Quotes of the Day
For Peter Kim, the call to join the family business came as a rude awakening. Snoring away a spring-break morning at the University of Southern California in 1994, Kim picked up the phone to hear his father Sang Hoon Kim shouting at him in Korean. "He goes, 'The company's got problems. Everybody's got to help out,'" recalls the younger Kim. The son did a lot more than that. At the time, office workers were no longer buying the polyester blouses the family company, Protrend, churned out. Sales were tumbling 50% every year. What's more, the father had invested in real estate during a market peak, and as a result the company shouldered $10 million in debt. Today Peter Kim, 33, is CEO of a debt-free, $15 million-a-year business. In 1999 he launched Drunknmunky, an Asian-influenced men's street-wear line that pulls in the bulk of the company's revenue. Battling low-cost production from competitors in China and elsewhere, Kim decided to pursue the higher profit margins in design and retail. "That's where I believe the industry is going: either you're a brand or you're dirt cheap," he says.
The Kims are part of a phenomenon sociologists call ethnic niche business, in which an immigrant group comes to dominate an industry, often with no discernible connection to its original culture. Think Chinese and laundry services, Arabs and gas stations, Koreans and groceries. And garments too. Experts estimate that more than half the 144,000 garment workers in Southern California are of Korean origin and up to half the companies are Korean owned. Entrepreneurs of Indian origin today own 38% of all hotels in the U.S. and more than half of budget motels. Mexican Americans whose forebears worked California's vineyards are becoming owners. Once, immigrant business owners were reluctant to pass the torch to their kids, hoping their labor would hoist the younger generation into more prestigious professions. That's changing. As the businesses grow, American-born heirs are increasingly willing to follow in their immigrant parents' footsteps. Armed with native English, advanced education and a comfort with change, the new generation is modernizing the family businesses in ways their parents never dreamed possible.
This generation's business strategies and goals far outpace their parents'. Drunknmunky, for instance, publicizes its popularity with hip-hop acts like Cypress Hill and Linkin Park and sponsors raves and rap concerts. Kim's ambitions include music and video-game production, accessories, bags and shoes. "I'd like to be more of a household brand, not just a clothing company — like [Ralph Lauren's] Polo," he says. Unlike their parents, Kim and his peers pursue deals outside their immigrant communities; Drunknmunky works with partners in FUBU, the African-American-owned clothing line. Instead of hewing to production, most Korean-owned companies are now full package, offering everything from fabric to manufacturing to export for major American labels, says Bruce Berton of Los Angeles' Fashion Institute of Design and Merchandise (where half the students are second-or third-generation Korean Americans).
Changing attitudes toward money have allowed the next generations to update and expand their companies. Early immigrants, suspicious of and unable to secure standard loans, turned to community loan clubs, in which relatives and friends put up money to help start businesses. This financing method is common but limited. What Koreans call kye is a hui for the Chinese, ekub for Ethiopians, san for Dominicans. Today, says Steven Gold, a sociologist at Michigan State University, immigrant businesses have access to loans from other ethnic sources, including banks or investors that cater to their community. The younger generation is also far savvier about landing tax-advantaged loans from the Small Business Administration and various minority-business-development funds. Some companies, including the Korean-owned clothing retailer Forever 21, are planning to go public.
Koreans arriving in the 1970s specialized in apparel manufacturing for some of the same reasons Indian immigrants gravitated toward the hotel industry: those businesses let them use family members as staff, conduct transactions in cash and get by with minimal English or experience. The Patel family's entry into the hotel business is exceedingly typical, right down to their surname. Natu Patel, a banana farmer in the Gujarat region of India — where most of the U.S.'s Indian hoteliers have roots and the majority of residents are named Patel — arrived in San Francisco nearly three decades ago with his family and $10. He learned the business working for motels owned by wife Hansa's relatives and then sought out affordable properties in remote regions before settling on a small inn in Cleveland, Tenn., later adding motels in Waco, Texas, and Kennesaw, Ga.
