It’s A Gray Area: Dietrich found success in his second act

Last month the Heritage Museum of Orange County inaugurated its speakers’ series with a presentation by Martin Dietrich, the founder of Dietrich’s Coffee. The theme of the series is how various businesses here in Orange County were created, and how they became successful, and that is exactly the information that Dietrich gave us.

Dietrich was raised in Antigua, Guatemala, where he worked at his family’s small coffee plantation. But when he became older, he bought a 1962 Volkswagen bus and drove it north to “make his fortune.” When he got as far as Corona del Mar, he happened to meet a man in a gasoline station who convinced him that this was the place to live and work, so that’s where he stayed. (Dietrich later found out that he had been speaking to the mayor.)

Dietrich began by selling the coffee beans he brought up from Guatemala in a small shop near the 7-Eleven at Irvine Avenue near Westcliff Drive. But soon his customers suggested that he provide them with some coffee while they were buying his beans, which he did. Later he put in a coffee bar next to Hi-Time Wine Cellars near 17th Street in Costa Mesa, and then about 18 months thereafter he opened his first full-fledged coffee house in Tustin.

Both of his coffee houses were successful. According to Dietrich, the secrets of his success included, of course, quality products and good service. But what really made the business successful was engendering the overall “Spirit of Hospitality.”

In effect, Dietrich was selling a feeling of home, comradeship and an “urban refuge” more than a particular product. In fact, when his customers asked him what separated his stores from his competitors, he responded by asking his questioners to close their eyes and tell him what they heard.

They heard people talking and laughing, and dishes clanking. And what they were surrounded by was quality, not only in the coffee itself, but also in the tabletops, counters, floors, cups and saucers and everything else.

In other words, Dietrich created a quality environment where his customers could discover “community” and would want happily to hang out with other people.

Over time this formula worked so well that Dietrich’s Coffee accumulated quite a few stores, and all had loyal clients. So even when the “dreaded” Starbucks came to town, his clients stayed with him.

But unfortunately, as Dietrich now sees in hindsight, that same success caused him to take his company public, and that was the beginning of the end. Maybe he had received some bad legal advice, or maybe he simply was not careful enough legally to protect himself, but over time he lost both control of the operation and ownership of Dietrich’s Coffee.

So one fine day the CEO of Dietrich’s Coffee walked into Dietrich’s office and told him that his contract was not being renewed, that the company was going to stop paying him, and he was out with just a 3% ownership. And that was that.

Later in 2006, the management sold all of the company and its coffee houses to Starbucks, so that was the end of Dietrich’s Coffee. And in addition, even though Dietrich’s real love was providing coffee to his loyal customers, he was contractually prohibited from opening up other stores under his own name.

Undaunted, and knowing they still had the right formula for success, Dietrich and his wife opened two new coffee houses under the name Kean, which was their son’s name. One of the stores is on Westcliff and Irvine Avenue, near their first location, and the second is in the exact same location as their first Tustin store.

What advice does Dietrich have for entrepreneurs who are considering the opening of a new retail business? They should consider four important “boxes,” which are: location, the raising of capital, the formation of a viable business plan and miscellaneous, which includes such things as designing the stores and menus.

But overall, Dietrich’s advice for success is to maintain one’s reputation and good standing in the community. As a small example of that community involvement, Kean donates coffee to Vanguard University’s theater arts department, which it sells during the intermissions of its performances.

And how is his new business doing? In their first fiscal year, Dietrich says that each of his two Kean’s coffee houses did better than his Dietrich’s stores ever did. And he is happier than ever in keeping his life simple with only the two stores.

For those of you who would have savored the opportunity to hear an entrepreneurial success story of this kind and be able to get your own questions answered, we have invited Martin Dietrich back for another discussion at some time in the future.

But at 4 p.m. Oct. 9, we are going to have a similar presentation by Parker Kennedy, the CEO of First American Financial Corp., which has offices in all 50 states and is one of Orange County’s largest business success stories.

Please make a note of the date, and make plans to hear Kennedy’s presentation, and also spread the word to any potential entrepreneurs that you may know.

The Heritage Museum of Orange County is located at 3101 West Harvard St., Santa Ana 92704. For information, call (714) 440-0404. I know you will enjoy this event.

JAMES P. GRAY is a retired judge of the Orange County Superior Court, the composer of the musical revue “Americans All,” which is being performed at Vanguard University until Sunday. He can be contacted at JimPGray@sbcglobal.com.