter of preference.

Still, life in the fast lane maintains a certain allure for most of us, which is why FE&S sat down and chatted with Schroeder to get a better idea of what propels him, and simultaneously, Concept Services.

The 10 project managers serve as Concept Services’ main point of contact with its clients. They are responsible for everything related to a specific customer and project, including maintaining client satisfaction. The photos below showcase these individuals with some of their interests.

FE&S: Hal, how about a little background on you and your company? Tell us how you got started.
HS: Joe, nobody cares about how we got started or our background. They mostly want to know, how we do it. What’s our secret?

FE&S: OK, how do you do it?
HS: I’ve told the story many times in many venues. Focus on one market you’re really good at [serving] and then have the discipline to do nothing else. Develop a culture that supports your model and then take the rest of the day off ... with pay.

FE&S: Given that the industry has many market segments to serve and a lot of products to offer, isn’t that really an oversimplification?
HS: Nope. Look, I’m not saying it can’t be done. There are a lot of successful dealers out there who are doing pretty well. I’m just saying how I do it and how it makes it easy for me. I’m just not very good at doing more than one thing.

FE&S: You often say how different Concept Services is. Where do you want to start in explaining this?
HS: Well, I already did. We are a specialist in providing services to multi-unit foodservice operators. No pots and pans, no bid work, no “mom and pops.” We don’t sell equipment. We get hired by chains to manage a process or orchestrate an event. Just like they hire a general contractor to manage the construction process, they hire us to manage their foodservice equipment issues.

FE&S: Your customers are chains. But outside of that, are your customers really any different than anybody else’s?

HS: You bet. We hand-pick the people we want to do business with. Life’s too short to do business with lousy people. Why do business with a lousy customer? That’s nuts. Fire bad customers. Better yet, send them to your competitors! We do business with really nice people. We genuinely like them. They need to be responsible for the things they’re responsible for and we’ll move mountains for them. We promise the moon and deliver the stars. We’re the guys with the big white hats who ride in and save the day when they have a problem. Cool stuff. Fun, too.

FE&S: What do you mean, “They need to be responsible for their stuff”?
HS: They need to be honest with us. If they say they’ll do something, we’re going to hold them to it. Because, if we say we’re going to do something, I guarantee you we’ll do it and do it right. They need to have integrity. They need to treat our people right. We do the right thing and we expect them to do the same. And, we’re a stickler for payment. No funny business allowed. We’ll do our part and we expect them to do theirs.

FE&S: Beyond being nice and honest folk, what other qualities do you look for in a client?
HS: OK, given first that we like them, then they have to want a long-term relationship. We’re not looking for a one-night stand.

We have a long-term relationship with our suppliers and need a long-term relationship with our customers. Lastly, they have to let us bring our sub-contractor/suppliers to the party. Two-door refrigerators are pretty much the same, but we know who can deliver reliability, time after time. I need to use vendors national in scope that can execute. If they’re using a lousy vendor, then we’re going to charge more to handle them since they are labor-intensive for us.

FE&S: You once said that your company has no brochure and it sends you to call on prospective clients instead. Is that still the way you present Concept Services when courting new clients?
HS: Absolutely. No brochures. We send ourselves instead. We need a “face-to-face” understanding of each other’s needs and wants. You can’t do business my way without it. It’s critical. And, we think our clients want to know us and know who they’re really dealing with. This is a relationship, not a transaction.

FE&S: Let’s look at your model a little more closely. You seem to have reversed the traditional “buy, then sell” to sell first, then buy. It’s an approach that seemingly serves Concept Services well. How did you decide to follow this path when so few — if any — dealers before you did so?
HS: Well, that’s really just a small part of it. The model was designed to keep working capital requirements at a minimum. New restaurant construction really doesn’t require on-hand inventory. Capital expenditure-type equipment doesn’t really require you to have any real need for accounts receivable. I simplified the process by concentrating on a certain market segment and listening very carefully to what my customer needs and wants.