Priti Patel, 33, hardly remembers another life. At 8, she was counting change and working the front desk. "I used to hate it," she says. "Everybody else gets to go home after school and get a snack. I had to help at the hotel. On weekends I had to cut grass." When friends drove by and saw her working, she would feel embarrassed. Still, the industry intrigued her enough to pursue a business degree at the University of Tennessee, and afterward she worked for the Small Business Administration. She returned to the family's HNP Enterprises to take over as manager of the Kennesaw motel in 1997.
Patel's management style differs from that of her parents. For one thing, she refuses to live on property, choosing instead to separate her work life from her family. Unlike her parents, who prefer to do the work themselves, she employs a housekeeping manager, a desk manager and a sales manager to oversee the property in her place. "I let go a lot more than my dad does," she says. Patel and her brother Hitesh, 25, plan to expand into restaurant franchises. Though their methods and goals may differ, says Patel, their father is proud of their achievements. "That's why he sent us to school."
Education is proving a key tool in grooming the second generation of Indian hoteliers. Unlike, say, the construction business, hospitality is an immigrant-heavy industry with a ready infrastructure of formal training. Over the past five years or so, as a new generation has come of age, students of Indian background have flooded hotel schools like the one at Cornell University. There they learn how to broker acquisitions, arrange complicated financing, set up room-booking technology and modernize marketing. Many take internships and first jobs in related fields like real estate or investment banking. The training helps "prepare them to take on an industry vastly more competitive and complex than when their parents entered it," says Cornell professor Chekitan Dev.
The new generation of Indian-American hotel owners is also learning, sometimes the hard way, how to play politics. After Sept. 11, ethnic-Indian proprietors suffered a wave of xenophobia, exhibited by signs outside competing hotels that claimed AMERICAN OWNED AND OPERATED. The bias cut into bookings, hurting business in an already devastating climate for travel. Yet while major hotel corporations lobbied for and received relief from Washington, the Asian American Hotel Owners Association had no presence or influence there to follow suit. "We learned from that," says Naresh (Nash) Patel, 38, current chairman of the association and a second-generation hotel owner. The group swiftly launched lobbying efforts and invited politicians like Newt Gingrich to speak at its gatherings. It set up a nationwide program to provide free hotel rooms for families of active military members on leave. Nash Patel called the owner of a Florida hotel with an offending sign. The owner took it down.
In some cases, the children of immigrants, thanks to education and experience, are leaving hard labor behind for good. Mexican workers in California's wine country have been preparing for generations to face their unique challenge: trading grape-stained work gloves for ownership papers. Since the 1940s, millions of Mexicans have traveled across the border to work the California vineyards. Those economics haven't changed in what is now the $33 billion U.S. wine capital. During harvest, Napa County is home to up to 2,700 migrant workers, most from Mexico. For as much as $15 an hour, the workers endure 18-hour days of backbreaking labor, often with no benefits or job security. "Without the Mexican labor force, there wouldn't be a wine industry," says Amelia Ceja, 48. Her children were to the vineyard born, all right — to migrant workers. Their grandparents toiled in the fields for $1 a day. Amelia met her husband Pedro while picking grapes at age 12. The family bought its first 15 acres, outside Napa, in 1983. By 1999, it owned 113 acres. Today Ceja Vineyards provides grapes for well-known brands in addition to its own labels. The company now produces 5,000 cases of wine annually, compared with just 750 in 2001. The Ceja children study at local universities and will inherit vineyards, not dreams.
Salvador Renteria traveled illegally across the border in the early 1960s to work in Napa. He moved up from driving stakes in the vineyards as a laborer for $20 a day to being a salaried foreman and supervisor. His son Oscar earned a college degree while learning all his father knew about vineyard management. In 1987 Salvador opened Renteria Vineyard Management, which oversees 1,500 acres of vineyard for 27 high-profile clients, employs 130 people and hauls in revenues of $8 million a year. Recently Oscar, 36, who took over the company in 1993, launched the company's own wine. "By growing grapes, there's not a lot of exposure," he says. "By making wine, you tell a story."
