One thing that strikes you when you visit the headquarters of Sterling Services Inc. in Canton, Mich. is that the company has class. The building may be in an industrial park, but the interior is classy. The rooms are furnished with stylish, contemporary furniture, everything is neat, and the walls are adorned with prints by the famous photographer Ansel Adams, Picasso and others.
It's the type of environment you would expect from a company that caters to customers that want a high class service. And that's the message that owners Ray Friedrich and Chris Peppo want to convey.
Businesses today want top value for their money, and Friedrich and Peppo aim to provide it. Sterling Services, founded in 1986 when the partners were nearly fresh out of high school, offers state-of-the-art vending, contract foodservice, catering and an unattended convenience store called "Fast Track Convenience."
Building a successful vending/foodservice operation in Greater Detroit is no small accomplishment, given the high caliber competition and the struggling local economy.
A veteran vending operator might have advised Friedrich and Peppo to try their luck elsewhere when they decided to get into vending, but the youthful duo simply didn't know any better. They were merely following their hearts' desires.
Beginning at the bottom positions in foodservice
Upon graduation from high school, both men worked in restaurants. They loved the restaurant business and wanted to go into business for themselves. They didn't have a lot of capital, so they kept a close watch for any and every opportunity to get into foodservice. When a new hotel opened in one of the suburbs, they approached the general manager and asked if they could do the hotel's catering.
They didn't get the catering gig, but when they were visiting the hotel, they noticed a proposal from a vending company to lease vending machines. They thought the company was charging a hefty price for the machines, and told the manager they were sure they could do a better job.
The hotel manager agreed, and the youthful duo found themselves in the vending business.
Vending offers a low-cost entry into foodservice
Friedrich, not knowing much about vending, called some local vending operators to learn what he needed to do. He studied vending banks to get an idea what products to buy and how to price them.
With their collective savings of $1,500, they bought a snack machine from a local equipment distributor and leased a beverage machine from a bottler.
The new snack machine had a bill validator, which was new at the time and proved popular. The front desk at the hotel was often strapped for change for the machine. "Dollar acceptance was something they liked," Friedrich said.
The hotel turned a good business, and, keeping their day jobs and working out of Peppo's parents' garage, the duo went out and signed up six more hotels that year. They provided meter readings along with the commission payments, something most vending companies weren't doing. Their first year's sales totaled $53,000.
They quickly realized that a lot of vending companies were promising locations commissions that seemed unrealistic. They also realized that those same vending companies weren't providing meter readings. Hence, they made it a point to tell customers that they provided meter readings as a way to verify the commissions.
Starting out in hospitality accounts
"Detroit was full of companies offering unrealistic commissions," Friedrich said. To compete against these operators, he told the customers he would guarantee a certain dollar commission that would at least match what the competitor could offer, even if the competitor was offering a higher percentage.
Working mainly with hotels that first year gave Friedrich and Peppo a broad exposure to the vending business. One hotel did not have any restaurants nearby and asked for a fresh food machine. They bought a used food machine and stocked it with precooked, frozen food.