Kemmons Wilson

"Kemmons Wilson: The Deal Maker"
Franchising Opportunities
June 1990
By John P. Hayes

The name Kemmons Wilson may not sound familiar to many people, but to the franchising world, he is a legend. A high school dropout, Wilson built the world's most popular lodging chain. Holiday Inns. Today at 77, he is worth hundreds of millions of dollars and is still too busy to do anything but work.

His face has graced the covers of Time and a half dozen other publications, and still folks don't recognize him. He's visited with every president since Eisenhower, shared the podium with Norman Vincent Peale and Billy Graham, been interviewed by Johnny Carson and Merv Griffin, and been featured on "Lifestyles of the Rich and Famous." Nonetheless, he remains unknown. The Sunday Times of London listed him among the 1,000 most important men of the 20th century, along with Winston Churchill and Franklin Roosevelt, and while that nearly tickles him to death, his name doesn't appear in any history books.

He's not a household name like Donald Trump, yet his buildings, unlike Trump's dot the roadsides of America and 55 other countries. Neither is he a household name like Walt Disney, but even Disney didn't do as much for the traveling public as this man has accomplished in almost 50 years.

Y'all know who he is? Probably not. And that suits him fine. For he's jus' an ole boy from Tennessee. A simple, family man, really, who loves magic tricks, popcorn, ice cream and pork rinds. He never seeks the limelight although he's not shy. But even at 77, he's too busy to do much of anything but work.

Who is he? Charles Kemmons Wilson. And what did he do? He built the world's most popular lodging chain-Holiday Inns®.

And that's not just whistlin' Dixie. Wilson, by most standards, shouldn't have amounted to much in life. That's what his teachers told him, anyway. A poor boy who dropped out of high school, he was "goin' nowhere fast." Today, he's worth hundreds of millions of dollars, owns 50 percent of more companies than he can remember, and Lord willin', he's on the verge of the biggest deal of his life.

"When you ain't go not education," Wilson explains, "you just got to use your brain."

"I'm looking for the deal. If you've got a good one right now, I say let's do it."

The Fledgling Entrepreneur
Wilson started using his brain even before he was old enough to think. If the age of reason is six, he was surely on track by then. That's when he started working. His father had died when he was 9 months old, so he had to help his mother, Ruby, make ends meet in Memphis. Wilson contributed to the family income by selling the Saturday Evening Post door to door. (Later, as half owner of Holiday Press, he printed the Saturday Evening Post.) He made a penny for every nickel sale, and he made a lot of sales. "How could anyone refuse a nickel to a cute little kid?" he asks.

Ah, but how much better life would be if he could show other kids how to sell magazines and then share in their commissions. Not a franchise, exactly, but that's the enterprise Wilson created when he was seven. He put 20 "cute little kids" to work selling Ladies Home Journal, which offered a better deal than the Post. " The Journal sold for a dime and paid three cents commission. So I paid out two cents and kept a penny for every sale!" Now that was makin' some money-as much as $3 a week, which was about one-tenth of Ruby Wilson's wages working for doctors and dentists.

A couple of years later, Wilson increased his earnings with a paper route, and then, as a teenager, he was hired by the corner druggist to jerk sodas and deliver prescriptions. He worked all the time, but he enjoyed his jobs. "If I was behind that soda jerker and a pretty girl came in, I gave her an extra scoop of ice cream," he recalls fondly. "That was one of the fringe benefits of my job."

Kemmons Wilson calls his latest business venture in the lodging industry, Wilson World. In 1984, he began building this $20 million, 443-room mid-priced hotel, complete with indoor and outdoor pools, an indoor waterfall, whirlpools and a nightclub.

However, one day tragedy struck when he was delivering a prescription to Bill Terry, the famous first baseman of the New York Giants. "I was crossing the street, and all of a sudden, a car appeared from nowhere and ran over me," he explains. "My kneecap was crushed. My leg was broken in five places. The doctors said I would never walk again. But Dr. Willis Campbell, a famous surgeon, said he'd make me walk again. And he did."

