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