FE&S: I know that the principals at some dealerships will still maintain contact with or service one or two pet clients once they transition to the executive suite. Do you still call on or meet with clients on a regular basis?
HS: No, unfortunately not. I loved my customers, but I don’t really have any, anymore. I really miss that part. I took great pride in “moving mountains” for them. My staff handle the relationships now. I’d just get in the way and if I went with them on a call, then I’d effectively undermine their authority and importance. They are the“go to guy” not me. I need to stay out of their relationships.

FE&S: Hal, you’ve said that you don’t really do much “managing.” You’re not in the office much. So, what exactly do you do?
HS: I have a very clear understanding of my job description. I know exactly what I’m supposed to do and, maybe more importantly, what I’m not supposed to do. While my title is president, I’m much more the chairman of the board. I do four things.

First, I’m constantly evaluating the market we serve: multi-unit chain restaurants. Is that market growing or declining? Is it the right market to be in?

Second, [I ask] are the goods and services we provide, in growing demand or shrinking demand? I think they are growing. More and more chain customers are seeking out people like us to manage their foodservice equipment issues.

Third, [I also ask] are we efficient in delivering our goods and services? Are we doing a really good job? I think we are. Customers love us. We’re so different, they find it refreshing. Customers go on and on how nice it is to do business with people like us.

Lastly, I ask myself, is my model financially efficient? Does it meet all my financial goals?

FE&S: You said earlier that you needed to develop a “culture” to support your model. From what you and I have talked about before, you said this would be the hardest thing to explain. Give it a shot. What makes your culture so different from that of any other dealer?
HS: First of all, it’s a thousand little things: philosophies, practices, attitudes and ways of doing things that make up a very complicated environment called culture. Let me give you an example. Years ago, we had an office manager who came to me and was complaining that there was never any money in petty cash. The employees were using it as a bank for lunch money when they were short. They’d drop in an IOU. Well, the office manager was frustrated by this and wanted to put an end to it. I was slightly amused by her and told her the problem was not people robbing petty cash for lunch, but the problem was that we needed to put more money in the till. What good is petty cash anyway if people can’t rob it for lunch money? We focus on the important stuff, and not silly busy work that gets in the way of many companies.

We have a culture that requires focus, discipline and responsibility. You’re just expected to be independent, creative, resourceful and take the initiative. It’s hard to put into words. But, I assure you, it’s different. And our people love it and thrive in it.

FE&S: So, what I take from that story is that you don’t want the little or bureaucratic things that often pop up in companies to cause your employees to lose focus. But how does this culture of empowerment help them in the customer’s eyes?
HS: We have a very good vision of what is important and what is not. Our clients are very, very important. Our response to their wants and needs is evident that we are not getting bogged down in company bureaucracy. Nobody asks permission to do something for a customer. They just do it.

FE&S: Do you have trouble recruiting new employees?
HS: Nope. I really need very special, specific people. They have to be the kind of people who thrive in an environment that expects them to make decisions, act independently and a company that doesn’t give them any runaround. It’s more than getting a square peg in a square hole. We have more than a square; it’s a very special, specific-shaped hole and we’re uncompromising in getting the person who will fit that hole.

I’ll never hire a person from the industry who has “experience.” I get calls from people all the time who tell me that they have X-years experience in the industry, blah, blah, blah. I tell them, “That’s a liability, we’d never hire you.” I only want young, fresh talent that I can bring up through our system. Shape them in our image and teach them our ways.

FE&S: If you are not hiring people from within the industry, where do you find your new recruits?
HS: I would say 99 percent come from friends and referrals of people who already work here. There always seems to be some young talent waiting in the wings who has heard about working here and wants to get in.

FE&S: Have you ever had an employee leave only to return? If so, why did they elect to come back?
HS: I’ve had a fair number of people who left for legitimate reasons on good terms only to come back. They missed our style, freedom and having responsibility without the hassles. They came back, wiser, stronger and better.

FE&S: OK, then, how do you cultivate leadership from among the ranks of your employees? And along those lines, can you describe how you go about shaping employees in the Concept Services image?
HS: This is a hard question. Leadership rises to the top and it’s pretty easy to identify. I can’t teach leadership. You either have it or you don’t. So, I can’t really say I cultivate it.

