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Nobody Asked Me, But… No. 57
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The Changing Face of North America; 
10 Bogus Reasons to Buy a Franchise; 
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By Stanley Turkel, MHS, ISHC
October 22,  2009

1. The Changing Face of North America

A quiet revolution in ethnicity has been taking place in the United States and Canada.  If current demographic trends hold, the U.S. and Canada are changing to become more diverse racially and ethnically, and retailers will have to respond accordingly.

This revolution has long-term consequences for the hotel industry, as well.  While the U.S. population has grown dramatically from 150 million in 1950 to more than 300 million today, even more important is its changing composition.

According to the U.S. Census Bureau, the U.S. will be a “majority-minority society, one without a clear majority of any one racial or ethnic group by 2050.”

This trend has already commenced with all 50 states experiencing a significant increase in their Hispanic and Asian populations.  The Center for Public Education says, “By 2050, the total U.S. population will grow to more than 400 million, will be 50.1% non-Hispanic White, 24.4% Hispanic, 14.6% Black and 3.8% Asian/Pacific Islander.  The Pew Research Center projects that the percentage of the U.S. population that is Hispanic will double by 2050 while the Asian percentage of the population will nearly double from 14% to 29%.  The shift already is true in some markets: Orange County, Fl. was slightly more than 50% minority in 2008, one of six countries to become majority-minority between 2007 and 2008.

According to the Census Bureau, as of July 1, 2008, nearly 10% of the nation’s counties were majority-minority, as were four states: Hawaii, California, New Mexico and Texas.

What does this mean for hotel operators?  At the least, more care must be taken with site selection, staffing and merchandising to locate and satisfy the target hotel guest.  A hotel in California, with the largest Hispanic population of any state, or New Mexico, with the highest percentage of Hispanic population (45%) should be prepared to cater to that particular demographic.

Fortunately, this shift is taking place gradually, giving the hotel franchisors and franchisees and management companies time to learn the needed lessons so that their hotels attract and satisfy their guests. 

As Ellsworth Statler said in his Statler Service Code in 1908:

Statler guests should be made to feel that we want to give them more sincere service for their money than they ever before received at any hotel… Make the guests feel the fine good-fellowship of the hotel; the ‘no-trouble-to help you’ spirit.  Never be perky, pungent or fresh.  Remember the guest pays your salary.

I have the feeling Statler would have known how to deal with these majority-minority shifts.  Do you?

2.  10 Bogus Reasons to Buy a Franchise

Recently, the Blue MauMau website brilliantly dissected Entrepreneur Magazine’s article “Ten Reasons to Buy a Franchise.” Entrepreneur said “we’ve gathered the best reasons to become a franchisee.”  Here are the ten reasons to buy a franchise according to October ’09 Entrepreneur Startups along with Blue MauMau’s comments (by Editor Don Sniegowski and Franchise Architects Craig Slavin:

1.  Entrepreneur Magazine: “You are buying a proven formula”

Craig Slavin:  This is a huge oversimplification of an ancient myth.  Just because a company is franchising, doesn’t mean the formula is either equipped with the talent or expertise to be a successful franchise company.

2.  ENT: “Larger franchise companies offer in-house lending”

Don Sniegowski : Larger franchise companies can have special arrangements with banks or lenders… But many of those same franchisors have also been having a tough time getting loans…..

3.  ENT: “A franchise provides a built-in support system”

CRAIG: Nothing is “built-in”.  A franchisor must allocate proper financial and human resources to support is franchise owners.  The degree of “support” will also vary from franchisor to franchisor.

4.  ENT: “A franchise is more attractive to the SBA”

DON:  False.  The Small Business Administration (SBA) thinks the opposite.  It has warned its cadre of small business lenders and bankers that in its experience in providing SBA loans to franchises, franchisees are more at risk of being able to pay back their loans than independent small business owners.