Young Wilson spent 14 months in a body cast, but today, the only physical sign of his injury is a slight roll of his left leg when he walks.

"The accident was the worst thing that happened to me in childhood," Wilson recalls. "All I could do was lie in a hospital bed on my back. I spent the time reading, learning to do magic tricks, and keeping up with my school work, which I didn't enjoy." His mother tutored him, and, as always, told him that he could be anything he wanted to be when he grew up.

Truth was, Wilson didn't know what he wanted to be. "I had no ambitions like that," he says. "I just knew that we were poor and I didn't want to be poor. I knew I had to make money. My mother always told me to pick my friends carefully, and I did. They were always better off than we were, and seeing them, I made up my mind that I wasn't going to be poor."

But things got worse before they got better. Wilson dropped out of high school to work full time when the Depression stole his mother's job. "I wasn't a good student anyway," he says. "I worked from after school until 10 o'clock every night, so I didn't have time to study. If the subject wasn't real interesting, I'd fall asleep in class and get in trouble. I didn't want to be there. My mother thought I should stay in school, but she couldn't stop me from dropping out. It was more important to eat than it was to get an education."

Kemmons Wilson stands in center court of the 7,000-seat stadium at Orange Lake Country Club, a $100 million time-share resort he developed in Florida.

He went to work at a brokerage firm for $12 a week. "I was a stock boy. I wrote the latest stock prices on the board. We started at eight and finished at two, when we had to erase the board and put up the high, low and closing numbers. "When everyone else went home, I stayed behind and made friends with the guy who kept the books. I got him to show me how to do it. I'm the most curious man you'll ever meet. I want to know how it works, and then how to make money from it."

Kemmons Wilson at five. A true example of a hard worker, he started working when he was six, selling the Saturday Evening Post door to door.

When the bookkeeper left for a better job, he recommended Wilson succeed him. "After three weeks of keeping the books, I was still making $12 a week and I wanted a raise. I went to the boss and asked if I was doing a good job. He said I was doing a great job. I said I hadn't had a raise. He told me I'd get one the next Saturday."

The raise was $3 a week, but Wilson was looking for four times that amount. "I went to the boss and told him I wanted $35 a week, since that's what they paid the other guy. When the boss said he couldn't pay a 16-year-old boy $35 a week, I quit. That was the first and only full-time job that I had working for someone else."

It's Either Good or It Ain't

Out on his own, Wilson began to demonstrate his entrepreneurial abilities. He would soon discover he had a nose for making deals. In truth, that's what he would become: a deal maker. Because he never liked details, he couldn't remain long with any project. "You can hire people for details," he says. "I'm looking for the deal. If you've got one right now, I say let's do it."

What make a good deal? Wilson thinks about that for a moment. "It's either good or it ain't. It's that simple.

Well, then, how do you come up with a good deal? "When you're hungry and you need money, it's easy," he says.

He was hungry and he needed money after he quit the brokerage firm, and it wasn't long before he spotted a good deal. "I was hanging around the Memphian Theatre and I noticed they didn't have a concession stand," Wilson explains. "I talked to the manager and got his permission to sell popcorn outside the theater. I'd pay him $3 a week to use the electricity. I bought a popcorn machine. Paid zero down and $1 a week for it for 50 weeks. But the manager watched me like a hawk. He was only making $25 a week, and finally he told me to leave because he was going to get his own machine and sell popcorn himself. I persuaded him to at least buy my machine for $30."

Years later, Wilson would buy back that old machine for a keepsake, but with the $30 he went looking for a new deal. This time, it was pinball machines. "I bought several secondhand pinball machines and placed them in drug stores, and that did pretty well," he says. "I'd give the store owner 50 percent of the take, and I hustled like mad. "I'd get $10 and I'd buy another machine and find another location. I didn't like the machines myself. I just liked the money they made."

Soon he was on a roll, selling machines to others as a distributor. Before he knew it, deals started coming his way effortlessly. "A man I knew in Dallas called me one day to sell me his cigarette machines in Memphis. He controlled 110 of them, but he couldn't service them profitably from Dallas. It was too much overhead. I could make a profit since I was in Memphis, but I told him I didn't have any money.

