How business, doctors and journalists prey on your food anxieties I

Innkeeper Henry Silverman has hundreds of partners
with the same surname . He's about to lead
his immigrant army into another industry .
Patel, Inc .
By Joel Millman
HFS' Henrv Silverman (left) w ;th rranchisee Hasmukh P . Rarna
Eyeing the brokerage <strong>business</strong> as a new field to conquer .
HosP[TALiTY F0.AVcHlsc SYSTHIDIS,
Inc ., with oaer 4,000 Ramadas, Days
Inns, Super 8s <strong>and</strong> <strong>How</strong>ard Johnsons,
is the world's largest motel franchisor .
Its re%enues last ccar were 5313 million,
its profits 553 .5 million .
Though it concentrates on the cheaper
S25-to-S65 roadside room, its
profits are among the highest in its
end of the lodging <strong>business</strong> . In the
past fi% e }'ears Chairman Hem}' Silverman
has nearlv doubled the number
of hotels under his banner at almost
zero capitai cost . 4t'a11 Street loves
him : E :fs' stock recentlv hit an alldmc
high, S43 a share, from a split-adjustcd
$8 at the 1992 iPO .
What made Silaerman so successful?
In a,cord, immigrants, immigrants
from India . These people,
more than half with the identical Gujarati
surname "Patel," have been
innkeepers to the nation's interstates
since the earlv 1980s . The Patels are a
widespread clan (whose last names
include Desai <strong>and</strong> ~uninj who have
been <strong>business</strong> people foi' centuries in
their native l<strong>and</strong> . Thet° started here in
$ 15=a-night di~es but moved quickly
to the S45-to-$65 franchises . Today
more than half of i-iFs' Dats Inns, <strong>and</strong>
about a third of its Ramadas, Hokcard
Johnsons <strong>and</strong> Super 8s, belong to
these hardworking, penny-pinching
Indians . Because their thrift generates
so muci capital, thev ha%e been excellent
partners to a chain seeking to
exp<strong>and</strong> without raising fresh monet' .
Silverman plavs down the role of
ethnicity in xFS' success . "Thev were
a stimulus to growth, but I think you
get there an}'~vav," he says . Maybe so,
but not as fast . Last eear oN er half of
FFS' new motals-15,000 rooms-
%~ ere built by immigrants from India .
When FFS launc7es a new br<strong>and</strong>,
Rringate Inn, next year, a third of the
70 charter franchises will belong to
Indians . Silverman acti%elv lures Pates
from Choice, Promus <strong>and</strong> Holiday
Inn, last vear providing refinancing
to moteliers willing to convert
from another banner to his . The HFs
executive in charge of luring the convertsi
1lanish Patel .
FrFS' S20,000-ro-S35,000 initiation
fees <strong>and</strong> its annual rovalties,
about 8%, are bargains for immigrant
moteliers . Thev need management
guidance <strong>and</strong> the means ofattracung
more customers . HFS can do both,
routing lodgers through its reservation
svstem <strong>and</strong> giving advice on everVthing
from ashtra,vs to ice machines.
After 111,11, it's up to the franchisee
to work hard <strong>and</strong> eflicientle .
PatcJs do both .
Hes' arerage Patel holds at least one
uni~ ersity degree, usually in accounting
or engineering, but he or she isn't
afraid to make beds or work the night
shift when needed . The%• can raise
cash, too . In ehe 1980s it wasn't
tmcommon to raise capital through
pools of Patel surgeons or engineers .
Sometimes the monec came in cash ;
there are even stories that it arrixed'ui
suitcases . Setting a daughter orson up
in a ne .c hotel with vour in-laws was a
good wav to exp<strong>and</strong> holdings .
Norwere the immigrants shy about
cashing in on U .S . affirmative action
programs . Though in no sense disad-
%antaged, Patels qualified as a
"minoriro" <strong>and</strong> tapped below-prime
financing offered by the Small Business
Administration .
What next for Silverman <strong>and</strong> his
Indian legions? HFs announced in
June that it was buying Century 21
Real Estate Corp . from Metropolitan
Life . Where were the synergies in
hotels <strong>and</strong> real estate? Look to places
like Richmond Hill in \ewYork City,
or Roswcll, Ga ., a suburb ofAtLanta,
neighborhoods teherc the same immigrants
are buying <strong>and</strong> selling
homes . "There sxill be svnergies for
Hts," saps Hasmukh P . Rama (ne
88 Forbes s Augusr 14, 1995
2046673346
http://legacy.library.ucsf.edu/tid/agf97d00/pdf