5.  ENT: “You can be your own boss (almost)…. It’s not the same as being an entrepreneur, but it’s the next best thing.”

CRAIG:  Being a franchisee does not mean that the individual is an entrepreneur.  In fact, the reverse is true.  An entrepreneur generally will not buy a franchise because they are too independent to follow the rules from someone else….

6.  ENT:  “Some low-cost franchises have strong ROI”.

DON:  If this is the case, where’s the proof?  Why doesn’t the article spell out what a typical return on investment is for a low-cost franchise…. very few franchise systems are willing to provide any meaningful profit, cash flow statements or even average top-line revenues to calculate return or investments.

7.  ENT: “In a down economy, the buy-in prices are lower”

CRAIG: There are a few companies who offer “recession concessions.”  However these reductions are generally pertaining to the soft costs, such as initial franchise or ongoing fees.

8.  ENT:  “Name recognition is what consumers look for”

CRAIG:  This insinuates a market penetration strategy that results in brand recognition- growth via concentric circles.  There are, however, more companies who engage in a “sales” strategy where they sell franchises throughout the US, thus fragmenting their own distribution system and reducing brand awareness.

9. ENT: “Baby Boomers who can’t retire can be their own bosses and see solid returns on investment.”

DON: That’s a repeat of point 6 with the words “Baby Boomers” thrown in to get that demographic interested.

10:  ENT: “The chance of success is much higher.”

CRAIG:  There are many reasons why someone should buy a franchise.  Franchising should bridge the gap for the franchise owner and the stuff that needs to be done to help him succeed.  Can’t today’s trade journals update their tired, worn-out arguments to fit today’s more sophisticated business buyer?


3.  Quote of the Month

Freedom is hammered out on the anvil of discussion, dissent and debate.
         Hubert Humphrey
Please take note that Stanley Turkel, MHS, ISHC has just published the book “Great American Hoteliers: Pioneers of the Hotel Industry.” It contains 359 pages, 25 illustrations and 16 chapters devoted to each of the following pioneers: John McEntee Bowman, Carl Graham Fisher, Henry Morrison Flagler, John Q. Hammons, Frederick Henry Harvey.  Ernest Henderson, Conrad Nicholson Hilton, Howard Dearing Johnson, J. Willard Marriott, Kanjibhai Patel, Henry Bradley Plant, George Mortimer Pullman, A.M. Sonnabend, Ellsworth Milton Statler, Juan Terry Trippe and Kemmons Wilson.  It also has a foreword by Stephen Rushmore, preface, introduction, bibliography and index. Visit www.greatamericanhoteliers.com to order the book.
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Contact:

