Corporate Coffee’s Henchel shares candid startup lessons and takeaways
Key takeaways for OCS operators
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Undercapitalization is a universal challenge. Many new operators underestimate the amount of working capital required to survive the first few years.
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Business structure matters from day one. Without systems and processes in place, operators risk inefficiency, disorganization, and costly mistakes.
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Trial and error is part of the journey. Henchel emphasizes that mistakes are unavoidable but can be powerful learning opportunities when addressed directly.
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Don’t copy: Create systems. Without a large-company background to emulate, Henchel had to build his own structure. New operators should be prepared to do the same.
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Practical advice beats theory. Henchel’s lessons stress the importance of foundational business practices over quick wins or shortcuts.
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Resilience fuels growth. Early failures didn’t prevent Corporate Coffee Systems from scaling; they laid the groundwork for long-term success.
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New operators need realistic expectations. Entering the OCS industry requires patience, planning and a willingness to learn from setbacks.
David Henchel, president and CEO of Corporate Coffee Systems, has some advice for new operators entering the industry. “Don’t do it! Or better yet, do it, but do it in another city,” said a laughing Henchel. Beyond the humor, he also offered more practical advice for new operators during Automatic Merchandiser’s Vending & OCS Nation podcast.
Today’s episode is part two of the David Henchel interview. According to podcast host Bob Tullio, “There was just too much quality content in the interview to get it done in one episode... There is plenty to learn from his experience, perspective and insights.”
For Tullio, one of the most interesting and honest moments in this interview is when Henchel talks about his two early challenges. The first is a common one: lack of working capital. “I hear that from everyone, and believe me, my partners and I can relate, and I know that all of those new operators out there understand the challenge right now as they try to find their way,” Henchel said.
The second one, not too many people admit to it: learning how to structure a business. As Henchel pointed out, he did not attend college, and he did not work for a major coffee service company where he could emulate existing systems. He had to learn by trial-and-error.
Of course, that leads to mistakes, which he calls “a great learning opportunity.”
No time to listen? Prefer to read? Here is an edited podcast transcript:
Bob Tullio: Today’s episode is part two of the David Henchel interview. David Henchel reflects on challenges, mistakes and opportunities — with some advice for new operators.
Is there anything over the years that, as a company, you look back and say, “Hey, we took a wrong turn, but we were able to correct it. It was a lesson learned.”
David Henchel: So, this is another one of those: If somebody tells you they weren’t, they’re lying to you. Bob, there were so many mistakes we made. I kind of see the journey that we took from 1985 to today, sort of like a windy, twisty road in the mountains. And I can’t tell you how many forks in the road came up on us, and we made the wrong turn. And one thing I did learn was those mistakes — those wrong turns — they’re amazing opportunities for learning.
And so, I can’t say to you that there’s one wrong turn that was so game changing. Because to be honest with you, we made a lot of impactful mistakes. I could tell you that none of them were so catastrophic that it put us out of business — because we’re still here. But I would tell you that we made a lot of mistakes. And we guessed wrong. I’d say that the thing that I got out of all those wrong turns was those opportunities to learn. There is no way to learn like you can from a mistake. This is the best lesson you can get. Boy, does that teach you a lesson.
Bob Tullio: What are you focused on right now?
David Henchel: We’ve been very, very acquisition oriented over the 40 years. So, I think one of my primary roles is always to be looking at strategic partnerships or acquisitions, mergers. I use the word strategic partnership because in today’s world, it could look like anything. Strategy is another very, very key role for me — thinking about strategy.
Then lastly is I’m still involved in operations. I’m still talking to the people that run the business, and I have to be involved enough so I have context. Otherwise, how in the world can I give an opinion if I’m not really sure what’s going on anymore because my context is 20 years old.
Bob Tullio: Let’s look at challenges you faced. Initially, what was the biggest challenge in the business when you started out?
David Henchel: So I think anybody who doesn’t admit this openly is probably lying. Money. Do we have enough money? How do we get enough money? I funded this company off of a Mastercard, with the old Manufacturers Hanover, which became part of Chase Manhattan, at 22% interest. Access to capital was impossible as a new business. So, I would say money.
The next thing I think that was really, really tough — not having gone to college, not ever working at a big corporation — was structure. I had no idea how to build structure. I didn’t know the first thing.
And with that thought: Procedures. I didn’t know how to build procedures, didn’t know what procedures were. It’s not as if I worked somewhere else and I said, “Okay, this is how we did it over there at one of the big national groups. I’m on my own now. Let’s do it the same way, and now we can change things.”
I had to build procedures. So, I think in the very early days, Bob, I would say to you that growing sales was not the primary challenge. It was finding enough money and figuring out a way to come up with enough procedures so that we can actually figure out how to run a business.
Bob Tullio: That does seem to be a common theme, the whole capital theme. Boy, that’s challenge for everybody in this business.
