Everything was taken away from them in 1961, but today, you see their name all over Miami. You see, Fidel Castro couldn't take away their knowledge or their desire to own their own business. You are about to experience our Master Class.

Jose and Luis Navarro will tell you step by step how they created something from nothing, how they learned the language of a new country and at the same time never forgot their roots.

(Voiceover) This is a love story, and this man started it all from his pharmacy in Havana. Jose Navarro Sr. opened his business in 1940, and his sons grew up in Cuba watching him take care of people.

HATTIE: (Voiceover) Jose Jr. and Luis Navarro have built the most productive pharmacy chain in the US. Here, they sell more per square foot than any other pharmacy chain in the country. And on any given day, they fill more prescriptions per store than any other. That means they beat the big boys like CVS and Walgreen and Rite Aid and Eckerd and everybody else. How?

They love it. And they love their families, and their families love the business, too. Gloria, Jose's wife, and Maria, Luis' wife, both work in the business. And now Jose and Gloria's children Marcel, Gabriel and Patricia are putting their minds and hearts to the task of growing the company.

GABRIEL NAVARRO: I'm going back, you know, to seven, eight years old. We'd always work in the stores here during the summer and on the weekends.

PATRICIA NAVARRO: It's pretty much inbred in us, I guess.

MARCEL NAVARRO: Well, I think I've been here since birth. But I've...

HATTIE: Yeah, since birth. (Voiceover) The Navarro family is seeing what loving customers for over 30 years brings. It brings 12 stores, generating $160 million in annual sales and jobs for nearly 600. All because one family pulled together in the same direction. After Castro came to power, Jose's family sent him to the US, where he swept floors in a drugstore to make a living.

JOSE: I start there. And then little by little, I went from cleaning the floors to working behind the counter to store manager.

Everything was taken away from them in 1961, but today, you see their name all over Miami. You see, Fidel Castro couldn't take away their knowledge or their desire to own their own business.

You are about to experience our Master Class. Jose and Luis Navarro will tell you step by step how they created something from nothing, how they learned the language of a new country and at the same time never forgot their roots. (Voiceover) This is a love story, and this man started it all from his pharmacy in Havana. Jose Navarro Sr. opened his business in 1940, and his sons grew up in Cuba watching him take care of people.

JOSE NAVARRO Jr.: I used to work there with him. I even used to work at night. I went to sleep behind the counter, and if you had a prescription, it was filled for you. And I was only maybe 13, 14.

HATTIE: (Voiceover) When his father made it out of Cuba, Jose helped him get him new American pharmacy going. JOSE: My father came with no money whatsoever. He was lucky enough to have an insurance policy that was worth $4,000. And with that, he went into business. I work in that store in the daytime. HATTIE: Right.

JOSE: My father work at the store during the whole day. When I finished, I went home, ate--you know, my wife cooked. And then my wife and I would go to the store and we'd stay there until the store closes.

HATTIE: So we have an 18-hour day.

JOSE: Yeah, it was from opening until closing to opening that store and closing this one. And that was going on seven days a week. I remember in those years, our entertainment Sunday was to get in the car and do our deliveries that we had during Saturday and Sunday. And we had to deliver to the customers.

HATTIE: But you'd get out in the fresh air.

JOSE: So the whole family got in the car and started doing deliveries. I hear--and I keep hearing stories that people went to him and said, you know, `I cannot pay you for this.' And, you know, that's very emotional.

HATTIE: Right. But he would give them their medication because they needed it... J

JOSE: Right. Right.

HATTIE: ...and he would let them pay him later. And maybe he never got paid.

JOSE: I always had a dream to have a drugstore chain. That was a dream.

HATTIE: It wasn't a drugstore. It was a drugstore chain.

JOSE: Chain. And to expand and to grow. I always wanted that. I always knew that. I had no doubt in my mind that that's what I wanted.

HATTIE: OK.

JOSE: So we started. We started in that little store. We moved that store three times making it bigger. I went to school and got my pharmacy license.

HATTIE: Your pharmacy license.

JOSE: My brother also went to school and got his pharmacy license. We started working and, you know, we were putting in long hours, long days. It was what we liked. It never really seemed that hard to work. I mean, we worked there from opening till whatever, and it seemed so normal. And then, we decided to open the second store. That was hard, that transition from the first to the second. There was a lot of sleepless nights.

