Welcome to The Business Buying Academy with Sieva Kozinsky.

🔑 If you’re planning to buy a business in the next year, take 60 seconds to read this

There’s one bill that almost never makes it into the deal model.

It’s the workers’ comp audit.

A few months after you close, the carrier checks payroll, job roles and subcontractor costs against what the last owner reported.

If employees had the wrong class codes, or the payroll numbers were out of date, the carrier sends a bill. Sometimes a big one.

The problem started before you owned the company. The bill lands on your desk anyway.

That’s why I’d look at the insurance before you close, not after.

​WithCoverage does this as part of diligence:

They review the claims history, so you know what’s still open.

They check payroll and class codes against what was reported to the carrier.

Their in-house insurance attorneys read the current policies for gaps.

And they tell you what the business will actually cost to insure under your ownership.

They also charge a flat fee instead of a commission, so they don’t make more when your premium goes up.

Here’s what one of their clients said:

“20%+ cost reduction, better protection, and significant time savings. A total win-win for our portfolio companies and management teams.”

- Robbie Patterson, Partner, Asto Consumer Partners

If you’re sending out LOIs or getting close to a deal, I’d talk to WithCoverage first.

​Get a free and confidential risk analysis from WithCoverage​

(Thanks to WithCoverage for sponsoring this newsletter)

🔑 The Rise and Fall of Budget Motels

Imagine you're back in the 1970s.

It's Spring Break and you're taking the family down South for a vacation.

You've been cruising in your station wagon down a pristine interstate for 10 hours.

But your three kids in the back seat are growing restless.

Are we there yet?

You pull into a sleek Days Inn hotel with modern shag carpet, a TV with cable, and a relaxing pool out back.

Everyone rushes out of the car and starts the vacation.

Best of all, you're only paying $15 per night for a spacious room with two beds.

For decades, this was the Days Inn experience.

It was the classic American economy hotel brand.

Founded in 1970, Days Inn quickly franchised its way to huge growth, changed ownership multiple times, got crushed in a high-profile bankruptcy case, and finally emerged from bankruptcy to regain its status as a leader in the budget category.

Let's jump into the story.

Days Inn starting in 1970 wasn't a coincidence.

One law created a new category of travel lodging: Roadside chain hotels.

Signed by President Dwight D. Eisenhower in 1956, the Federal-Aid Highway Act authorized the construction of the Interstate Highway System.

The system was a planned network of 41,000 miles of high-speed freeways connecting the country.

The Interstates funneled long-distance car travelers onto predictable routes with exits in both cities and smaller towns.

This generated steady demand for clean, affordable, standardized places to stay right off the exits.

New hotel/motel chains popped up, and others expanded rapidly in the 1960s and 70s.

Motel 6 and Rodeway Inn started in 1962.

The first Days Inn opened in 1970.

The Red Roof Inn and Drury Hotels were created in 1973.

Super 8 started in 1974.

Consumers started favoring chain brands over independent mom-and-pop motels. Older U.S. highways like Route 66 were lined with unique local motels.

But the new Interstates often bypassed those older routes. Travelers preferred the reliability and consistency of chains; Brands that could scale quickly via franchising had the advantage.

Founding and Early Growth of Days Inn (1970s)

Cecil B. Day, a Georgia real estate developer, founded the chain after a family road trip highlighted the lack of clean, affordable places to stay. He opened the first Days Inn in 1970 on Tybee Island (Savannah Beach), Georgia, with rooms starting around $8 a night.

The concept targeted budget-conscious families and travelers.

Franchising began in 1972. By the early 1980s the system had grown to roughly 300 properties across the U.S., Canada, and Mexico. Revenue rose from $68 million in 1976 to about $120 million by 1980.

Early Days Inn locations were full-service stops for travelers. They often featured on-site gas stations and Tasty World restaurants/gift shops.

Ownership Changes in the 1980s

• 1984: The Day family sold Days Inns of America to Reliance Capital Group for $300 million. The new owners aggressively expanded the chain through franchising, sold off many company-owned properties, and took steps such as a public offering.
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• 1989: Reliance sold the company to the Tollman-Hundley Hotel Group (Stanley Tollman and Monty Hundley, the chain’s largest franchisees) for about $765 million, which was mostly assumption of debt that Reliance had saddled the company with.

Expansion in the 1980s

Thanks to increasing demand from highway travelers and aggressive franchising, Days Inn grew quickly:

• Expanded from 300 hotels and 44,000 rooms early in the 1980s to roughly 950 hotels and 80,000+ rooms by 1989.
• Became one of the largest budget hotel chains in the U.S.
• Under Reliance Capital ownership, the company shifted heavily toward franchising, sold many company-owned properties, and pursued rapid growth.
• Systemwide hotel revenue exceeded $1.7 billion by the late 1980s. the brand was a clear leader in the economy segment.

Bankruptcy and the Key Buyout (1991–1992)

Speaking of heavy debt, Days Inn struggled with the debt burden under the new ownership group.

Tollman-Hundley struggled under heavy debt amid a weak hotel market.

Days Inns filed for Chapter 11 bankruptcy protection in September 1991. Assets were listed at $326 million and debts around $400 million.

The Bankruptcy Buyout ​
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Hospitality Franchise Systems (HFS), a Blackstone Capital Partners-backed company run by Henry Silverman (who had previously owned Days Inn at Reliance), agreed to buy the franchise system.

They acquired the brand name, trademarks, support services, and roughly 1,500 franchise agreements, all for approximately $250 million.

Days Inn emerged from bankruptcy in 1992.

This created one of the world’s largest hotel franchisors at the time by combining Days Inn with HFS’s existing Ramada and Howard Johnson systems (totaling over 2,300 hotels).

Tollman and Hundley later faced federal fraud-related charges connected to the bankruptcy process (undisclosed assets); outcomes included a conviction for Hundley and a later settlement for Tollman.

Budget hotels' share of the tourism industry gradually shrank after this point.

About 20% of the nationwide supply of hotel rooms were in the budget category in the 90s. That figure has shrunk to about 15% today.

After the Buyout (1990s–Present)

HFS continued operating Days Inn as a pure franchisor (collecting fees while franchisees owned and operated the properties). HFS grew by adding other brands, went public, and later merged into Cendant Corporation. Cendant’s hotel group was spun off as Wyndham Worldwide (later Wyndham Hotels & Resorts).

Today the brand is known as Days Inn by Wyndham.

It's still a major chain with roughly 1,500 locations worldwide (down from a peak of 1,700) and is part of Wyndham’s large portfolio of brands (alongside Super 8, Ramada, Travelodge, Howard Johnson, and others).

Sieva

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Disclaimer: nothing here is investment advice. Please do your own research. The information above is just for information and learning.

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