Stanley Turkel, MHS, ISHC
917-628-8549
stanturkel@aol.com

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Also See: Nobody Asked Me, But No.56 / “Great American Hoteliers: Pioneers of the Hotel Industry”; The Stanley Hotel; Will Hotel Franchisees Remember? / Stanley Turkel / September 2009
Nobody Asked Me, But No.55 / Exterior-Corridor Hotel Properties; Blackstone Denies Hilton Breakup / Stanley Turkel / August 2009
Nobody Asked Me, But No.54 / Famous Japanese Capsule Hotel; Dunkin’ Donuts Independent Franchise Owners Association; Remember Magic Fingers? / Stanley Turkel / July 2009
Nobody Asked Me, But No.53 / Historic Hotel Theresa: the Waldorf of Harlem; Make Mandatory Arbitration Illegal / Stanley Turkel / June 2009
Nobody Asked Me, But No.52 / At Long Last; New York’s Essex House; Origin of Mother’s Day;  An Annual Feast for Number Crunchers; The End of the Hotel Bathtub?/ Stanley Turkel / May 2009
Nobody Asked Me, But No.51 / Transformation of the Shelton Towers Hotel; One Hotel’s Fate 119 Years Ago / Stanley Turkel / April 2009
Nobody Asked Me, But No.50 / Do You Know About O8A? Do Hotel Franchisees Need Independent Associations?The Best Franchise Advisory Councils / Stanley Turkel / March 2009
Nobody Asked Me, But No. 49 / Slave Trading at the Saint Charles Hotel in Washington DC, Why Are Some Hotel Franchise Companies Defranchising Exterior Corridor Hotels / Stanley Turkel / February 2009
Nobody Asked Me, But No. 48 / New President of Wyndham Ignores the Real Issues; Hotel Franchises Compared to Auto Dealer Franchises / Stanley Turkel / January 2009
Nobody Asked Me, But No. 47 / New CEO of Choice Misses an Opportunity; Lost and Forgotten Hotels; Little Known Hotel Facilities in New York / Stanley Turkel / December 2008
Nobody Asked Me, But No. 45/ Remembering John Curry; Hotel Owners Have The Power / Stanley Turkel / October 2008
Nobody Asked Me, But No. 44 / Hotel Franchise Companies Performance Appraisal Report, a Down-to-earth Assessment of the Hotel Capital Markets / Stanley Turkel / September 2008
Nobody Asked Me, But… No. 43  / Hotel Franchisor Companies Ignoring Critical Franchising Issues,  Marriott Leads the Way with Aggressive Environmental Strategies / Stanley Turkel / August 2008
Nobody Asked Me, But No. 42 / Remembering Jack Craver; World Record-Setting Hotels; At Last: A Major Gaming Facility in the Catskills / Stanley Turkel / July 2008
Nobody Asked Me, But No. 41 / Landmark Belleview Biltmore Resort Saved; Hotel Developers Take Note - the Borough of Bronx in NYC Has 1.5 million Residents and Just One Hotel in the AAA Guide; Boutique Hotel Bandwagon / Stanley Turkel / June 2008
Nobody Asked Me, But No. 39 / Say Goodbye To The UFOC; Dunfey Brothers To Be Honored; The Plaza Hotel Reopens After a $400 Million Renovation / Stanley Turkel / April 2008
Nobody Asked Me, But No. 38 / Super 8 Owners Form an Independent Franchise Association; Why Is There a Bible in Every Hotel Room? / Stanley Turkel / March 2008
Nobody Asked Me, But No. 37 / Remember the Savoy Plaza Hotel?; Is Economic Disaster Imminent; Cuba at the Crossroads / Stanley Turkel / February 2008
Nobody Asked Me, But No. 36 / What the Advertisements for the Largest Hotel Franchise Companies Never Mention - Also Measuring Hotel Brand Value / Stanley Turkel / January 2008
Nobody Asked Me, But No. 35 / Casino Expansion Has Transformed America, Exercise Awareness / Stanley Turkel / December 2007
Nobody Asked Me, But… No. 34 / IHG’s Great Idea, Sound-Proofing Hotels, Best Western Enters the Upper Midscale Segment, How to Convert Confusion Into Order,  Sign at a Tarrytown, NY Inn, 1798 / November 2007
Nobody Asked Me, But… No. 33 / 1957 Murder at the Park Sheraton Hotel; How Much Does A Franchise Really Cost?A Marriage Made in Heaven?; A Good Night’s Sleep at the Benjamin Hotel / Stanley Turkel / October 2007
Nobody Asked Me, But… No. 31 - Rhode Island Improves Franchise Rules, What’s Up With Canada? Conversion of a Jail Into a Hotel, The Richest (and Poorest) Places in the U.S. / Stanley Turkel / September 2007