"When he said he'd sell to me on credit, I told him I'd be in Dallas the next day to make the deal. I went down and agreed to pay him $100 a machine. But when I signed the papers, he said to me, "Now how you gonna pay for the cigarettes?"

"I said to him, 'You told me you'd sell on credit.' He said, 'Oh yes, but not the cigarettes. You need $8,000 cash to buy the cigarettes.' I told him I was sorry I had wasted his time, and left to drive back to Memphis."

On the road, all Wilson could do was think about how to salvage the deal. "About 30 miles up the road, I figured it out. I knew the man who owned the Memphis Tobacco Company. If he would give me 10 days credit, I could do it! I turned the car around, went back to Dallas, and signed the deal. I told the man what I was going to do. I gave him 10 $800 checks dated a day apart. I told him they weren't worth the paper they were written on unless I could do what I thought I could do."

At home, Wilson made a deal with the Memphis Tobacco Company. "They gave me the 10 days, and I went to my machines twice a day to empty the coins out of them. That's how I covered every one of those checks. That deal made me a lot of money," Wilson says, satisfied that he was right to fix a deal that had blown up in his face.

By the mid-1930's, Wilson was no longer poor. In fact, he had enough money to build his mother a home. Ruby Wilson never remarried because she said no man was good enough to be her son's daddy. Wilson, in turn, said he'd never marry and would instead take care of his mother for life. Well, he did marry, but he also took care of Ruby. In 1933, he paid $1,000 cash for a lot and $1,700 cash to build her a two-bedroom home.

The Wilson children-Spence, Bob, Kemmons Jr., Betty and Carole-cut the ribbon at the first Holiday Inn in 1952.

Not long thereafter, Wurlitzer heard about the young entrepreneur and offered him the Memphis jukebox dealership for $6,500. Wilson liked the deal. Ultimately it changed the direction of his life, not as a jukebox salesman-although he became Wurlitzer's top distributor-but as a real estate tycoon. To pay Wurlitzer's up-front fee, Wilson borrowed money against his mother's home.

It was then that Wilson realized how he might finance the biggest deals of his life. "I said to myself, if you can buy a lot for $1,000, build a house for $1,700, and borrow $6,500 on it, that's got to be the business I want to be in."

So Wilson began to investigate the real estate market, looking for deals in Memphis. He found one after another. "Insurance companies," he explains, "had repossessed apartment buildings and houses during the Depression, but they're non-productive without someone living in them. I bought many a good apartment for $2,000 down, and even though I paid 10 percent down, I cut that in half by becoming a realtor and getting the 5 percent commission on the sales." For a boy who had not finished high school, Wilson was doing just fine.

By 30, Wilson owned notes for several million dollars of property throughout Memphis. He continued to build new homes-even built seven movie theaters-and also continued to run his pinball, cigarette and jukebox distributorships. He worked day and night, driving around town in a Chevy pickup truck to keep abreast of his various ventures. On Sundays, for enjoyment, he learned to fly his own airplane, an Aeronica C-3. True to his entrepreneurial instincts, he sold rides for $1 a piece.

It was a good life, and it got better in 1937 when he married Dorothy Lee, with whom he would have five children. However, World War II temporarily set him back. "When I enlisted in the service, and I was going to leave behind my mother, my wife and two children, I was afraid of all the debt I was carrying. It was about $3 million. So I sold everything." He ended up with $250,000 cash, which he invested in war bonds before a stint abroad. He laughs about that investment today because it delivered such a small return. "If I had not sold all those equities," he says, "the $3 million would have doubled and tripled in no time."

He returned home from the service in 1948 ready to start building a fortune all over again. This time, however, in addition to real estate, he was going to make money selling soda pop. Or so he thought. Much to his surprise, he was about to flop.