Sometimes the ambitions of business heirs fly far beyond anything the founders imagined. When he was rolling penny cigars on a sidewalk in early-1900s Cuba, Teorifio Perez-Carillo could not have dreamed that someday his handiwork would be legendary among Hollywood stars and other aficionados. Or that his son Ernesto would buy the building behind his sidewalk stake and turn it into a tobacco warehouse. Or that his grandson, also named Ernesto, would take over the operation in Miami and become a multimillionaire.
Ernesto Perez-Carillo Jr., 52, considers that improbable journey as he strolls among the dozen men and women sorting and rolling molasses-colored leaves in El Credito Cigars' pungent storefront in Miami's Little Havana. His father expanded production to 140,000 cigars a day, at one point supplying troops during World War II. They fled to Miami after Fidel Castro's takeover in 1959. In 1968, finally convinced the exile was permanent, the elder Ernesto paid $5,000 for a cigarmaking factory in Miami. To find a niche among the 30 or so other cigar factories, Ernesto Sr. began testing some signature brands. He developed a mail-order business to reach markets in Chicago and the Northeast, leafing through the Yellow Pages to find doctors, lawyers and other potential cigar smokers.
Though he had set out for New York City to make it as a jazz drummer, Ernesto Perez-Carillo Jr. returned to Miami when his father came down with Lou Gehrig's disease. In the midst of negotiations to sell the business, "something came over me," says Perez-Carillo. He persuaded his father to decline the offer and turn the business over to him. Ernesto Sr. died in 1980. El Credito's focus on premium lines paid off in the early '90s, gaining the company notice during the cigar boom. An article in Cigar Aficionado magazine sparked a flood of orders, causing a six-month backlog. Bill Cosby, Sharon Stone and Arnold Schwarzenegger became loyal clients, says Perez-Carillo.
The trickiest decision for immigrant business owners is often the exit strategy. Though both have worked in the business, Perez-Carillo's son Ernesto III, 22, is a recent Stanford grad and consultant, and his daughter Lissette McPhillips, 30, is a lawyer. So Perez-Carillo knew he faced a choice in 1999 when tobacco company Swedish Match offered to buy El Credito for a reported $20 million. He sold. "Most people would have thought, Millions and millions of dollars — this is my dream, my dream has come true," says McPhillips. But for her father, "there was a sadness there." Perez-Carillo now works for General Cigar, a subsidiary of Swedish Match, and still runs El Credito in Miami.
In part because of such potential rewards, these days many immigrant children no longer view following their parents' path as a jail sentence. All the second-generation members of the Rama family, whose Greenville, S.C., JHM Group owns a string of more than 40 hotels, have worked in the family business since they could fold towels. Three are pursuing degrees in architecture, business or hotel management — by choice. "I knew I wanted to make the hotel business my career. My head was always in it," says D.J. Rama, 36, a Cornell M.B.A. and vice president of operations for JHM. "Work is the fabric that weaves the wealth the first generation built together with the next."
Others take more convincing. When he was called back to work for the family company, Peter Kim was less than thrilled. But one day he had an epiphany while driving down the freeway. "I was feeling sorry for myself," he says. "Then it hit me: You are such a coward. My parents and that whole generation come to this country with nothing — like, a suitcase and maybe, what, a couple hundred bucks?" His father, seated beside him, says, "Thirty-eight dollars."
"They don't know the language," Peter Kim continues. "They don't know the culture. They can't even find a bathroom. They know nothing but can build this. It was almost like somebody took a frying pan and smacked me on the head. I am born in this country. I am educated in this country. We can make a go of this." The American Dream, after all, is worth fighting for.
- Lisa Takeuchi Cullen