Nobody Asked Me, But… No. 31 - Blackstone's Acquisition of Hilton, The Art of Groveling, The Origin of Franchising / Stanley Turkel / August 2007
Nobody Asked Me, But…. No. 30 / Impertinent Questions In Search of Pertinent Answers: Carbon monoxide detectors, exterior-corridor properties / Stanley Turkel / July 2007
How American-Owned Can You Get?, ISHC's CapEx 2007 Report, The Bowery Hotel / Stanley Turkel / June 2007
Hotel Franchising and State Laws, Is Immigration Important? Save the Biltmore, The Good Old Days, Quote of the Month / Stanley Turkel / May 2007
Nobody Asked Me, But - No. 27 / Hotel Franchise Agreements: Mediation, Arbitration or Litigation? / Stanley Turkel / April 2007
Nobody Asked Me, But - No. 26 / Energy Usage and Potential Savings; Great Art in Hotels; Lifestyle Hotels; The Minimum Wage Issue; Quote of the Month / Stanley Turkel / March 2007
Nobody Asked Me, But - No. 25 / Guestroom Design & Amenities, Get a Human, Best Luxury Hotels in the U.S., Turnpike, The Pineapple as Symbol of Hospitality, Fair Franchising / Stanley Turkel / February 2007
Nobody Asked Me, But - No. 24 / Loose Cannon, Fair Franchising, Manhattan Hotel Profits, Hotels of the Future, Interesting Miscellany, Quote of the Month / Stanley Turkel / January 2007
Nobody Asked Me, But - No. 23 / Biting The Hand That Feeds You?, By The Numbers, Shortage of Hotel Rooms, There is No Free Lunch, Iron Laws of Business Travel, Happy New Year / Stanley Turkel / January 2007
Nobody Asked Me, But - No. 22 / Smart Elevators, Tony Marshall’s Memorial, Women in the Hospitality Industry / Stanley Turkel / December 2006
Nobody Asked Me, But… No. 21 / The Drake Hotel in New York, Fair Franchising is Not an Oxymoron, By the Numbers, Another Secret Underground Shelter, Passing of Anthony G. Marshall / Stanley Turkel / December 2006
Nobody Asked Me, But… No. 20 / Turnabout Is Fairplay, Secret Underground Shelter, By the Numbers, Genuine Fair Franchising/ Stanley Turkel / November 2006
Nobody Asked Me, But… No. 19 / International Society of Hospitality Consultants, Great Miami Hotels, Reduce Carbon Monoxide Emissions, Turn Gray Into Gold / Stanley Turkel / November 2006
Nobody Asked Me, But… No. 18 / John Q. Hammons, Save the Belleview Biltmore, Chinese Tourism, CFLs, Ernie Byfield, Guestroom Entertainment in 1905 / Stanley Turkel / October 2006
Nobody Asked Me, But… No. 17 - AAHOA's 12 Points of Fair Franchising, Protected Territories, / Stanley Turkel / September 2006
The Newest Independent (and Oldest Partially Independent) Franchise Association in the Hotel Industry / Stanley Turkel / September 2006
In Hotel Franchising, Reality Trumps Wishful Thinking / Stanley Turkel / August 2006
Nobody Asked Me, But… No. 14; Impact Studies, Stretching Segments, Short-Stay Rentals, Smoke-free Marriotts, Franchising in China, Save the Belleview Biltmore Hotel / August 2006
The U.S. Population Age 65 and Over is Expected to Double in the Next 25 Years; What Does this Mean for the Hotel Industry? / Stanley Turkel / July 2006
Nobody Asked Me, But… No. 12; Portman, Women Homeowners, Minimum Wage, Tipping, Brooklyn Bridge, Chinese Tourism, Impact Studies / Stanley Turkel / July 2006
Do Hotel Franchisees Need Independent Franchise Associations? / Stanley Turkel / June 2006
Nobody Asked Me, But… No. 10 / Chinese Tourists, Gasoline Prices and Alternatives, GLBT Segment, Travel Agents, FAC's, Manhattan's Record Breaking Year, Impertinent Questions / Stanley Turkel / June 2006
Nobody Asked Me, But… No. 9 / Blang, Bathtubs, Best Green, Arbitration, Best Western, AAHOA, State Franchising Laws, VFR / Stanley Turkel / May 2006
Nobody Asked Me, But… No. 8; Bathtubs, Smokefree Hotels, Maps, Saving Water, Nevada Revenues, H.P. Rama, Ritz-Carlton, Statler Service Code, Mother’s Day / Stanley Turkel / April 2006
Nobody Asked Me, But….No. 7 / Stanley Turkel, MHS, ISHC / March 2006
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