"While I was in India, I lived in a tent with a man who owned an Orange Crush bottling plant in Georgia. Every month he got a spectacular sales report, and he was making more money that I ever dreamed was possible. First thing I did when I got back to Memphis was get me an Orange Crush distributorship. I got back to Memphis on Friday and on Monday morning I was sitting in the Chicago office of Orange Crush convincing them to sell me the Memphis territory. I got the franchise, and I spent $150,000 to build a plant in Memphis. But a year later I couldn't even get my wife and children to drink Orange Crush. Everyone wanted to drink Coca-Cola!" Wilson eventually sold the plant at a loss.

"I'm the most curious man you'll ever meet. I want to know how it works, and then how to make money from it."

Fortunately, the post-war real estate market was booming, and Wilson's fortunes bounced back as he continued building homes. He also had other profitable business interests on the side, including an insurance agency. But his biggest deal of all was yet to come.

Building the Empire
It was 1951 when Wilson packed up his family for the obligatory vacation to Washington, D.C. Along the way, his Scottish blood boiled when he discovered roadside motels-which were not always reliable-charged $2 more a night per child. With five children, that meant a $6 motel room sold for $16. Wilson thought that was outrageous.

"I told Dorothy that wasn't fair. It wouldn't encourage people to travel with their children. I told her I was going back to Memphis to build a chain of motels, and I was never going to make a charge for children as long as they stayed in the same room with their parents. Plus, I was going to build a brand name that people could trust. And I told her I'd build 400 of these things across the country." Dorothy laughed. "That kind of made me peeved," says Wilson, and that was all he needed to get moving.

Before returning to Memphis, he sketched out some plans. Back home, he hired a draftsman to finalize the blueprints. It just so happened the draftsman was watching a Bing Crosby movie while working, and he printed the name of the movie at the top of the blueprint. The movie was "Holiday Inn," a name Wilson liked.

By the mid-1950's, Wilson had built four Holiday Inns in Memphis. "There was one on each corner of the city, so you couldn't come into Memphis without passing one of my hotels." But then, out of money and credit, he was a long way from 400 units. "I got to thinking about what to do, and I decided that the only way to go about this was to get home builders across America to each build a Holiday Inn. I dreamed up the idea of franchising. It had never been done with anything so far as I know. If I could get every home builder in the United States to build one Holiday Inn, then I could get those 400 up almost overnight."

Wilson took his idea to Wallace Johnson, who was vice president of the National Association of Home Builders. "Wallace was enthusiastic, so we wrote hundreds of letters inviting home builders to Memphis to hear about our deal." Indeed, it was one of the sweetest deals in history: a Holiday Inn franchise for $500 up-front and royalties of five cents per room per night!

"My mother thought I should stay in school, but she couldn't stop me from dropping out. It was more important to eat than it was to get an education.

As a result of the letter-writing campaign, 68 home builders arrived in Memphis. "Everyone paid $500 for a franchise," says Wilson, "and they went home with a set of plans to build a Holiday Inn. But, at the end of a year, only three had been built. The rest had not followed through. That's the problem with most people in this world."

Wilson, now with Johnson as his equal partner, never failed to follow through, even when the risks were great. For example, when they decided to build nine more Holiday Inns on their own, they borrowed $300,000 from a bank that required them to sign demand notes for nearly $3 million. "Our attorney thought we were crazy," says Wilson, "but that's what we had to do to get the money."

The attorney, meanwhile, said he couldn't go along with them taking that risk. They had given him 10 percent of Holiday Inns for his services, but he said the demand notes made the risk to great. When they asked him what we wanted for his percent, he said $25,000. Wilson and Johnson borrowed the money and bought him out. Within a decade, that $25,000 would have been worth $25 million.

Holiday Inns wasn't immediately successful as a franchise, but due to the persistence of Wilson and Johnson the chain began to expand. By 1960 there were more than 100 Holiday Inns. Two years later the 400th Holiday Inn was built in Indiana. Dorothy wasn't laughing for the same reason anymore.

