Plenty of companies have invested heavily in developing great brands and have reaped the rewards. McDonald's gets hefty fees from franchising its brand and burgers. Likewise Coca-Cola, whose real thing seems to be worth $167 billion (the difference between its $15 billion of physical assets and its $182 billion market capitalization). A few companies have even made brand plays as pure as Mr. Silverman's. Nike farms out manufacturing of its sneakers and sweatsuits and focuses on advertising. Sara Lee recently decided to stop making cakes so it could focus on brand management.

But Mr. Silverman has gone as far and as fast as anyone in arguing that brand is everything and in showing how a brand can even be split away from the operational aspects of the business.

The reason may be his background on Wall Street, where it's long been routine to, say, buy a stock and then sell its dividend stream separately from the underlying security.

The Brooklyn-born Mr. Silverman landed on Wall Street in the 1960s, after getting a law degree from the University of Pennsylvania. He found he had a talent for corporate finance and became a second-tier player in the testosterone-driven world of corporate buyouts. He finally hit the big time in 1990 when he joined the Blackstone Group, Wall Street's second-largest buyout firm. It was then that he got the idea for what he calls "a pure franchise company."

Armed with data showing that value-conscious baby boomers were likely to increase their travel, he purchased Howard Johnson and Ramada for $170 million, then Days Inn for $295 million. In 1992, Mr. Silverman left Blackstone and took this portfolio public as Hospitality Franchise Systems, becoming its chief executive and largest shareholder. Over the next few years, with the acquisition of Super 8, Travelodge, and other brands, HFS became the largest franchiser of overnight lodgings in the world.

There have been hiccups: Shortly after he bought Ramada and Howard Johnson, the Gulf War broke out, and Americans cut back sharply on travel. Result: All the independent hotel operators in those chains went belly up. "Every one of them," Mr. Silverman recalls.

Nonetheless, he pressed forward with his franchising master plan. HFS snapped up Century 21, ERA, and Coldwell Banker, making the company the world's largest franchiser of residential real estate. Mr. Silverman also moved into the related businesses of running a vacation time-share exchange and managing fleets of corporate vehicles.

The quintessential HFS deal was Mr. Silverman's 1996 purchase of Avis for $800 million. Even before the deal closed, he announced that he'd repackage the hard assets of Avis, spin them off, and take this package public. Cars, after all, can crash. By selling most of the company, he wouldn't have to worry much about Avis's 174,000 vehicles, 20,000 employees, and 540 rental-car locations. HFS would instead turn around and begin charging Avis fees for operating its computers and reservations systems and for licensing the four key assets that HFS kept to itself: "A," "V," "I," and "S."

The beauty of being a franchiser rather than an operator, Mr. Silverman believes, is that a franchiser leaves the dirty work of running the business to the franchisee. The hotel franchiser, for instance, simply collects steady and relatively predictable fees—typically 4% of revenue—in return for advertising the brand name, running the reservation system, and dispatching inspectors to ensure that the properties meet certain standards.

"I don't even want to have a pencil on my balance sheet," Mr. Silverman says. "We lease almost everything and own virtually nothing . . . . In inflationary times, there is nothing that you'd rather own than a motel in Florida," he says, because a hard asset will hold its value better than cash, stock, or any other financial instrument. "But [in this low-inflation climate], that's the last thing you'd want to own."

By franchising brands and avoiding owning hard assets, he says, "you're basically growing your business using other people's capital and getting the benefit of predictable revenue, predictable earnings, high cash flow, and no capital reinvestment." With the physical assets off the company's books, Mr. Silverman is free to focus on extracting value from his brands.

Wall Street loved the concept. HFS's revenue grew 10-fold from 1992 through 1997, to more than $2 billion. Profits multiplied 20-fold. The stock outperformed even Microsoft and Intel, reaching a total market value of about $10 billion by the beginning of 1997.

Sometimes, of course, it's not so easy. Sometimes, Mr. Silverman must rebuild brands before they can grow again. Howard Johnson is a case in point. "HoJo is a venerable brand that has gone stale," according to Mr. Dempster of CKS. "You think of those wonderful family car trips in a station wagon in the '50s and '60s. But it has lost its relevance in an age when [hotel chains] like Hyatt and Hilton have become more like high-tech corporate offices." Rebuilding such a brand, according to David Aaker, a marketing professor at University of California at Berkeley, will be a long, tough slog. Mr. Aaker, the author of Building Strong Brands, says, "Schlitz Beer tried to rebuild its brand and failed. Toyota and Nissan did it, but it took them 15 years." Mr. Silverman kicked 150 hotels out of the Howard Johnson system, then forced others to upgrade their facilities and quality of service. But whether he succeeds in bringing it back remains to be seen.