David Henchel: It is, especially now, Bob, because the cost of entry is astronomical compared to what it was when most of the older operators. When they started it, the cost of the entry was so low.
Bob Tullio: So how has that changed now? What’s the biggest challenge you have today, would you say, that you have to deal with?
David Henchel: The biggest challenge today? Continuing to grow the business at an appropriate level because running a business with 70, 80 people, there’s a lot of expense — to do it the right way requires an appropriate margin. So, I would say making sure that we are growing the business in an appropriate way is certainly top of the list. Also top of the list is attracting, finding and attracting game-changing people. And game-changing people are not just a director of sales or a director of ops. Apantry attendant who comes in and is excited, wants to work for us and loves the idea of serving people at that level — that’s game-changing too at a customer level and at a route level.
So, I would say that’s challenging too, continuing to funnel in enough people that are meaningful, that continue to move the business to continue to get us to that vision of being the most compelling.
I cannot deliver us to the promised land by myself. I wish I could, I can’t.
Bob Tullio: How has selling convenience services changed over the years?
David Henchel: When I started in 1985, and I went into Midtown Manhattan, I had an ability to sell on price because prices were so robust. I’m not saying they were overcharging. I’m saying that the margin was robust enough that I could sell on price and still make healthy margin.
I think that one of the critical things today — besides the fact that selling convenience cost-of-entry is so much higher — I would say to you: You can’t sell on price.
Because if you go back to one of my visions for the company is: We’ve got to be profitable. You can’t be profitable, and also be a discounter. Certainly not in New York, where it’s very costly to operate a convenience business. So, I think that that’s very different.
The third thing I think that’s very different. We’ve got to be relationship selling. And I’m not sure that the decision-maker was as astute — as educated a decision-maker — when I started in 85 as they might be today. And it’s not because of an intelligence level. I think it’s an exposure level. I think that decision-makers are way more educated than they were in 1985 because it was more in its infancy — the whole convenience OCS business was more in its infancy.
Today, my decision-maker — or our decision-maker prospects — they know all about our competitors. Sometimes they know their strengths and weaknesses. They certainly know who they are. And in a lot of cases, they know salespeople at these because they’ve been in the business 40 years as a decision-maker. And so in 1985, I didn’t experience that. So I think the relationship is way, way, way more important today than it ever was.
Bob Tullio: What about the process of selling?
David Henchel: I think the process of selling is way more relationship centric than it was. It’s certainly — for Corporate Coffee — is not about the price. Now with that said, I don’t want to suggest the price never comes up. I don’t want to make a speech. We never ever discount. That’s a silly speech to make. It’s not true. But I think that that’s not the prevalent piece of our pitch. It is about the relationship. But also, the customer is bigger today than they were in 1985. Because the product SKU or the product portfolio is so much bigger than it was in 1985. So we’ve got a different sell than we did back then because even though in New York we had more SKUs than maybe you did in California — certainly then you might have had in St. Louis or in Idaho as examples — I’d still say that it’s way, way more diverse today.
So our people have to be more educated than they were in the 80s, and we have to educate the decision-makers more so than I think we did in the 80s.
Imagine Bob, a coffee service company with a office in a in a tower in midtown Manhattan. I mean, when I started, it would be unheard of. Nobody would do that. We’ve invested in a showroom that gives a customer the ability or prospect the ability to touch and feel and to taste coffee and to see whether the machine is plasticky or it’s solid. What do they like? You know, it’s funny. They see content on a website or a flyer and yeah, okay, they can see it, but it’s still not quite the same as touching it and feeling it and seeing it live.
And it’s hard. Nobody’s coming out to Long Island or New Jersey to attend a presentation —or very unlikely. Midtown Manhattan gives us an advantage. I’ll tell you what: we sell 95% 90% of the people come up there.
Bob Tullio: That’s great. Yeah, you’re not going to get rid of that office then anytime soon. How important is it to take care of your employees?
David Henchel: Critical. This is critical to our business. This culture, that attracts people, and it can’t be faked. You can’t talk about it. You have to execute it. But if you go back to my vision, and I think is still prevalent today, one of those three critical things is always, always, always making sure that this company is a place that people want to work.
Bob Tullio: How have you adjusted your business, especially OCS, to deal with the fact that you’re serving a smaller office population than you served in 2019?
David Henchel: That’s a great question. Knowing that consumption is not as connected to employee count because that number of people work for the company. But, when you look at the amount of people in the office on Fridays and Mondays, and what percentage is Tuesday, Wednesday and Thursday, the overriding number from a consumption perspective could be 40, 50, 60 percent of what the total count is.
So, the way that we combat that is that we’ve got to be even more focused on machine placements as valuable assets that have to drive a certain minimum revenue to get to an ROI.
And so, if a customer wants a certain portfolio of equipment and we’re a little uncomfortable that 300 people are who’s there on Mondays and Fridays, the solve is a minimum spend. The customer’s got to agree: They’re going to spend a minimum in order for us to be willing to invest in that portfolio of equipment to satisfy or to give them the amenity that they’re after.
