A Capital Story from Joint Venture

In the summer of 1954, four hundred wealthy businessmen were invited to hear about a joint venture proposal. Hands were shaken, coffee was served and for the next few hours, behind closed doors, P & L statements expected the future of how this venture would play out.

History would show that this was one of the sweetest deals ever accessible in business and those that embraced this idea would make thousands of times their original investment … all that joined the venture would make millions.

This was not a naive group of wet-behind-the ears dreamers, awestruck by the thought of sudden riches, or easily swayed by impression.

No, this was a hard-nosed bunch, used to to dealing with bankers and politicians.

Here were the captains of their industry, being offered the deal of a lifetime. Their reaction is what is fascinating. How many jumped at the deal?

How many of those original 400 had the foresight to run with this deal … and beat out the competition?

As it turns out, exactly three.

The creator of this idea — ever the businessman — understood; «After all,» he says, «all we were offering them was a name, a set of plans, and a dream!»

A name, a set of plans, and a dream… The deal was a simple one: $500 down and about $5 per day was all they had to pay for the rights to use a name and a set of plans … to make the dream of a lifetime come true.

Who were this industrialist and what was he selling?

You may not recognize his name but you certainly know his company. Today, it is one of the most recognized brand names in the world.

Side Note: Within three years this company went public with a $3.9 million stock offering and suddenly, everyone wanted in on the deal.

Those that didn’t jump on board wound up standing in a long line, waiting their turn.

Who was this guy?

Opportunity: «…Opportunity comes often, it knocks as often as you have an ear trained to hear it, an eye trained to see it, a hand trained to grasp it, and a head trained to use it.»

This quote is from «Twenty Tips for Success» by Mr. Kemmons Wilson, founder Holiday Inn, America’s Innkeeper

In 1951, Kemmons Wilson was on vacation with his family and became disgusted by the motels of the era that charged $2 extra for children, «We have five kid’s, so our $6 room became a $16 room,» he said. One year later, he opened his first Holiday Inn where children could stay for free and families were assured of consistently clean, safe, rooms. Very soon, Holiday Inn setup the first nationwide motel computer worries network and then, everyone wanted in on the deal.

«From that point on it wasn’t a question of trying to sell franchises — it was a question of allocating them.»

The important point [call it the secret] from this meeting?

Really, there are two important lessons. First, when the risk is small — don’t hesitate. In this case; $500 for the use of the Holiday Inn name plus five cents per room per day — about $5 a day on a 100 room motel — was a pittance compared to what investors made on this deal.

But the biggest reason for Holiday Inns’ success was a risk taker founder, backed by hard working no nonsense franchisees that were willing to invest millions in the first all over the country computer reservations network.

A centralized computer system was impressive that the rest of the lodging industry didn’t have at the time. At that time the competition was a bunch of small independently owned roadside motels too small and scared to make the chief deal needed to win … so they lost and the people that joined Mr. Wilson became very big winners.

So, the biggest [secret] from this meeting? When you are first to the market with a new technology backed by people that won’t «give up», then don’t be afraid to take a risk and go for it!