HATTIE: (Voiceover) Since 1968, Jose and younger brother Luis have added stores one at a time. Now they have 12. They aim for 20. JOSE: We are extremely conservative. We have always tried to finance our growth.

HATTIE: Yourself. JOSE: Yeah. We never have tried to borrow and borrow and borrow to a point that we cannot control it.

LUIS NAVARRO: My brother has always been the one with a vision. HATTIE: Mm-hmm. Luis:

He's always had this thing about growth. And he's always had his eye on the major chains and on what they were doing and how--that was his dream.

HATTIE: Mm-hmm. Did you ever want to say, `Stop, this is big enough. Three or four, that's enough'?

LUIS: I kept saying that we have enough.

MARCEL: We moved here in '97. We went from 38,000 square feet to 92,000 square feet. That allowed us to bring a lot of new lines direct, and it's allowed us to provide a much more competitive price.

HATTIE: You've always grown with retained earnings. Now isn't that kind of tricky? Isn't that hard?

MARCEL: Yeah, it's been somewhat conservative growth. Now in the past couple of years, we've expanded quicker. In '97, we opened two stores and moved to this facility. In '99, we opened a store. And in the beginning of 2000, we opened two stores. So now is when we're really starting to grow at a little faster pace. JOSE: Locally, we have found a niche, you know, being Miami has such a Hispanic concentration. We have, like, 12 percent or 13 percent of the Spanish market in the pharmacy business. So that means that if you take that Miami's 50 percent Latin, even more than 50 percent right now...

JOSE: ..that means that one of every four shoppers shops in Navarro's.

HATTIE: OK. Let me ask you this question: Does an Hispanic person come to Navarro because it says `Navarro Pharmacies' or do they come here because everyone speaks Spanish? JOSE: I think language has a lot to do with it.

Also, it has to do with the way we treat that customer. I mean, you might go into a store and you went there and they don't know you and they give you a prescription. Here--if you stay here long enough and you see--and you watch it, you know, these customers become friends with these employees. And they go there and they tell their stories. It might not be the most efficient way, and sometimes I say, you know, `It's taking so long. Why is that customer--hurry to the next customer.'

HATTIE: Hurry up.

JOSE: But then you realize that, you know, that's why they're coming to you. They know them. When they come, they say, `How's your daughter? How's your,' you know, `grandmother? Is she better?'

And they know. They're in a one-to-one relationship. So that relationship is very, very important. So I think that is extremely important for us.

HATTIE: (Voiceover) I watched Jose work with a customer.

HATTIE: (Voiceover) He even had to borrow his brother's glasses to help her find the right product. Jose listens, thinks and studies to make sure he makes the best recommendation. (Unidentified Woman -- Spanish spoken -- with JOSE)

HATTIE: How do you find these people that you hire who can cultivate that?

JOSE: My wife is the one in charge of the hiring. You know, she goes through a very long process in selecting somebody.

GLORIA NAVARRO: It's not just hiring the person and putting them to work and forget about them, you know. We continue the rapport. We continue to see, you know, who does what best. I put a lot of emphasis on the fact that customer service is very, very important for us.

We put a lot of emphasis on the fact that there's great opportunities for advancement. All the managers that we have in the 11 stores are people who have started working with us as stockmen, cashiers, whatever.

HATTIE: How do you know that's the right person? What does the behavior look like when you say, `Oh, that's going to be a manager' or `That person's on the way up' or `We're going to'...

GLORIA: The desire, the desire to do better, to really advance, to be the best they can be. Actually, that's it. And in some cases, you know, we have sent people--like, for instance, we have a lot of people who don't speak English very well. And in some cases, we have send them to Berlitz or, you know, a language program. HATTIE: Right. GLORIA: And they have done well, and they have been able to apply to a better position.

LUIS: (Voiceover) I'll pick a store every day. And I'll spend most of the day in that store. I try to look for problems. You have to eyeball it. You also have to talk to the store personnel. They give you a feeling of what is going on on a day-to-day basis. They give you a good sense of what the customers are asking for.

HATTIE: So does the manager know you're coming? Or...

LUIS: No, they don't. They never know. They're never expecting me. The store managers for us--you know, it's such a small group, it's like family. So we--like, this particular manager, we've known him for a lot of years. So they really have nothing to fear, or anything. They know that we're here to help them out.