The floodgates broke open at Holiday Inns during the mid-1960s. That's when Wilson negotiated a deal with IBM resulting in Holidex, an $8 million reservation system that allowed travelers to reserve rooms in any Holiday Inn in the country with one call. "After the introduction of Holidex," Wilson, says, "it was no longer a matter of selling franchises. It was a matter of allocating them, because everyone wanted one. People lined up for our franchises. "Soon, there was a Holiday Inn being built every 2.5 days somewhere in the world, and a new room every 20 minutes.

The good times rolled into the early 1970's when Wilson was featured in Time. Then, two unanticipated factors worked forcefully against the company: the 1974 oil embargo and the recession. Suddenly, fewer people were traveling, leaving Holiday Inns and the entire travel industry in turmoil. Net income for Holiday Inns dropped 36 percent from 1972 to 1974, and stock dropped from 56 to 4.25.

Wilson quickly made changes in his top management to bolster the company. It worked. Profit returned to Holiday Inns by the decade's end. However, it was now a different Holiday Inns. It was no longer Wilson's Holiday Inns. Gone were the days of, "let's roll up our sleeves and make a deal." A new, textbook-style management was calling the shots and streamlining the company. Wilson was still chairman of the board, but he had lost control. He realized it while he was in the hospital recuperating from a heart attack.

"I called my board of directors from my hospital bed and spoke to them over the speaker phone. "Wilson asked them not to buy a restaurant chain they were considering. "I told them it would be a mistake. But they voted to do it anyway. It was then that I knew I was not as strong as I had been. And if I can't be the boss, I'm not going to be around."

The Deal of the 80's

Wilson retired in 1979, planning to spend more time with Dorothy, their children and grandchildren, all of whom lived in Memphis. His three sons continued to run Wilson Companies Inc., which included dozens of the sideline businesses Wilson had accumulated through the years: construction, real estate, insurance, banks, plastics manufacturing, graveyards, even the funeral parlor that buried Elvis Presley. ("I know for a fact that Elvis is dead," Wilson says.)

To no one's surprise, it wasn't long before the ole deal maker was back in action. Within a few months of his "retirement," Wilson landed a deal to produce nacho chips and pork rinds, two of his favorite snacks. This little enterprise earned $2 million annually, but it was mere child's play. Wilson was warming up for bigger deals, including a time-share resort in Florida, and a new chain of hotels that might one day challenge Holiday Inns.

"The challenge now is to get back into franchising. As soon as I can prove to the lenders that my concept works, "I'll get financing for franchisees, and then I'll be doin' more deals."

In the last 10 years, Wilson has been forced to slow down physically, but mentally he's still flying. In 1980 he spent $2.5 million for 357 acres of land in Florida where he has developed Orange Lake Resort and Country Club, a $100 million time-share resort. Through the mid-1980's, he commuted to Florida to work three days a week overseeing this project, four miles west of Disney World.

"If Orange Lake succeeds," Wilson said early in the venture, "all the credit should go to Mickey Mouse." In fact, the project continues to succeed, selling more than $1 million of timeshare vacations a week. Hurray for Mickey Mouse!

Wilson launched yet another late-life project near Disney World in 1984. He built a $20 million, 443-room mid-priced hotel, complete with indoor and outdoor pools, an indoor waterfall, whirlpools and a nightclub. He called it Wilson World although he has a similar model in other parts of the country, which he calls Wilson Inn. Even though he admits there are too many hotels today, he's built 20 new ones and hopes to build hundreds if not thousands more. Why? "Because I can build a better mousetrap," he says.

At 77, Kemmons Wilson is still looking for a good business deal. "Yes, sir. That's what I live for."

Beyond that, it's the thrill of making a deal. "Yes, sir. That's what I live for," he says, working from an office filled with memorabilia, blueprints and a huge portrait of his mother looking down on him with loving eyes. "The challenge now is to get back into franchising. As soon as I can prove to the lenders that my concept works, I'll get financing for franchises, and then I'll be doin' more deals."

It makes you think there's still a chance the nation's innkeeper will become a household name. But it won't impress him a bit.

-John P. Hayes