Cocoons are easy to hatch - they just take some time. If you can keep them relatively warm (80 F) and moist, they will hatch in several weeks. They will hatch at a lower temperature but it will take longer. The cocoons will change from a pale yellow to light brown when hatching.
The cocoons are shipped with refuse screenings (uneaten material, small rocks, baby worms, etc.). Add a few inches of moist peat or compost on top of the cocoon mixture. To this, add some food for the baby worms - such as, non medicated chicken crumbles or vegetable/fruit kitchen scraps. The baby worms will be very hungry when hatched! Provide good ventilation - worms need to breath.
Do not add too much food - it may heat up during decomposition and kill your new worms. Only add more food as it is eaten. If using sphagnum peat, add dolomite lime to adjust pH since peat is very acidic. Usually, 2-3 cups of lime per 3 cubic foot bale (about 23-25 gallons loose peat).