HATTIE: Right. Well, when Jose said one of the hardest things about growth was going from the one store to the two. The second store, that was really hard.

LUIS: (Yes it was.).

HATTIE: As you added three, four, five, six, seven, eight, nine, 10, did you find that you've got systems that made the additional stores easier, or does it get harder with each one?

LUIS: It's a changing process. And, like, one year, you're doing one job, then the next year, as you get more stores, you're doing a different job. So you have to change what you do with the growth that you have.

HATTIE: So have you done everything in this store? Have you done all the functions?

LUIS: You work in a family business, you start from sweeping floors to driving a forklift to driving trucks to--you pretty much have to do everything.

HATTIE: You're a pharmacist yourself. So you can even make the medicine.

LUIS: This is what we did back in pharmacy school back in the '70s. HATTIE: Mm-hmm. LUIS:

We hardly do this anymore. It's a very odd...

HATTIE: Once in several years. Mm-hmm.

LUIS: Once in a blue moon, you get a prescription from the doctor where he feels that what is out on the market is not probably adequate.

HATTIE: Lots of change.

JOSE: A lot of change. I think that's one of the reasons that we've been able to grow the way we have, you know. We're ready for change anytime it happens. We have been able to be there and react fast.

HATTIE: Talk to me about making your product, your selection, unique for the niche. How do you do that?

LUIS: Well, the selection--we have pretty much grown into the selection, always trying to keep up with new items. Trying to add--it's just like a trial, you know...

HATTIE: Trial and error.

LUIS: Yeah. Hit and miss. You bring new products. Some will work, some don't work. If you bring in a line and it works, then you try to expand on that category. HATTIE: Mm-hmm. LUIS: So, you know, through the 30 years that we've been doing it, you grow into it.

We have a little world of our own. Merchandising for us is totally different than merchandising for somebody in Georgia or...

HATTIE: OK. Tell--give me an example.

LUIS: It's kind of hard. And, like, there are so many products that for us, they're number one in the category. Once you step outside Dade County, those products don't sell.

HATTIE: Can you give me an example?

LUIS: A product like this for us in the powder category is, like, the number one. It's what we call a `loss leader,' where we hardly make any profit on it.

And once you step outside Dade County, you can't hardly get this anywhere.

HATTIE: Well, what is it? Is it the smell? Is it...

LUIS: No, it's just--it's a real good product. And...

HATTIE: Mm-hmm. How come I've never heard of it?

LUIS: Really?

HATTIE: I haven't.

LUIS: Yeah, well, you know, because of the heat and the humidity down here...

HATTIE: Ah, lots of powder.

LUIS: Yeah.

HATTIE: All right. Talk to me. How many products are you putting your own labels on?

LUIS: I believe right now we have about 3,000 products.

HATTIE: How big did you have to get before that became doable?

LUIS: You've got to have a certain amount of sales. These manufacturers don't want to put your...

They don't want to spend money on the labels, on the package unless you can buy a certain amount of product.

So I think we were where we had, like, probably seven stores, it was when we were able to get started with the store product label...

HATTIE: So you get more margin on this.

LUIS: Right.

HATTIE: So, of course, that's the motivation.

LUIS: Right. That's what we try to sell. And we've been able to--since all these generic and private label products are now so popular, you get so many companies that are doing the manufacturing that the quality has really changed from the quality that it was back in the '70s.

HATTIE: Has it gone up or down?

LUIS: Better.

HATTIE: The quality's up?

LUIS: A lot better. A lot better.

HATTIE: So you're really proud of this product.

LUIS: Oh, yeah. Yeah. And in every category, most--I would say 80 percent of the categories that you look at--and you look at the movement of the products--our private label has become, like, the number one seller in most of the categories. HATTIE: Really? LUIS: Yeah. And then the national brands will go below that.

GABRIEL: This piece was for Valentine's, and you see the focus of it. I think that one quarter of it is devoted to fragrances.

HATTIE: Ah. GABRIEL: It's direct mail by ZIP code. We're going to half a million homes every week. These days, if you look at the competition out there, all the chains, the mass market, they're out every single week. So to be competitive, you do, too.

HATTIE: PATRICIA, how old are you?