So more than ever, you’ve got to make sure that you tie equipment cost, equipment into a appropriate ROI. And that solves the problem of the consumption.
Bob Tullio: You’ve got to ask for what you need to be profitable, right?
David Henchel: Yeah, I think operators have to be bold enough to realize: They’re businesses, right? This is not a charity. It’s a business. And that customer might not be the right customer if you can’t get the spend or the ROI that you feel you need.
Now, operators may decide to stretch that ROI out. I don’t think that’s a good idea, but everybody makes their own decision with an asset that they purchase. But I will tell you that for me, operators that I talk to pretty regularly, people are more focused on that machine, that minimum ROI, I guess, is what I really want to say than they were before.
Certainly in 85, in the 80s, I think we just put machines out.
I will tell you at Corporate Coffee, we are so crazed that we are constantly reevaluating customers when we need to reorder equipment. We’re going back first to check, and see who’s got those machines. Are we getting what was promised? If we’re not, we might pull the machine. We might try to downgrade the customer. I will tell you, it doesn’t always work. We don’t always want to lose the customer, but you’d be surprised how many times we can get equipment back because people don’t want to drive the ROI that we wanted.
Bob Tullio: Sure. Or they do finally wake up and realize they better buy more.
David Henchel: Right.
Bob Tullio: That’s the reality. Stop buying from Costco. Stop buying from these outside —
David Henchel: That’s another problem, right?
Bob Tullio: Yeah. Got to send that message.
Are you still having fun as an operator after all these years?
David Henchel: I’d say that I’m having fun — most of the time. I will tell you that a business this size in a market like New York, it’s challenging. We face a lot of challenges. I think that one of the biggest challenges is that what used to be unthinkable, Bob, is now very possible, even likely.
What was unthinkable before? If you asked me in 1985, will there ever not be the need? I’d laugh at you. Manhattan keeps growing. They keep putting towers up.
Today, it’s a whole different ballgame. The unthinkable has happened. It’s challenging. And again, because we’re bigger, I think we have to be, we have to be paying so much attention to profitability and to those three core values you asked me about. I keep going back to them, not to be repetitive, [but] because that’s what guides me. And I’ve got to stay profitable. And that’s hard work. That doesn’t come easy.
Bob Tullio: Makes sense to me. What do you love about the convenience services business?
David Henchel: It’s dynamic. It’s different. The solutions change. We’re always looking at something new. The needs of the decision-makers and the end user customer change. So that is challenging, and I like challenges.
Bob Tullio: What’s the secret sauce at corporate coffee? What’s made your company successful?
David Henchel: This is so easy. It’s so easy. It’s two things. It’s a level of care, a level of care in the things that we do, and it’s the ability to execute.
To me, this is what has gotten us to where we are today. What keeps us out there being relevant and compelling is because in the end, as you know, running a big company that you did, you can’t, you can’t do it all. And so, if the culture doesn’t support the employee and the employee is not executing and caring — because the execution comes partly from the care. If people don’t care, they’re not responding to customers quickly, timely, and we can’t execute in the same way. And so, I think that’s what’s helped position us for success.
Bob Tullio: What’s the best advice you have for the many new operators in the industry today?
David Henchel: You going to laugh. Don’t do it. You’re crazy. It’s too hard.
Bob Tullio: Matthew Marsh said the same thing. Stay out and stay out of my way.
David Henchel: Stay out of my way. Better yet, do it. Pick another city. Pick another town.
In today’s world, you have a new operator has got to realize that they can’t just be a sales organization. They have got to have financial controls. They have to understand what it costs to operate. They can’t just be out there trying to grab the business the way we did in the 80s because it catches up on you in today’s cost of entry — well, it’ll catch up on you quicker.
Bob Tullio: Here’s a multiple-choice question for you. What does the future look like for David Henchel? Is it expansion? Is it growth? Golf course in Boca?
David Henchel: I think the answer is, it’s a combination. Listen, I have a brand new grandson. He’s 10 months old, my first grandson.
Bob Tullio: That’s great.
David Henchel: I have an amazing marriage to my soulmate, who happens to be from the coffee service business.
I’ve got a golf game that ain’t bad.
Bob Tullio: No, we know that.
David Henchel: And I’m still having fun most of the time. And I think we’re still compelling. So, I think the future for me today is to stay the course, is to continue to maintain the culture that develops people so that it’s not all on me because at an 80-person company, it is too much for it to be all on one person. No one person can do it.
About the Author
Bob Tullio
Bob Tullio is a content specialist, speaker, sales trainer, consultant and contributing editor of Automatic Merchandiser and VendingMarketWatch.com. He advises entrepreneurs on how to build a successful business from the ground up. He specializes in helping suppliers connect with operators in the convenience services industry — coffee service, vending, micro markets and pantry service specifically. He can be reached at 818-261-1758 and [email protected]. Tullio welcomes your feedback.
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