Shaping employees in the Concept Services image is really hard to put into words. It is a subtle, but definite force that they are subjected to almost constantly. It’s a thousand little brushes, experiences, comments, expressions of attitude and teachings that they experience. That’s why it’s easier to start from scratch with new, young people who don’t have a lot of experience that just gets in the way. It’s a process that’s very hard to describe.

FE&S: Earlier you mentioned your company’s image. Can you describe that?
HS: From the vendor/dealer community’s point of view, we’d probably be described as a chain specialist, professional, high integrity and good at what we do. From a chain’s perspective, probably totally reliable, trustworthy and really, really good at what we do.

FE&S: Let’s go back to the unique culture you’ve established at Concept Services. You once were quoted as saying “management is bad and leadership is good.” Can you expand upon that?
HS: Alright. There’s really no management per se, at Concept Services. No sales managers, no VP of sales and certainly no warehouse manager. It’s just not my job to manage these people. Good people only need leadership. Sales reports, quotas, meetings and any kind of micro-management are bad ideas. Managers are the fat of a company. I say get rid of them and get better people.

In the history of Concept Services, we have never had a sales quota or sales goal at the individual level or even company level. Think about that! Chasing sales goals gets you out of focus on the things you do best. [Focus on] core competencies. Create a model that carefully services the needs of your customer; create a culture for the right people to thrive. Everything else simply falls into place. I have a very clear vision of what Concept Services does and does not do.

FE&S: But how do you then drive sales?
HS: I don’t. There is way too much emphasis on sales in our industry. Everybody wants sales growth in an industry that has too much overcapacity already. It’s a beauty contest to see who can give away more than the other guy to drive up their sales records. It’s crazy. I focus on EBITDA and return on assets. My intent is to maximize our bottom line with the minimum of assets. If you’re growing, pay real close attention to liquidity. Don’t fall into the standard trap of going to the bank if you need cash. Change your model. Find customers who will pay you cash on delivery. Concept Services has no debt. Never had any for more than two weeks.

I have no bankers to report to and my life is better for it. I co-teach a class at the University of Texas, Entrepreneurial Finance 372, to senior-level accounting and finance majors. I pound on them real-world stuff. Have a clear competitive advantage, focus on the bottom line but not sales, and create a model that refuses to accept debt. Do things differently. Refuse conventional wisdom. Rock and roll.

FE&S: If you don’t drive sales or have sales quotas, how can you tell if your teams are doing their jobs correctly?
HS: There is no set way. It’s more intuitive. Are they having fun? Are they busy? Do I hear back stories about how their customers love them? Do I hear stories about how they “saved the day” for a customer?

FE&S: How do you go about sharing or communicating that vision with others at Concept Services?
HS: Again, this is a really hard question. They follow my leadership. But, it’s really a million little contacts they have throughout the day. I’m always “fine tuning” a comment, an approach to a problem or idea. I do it over and over again.

FE&S: How has your role within the company evolved over the years? I mean it has to be pretty different from when you first started Concept Services, right?
HS: Big time. I used to go to the job site in my suit and visit with the customer. As soon as he left for the day, I’d change into my jeans and work clothes and start uncrating equipment. Now, I’m pretty much stuck in the ivory tower and involved in industry leadership issues.

FE&S: Has the world had enough of Hal Schroeder?
HS: I think so. I’m outspoken, opinionated and too intense. It wears on people. It wears on me. There are still some industry issues that I think I can have input and help on. I’m getting old, but my workload at Concept Services will allow me to be around for maybe another 10 to 15 years. I need to get away from being “out in front” of the industry and go back behind the curtain. Hopefully, you’ll hear less of Hal Schroeder in the future. But, what you do hear, I hope will be good. I’ve been blessed, big time. Who knew that it would have worked out so well? So, I think I will take the rest of the day off ... with pay, of course.

All photography for this article was done by Andrew Yates Photography, Austin, Texas.