Just as difficult as breathing new life into a moribund brand is trying to expand a brand into new areas. For instance, while Nike has successfully extended its high-performance, high-energy brand from sneakers to clothing to sporting-goods superstores, it probably couldn't extend that image to furniture or denture cream. In 1993, Mr. Silverman saw an opportunity in the expansion of the gambling business and decided to franchise the Days Inn brand name to new casino operators in Southern states. The venture ended quickly and badly. "The brand didn't help anyone," Mr. Silverman says. The no-frills Days Inn brand just didn't fit with a Las Vegas-style environment.

Sometimes, however, Mr. Silverman has been able to change the brand image. When Mr. Silverman bought Century 21 for $392 million, the realtor had nearly 100% awareness among its target market. But its television ads had long emphasized the vast resources of the world's largest real-estate network. Research showed that home buyers and sellers care less about the company's size than about forging a close relationship with a caring, trustworthy agent. So Mr. Silverman launched a new advertising campaign that focused on those more personal attributes. Century 21's annual fees have doubled.

Avis had a different problem: It was projecting the right brand image, but Mr. Silverman believed the previous owner didn't fully capitalize on its intrinsic value. "You can rent a car for less than it costs to rent a tuxedo. . . even though a tux costs $200 to make, and a car costs $18,000," he says. "My gut was that pricing should go up." He was right. Avis was able to raise the average daily rental by $3—leading to tens of millions of dollars in additional profits for franchisees.

Such strategies helped Mr. Silverman get more out of the brands he owned, but they still failed to exploit one of the key assets HFS had: data on the behavior of more than 100 million consumers. Every time someone stayed at an HFS hotel, bought a house, or rented a car, HFS captured two key assets: (1) a rich demographic profile and (2) the consumer's momentary attention.

"The problem," Mr. Silverman says, "is that we weren't doing anything with it."

That's why last year Mr. Silverman agreed to merge with CUC International, a Stamford, Conn., direct marketer and a pioneer in electronic commerce. CUC and HFS already had ties: CUC marketed travel, shopping, dining, and car-buyers clubs to the tens of millions of HFS hotel guests. When a customer phoned, say, the Ramada for reservations, the clerk asked if the caller was interested in joining a discount travel club, offering $20 in free gas coupons as an incentive. If so, the caller was transferred to a CUC operator.

The idea is simple but effective, because, unlike many other direct marketers, CUC doesn't use mindless junk mail, cold calling, or spam. Instead, CUC targets consumers when they are most receptive to a certain sales pitch. Of consumers who agree to hear the CUC pitch, 30% become customers, compared with 1% or 2% through typical direct marketing.

Through HFS, CUC quickly signed up more than a million new shopping-club members, who typically pay $49 a year to buy heavily discounted products and services. And a big, bright light went off for both Mr. Silverman and Walter Forbes, the chief executive of CUC.

People buying houses through Century 21 might be receptive to climbing on CUC's Welcome Wagon, a service that delivers coupons for local products to new homeowners. Renters of Avis cars could encounter a CUC marketing message dangling from their rear-view mirrors. And there might be ways to use HFS's intimate knowledge of buying habits to turn CUC catalog shoppers into on-line buyers—Mr. Forbes says on-line shoppers buy three times as much while costing half as much to service as catalog shoppers.

For Mr. Forbes, who had been toying with the idea of on-line marketing since his days as a Harvard Business School graduate in the early 1970s, HFS represented the missing link. He needed detailed information on consumer households and a way to reach them without appearing as if he were a typical direct marketer. HFS could supply both. HFS represented "one huge marketing opportunity," he says.

When it came to simply buying HFS's information, the two chief executives couldn't come up with a fair and simple agreement. Finally, Mr. Silverman says, "we agreed that the only thing to do is fully share all the risks and rewards. The only way to do this is to bring the two companies together."

Cendant was thus formed through a stock swap valued at $14 billion, which was the largest deal to be announced and completed in 1997—a record year for mergers and acquisitions.

(As of this writing. Mr. Forbes has maintained a low profile on CUC's overly aggressive accounting for revenue from club memberships and on the dismissal of some of his key executives. But he hasn't personally been implicated and remains chairman of Cendant.)