PATRICIA: I'm 24.

HATTIE: You're 24, and you're own your own. Are you doing as much--as many dollars per square foot in this little corner as he's doing with his vitamins, for example?

PATRICIA: Sure.

HATTIE: Are you sure?

LUIS: No, she's doing more.

PATRICIA: Well, our fragrances are a higher priced items. And our fragrance department has really taken off. It's done even better over the last couple of years. But, you know, I think it's due to the variety that we have. We pretty much have any fragrance that you're looking for from any department store, we have it. From Estee Lauder to Calvin Klein to anything. And we've always tried to maintain that. It's a very important part.

HATTIE: All right. Do you have any research that shows you that Hispanic women use more fragrance, have more choices, buy it more often than the general market?

PATRICIA: Well, the Hispanic woman concentrates very much on cosmetics and fragrances. You'll never see a Hispanic woman step outside of the house without makeup on.

LUIS: The Latin woman is the number one consumer on makeup.

HATTIE: So what do you think? You think she's got the merchant soul, she's going to make it?

LUIS: I think she does have it. I think she's come a long way from when she started. And I think she really enjoys what she's doing. And does--she's the type of person that puts her heart into her work. So I think she has a great potential. I think she has a great future.

HATTIE: Is it in you? LUIS: I mean, we have a great future with her.

The Lightbulb (HATTIE): Preparing a person's prescription is deeply intimate work. Jose and Luis remember when they could call many customers by name, and they have vivid memories of their father filling prescriptions for people who couldn't afford to pay. These two have had to have a tough side to have achieved what we see today. But I saw in their eyes compassion for their customers. Out of this compassion flows their decisions to deliver the same type of service they gave when they just had one location and thin profits. Jose and Luis have the precise solution to the problems their customers brings them. Do you? As business owners, we solve the problems of our customers. But should our attitude be arrogance--`I've got the solution to your problem'? No, because arrogance makes most people sick. Learn from Jose and Luis. These are the words that describe the way they see their customers: respect, deference, admiration, honor, appreciation, regard, fondness and approval. If you don't have these true feelings for your customers, you'll never build the kind of loyalty we see from the customers of Navarro Pharmacies. There's much more at smallbusinessschool.com. You can see streaming video of this and all of the programs, as well as transcripts and study guides.

HATTIE: (Voiceover) Tony Argis is a partner in Miami's eighth-largest CPA firm. His company provides accounting services to Navarro Pharmacy, and so he knows the business as well as the personal side to Navarro's. What is it that they're doing that makes them so successful?

TONY ARGIS: The things that the Navarros do--first of all, their father started their business along with two of the brothers, Jose and Luis. And they all work as a team in the business. They all show up early in the morning. They work hard hours. They all complement each other. Luis might do the purchasing. Jose might run the entire operation. Their wives are also involved. They act as humble as when they started the business back in the early '60s. And that's what makes them excel at what they do.

HATTIE: When they came over in the '60s, others came as well. TONY: Right. HATTIE: What is it that that first wave of immigrants had that caused them to be so successful?

TONY: The big reason the 1960 influx of Cubans made them as successful--the cream of the crop of Havana and all of Cuba left. These were people with real good education, developed knowledge in owning their own businesses in Cuba.

And they came here. And because they were so prepared educationally, that they were able to succeed and knew the hard work of the Spaniards that had come to Cuba and had been their great-grandparents and taught them...

HATTIE: Yeah, but they didn't have any money when they came.

TONY: They didn't have any money, but they had education. And education gives you the opportunity to develop the knowledge. And that's what they really used, that knowledge, to gain that foothold that they have gained in this city.

HATTIE: You obviously had great parenting. You had people who taught you...

JOSE: Definitely, definitely. And I think that all the values that were--that we have is our parents. And they put it--they taught us and they... HATTIE: Did you go to church every Sunday?

JOSE: Yes, we did. HATTIE: How could you squeeze that in with all the...

JOSE: Yes, we did. We did. So--oh, yes. HATTIE: You're Catholics?

JOSE: Oh, yes. Yes. Oh. my mother--you had to go to church every Sunday. There was no doubt about skipping church. I mean, church was something that you had to make time for it. It was--I mean, maybe it was at night, you know, after we finished doing the deliveries. HATTIE: Mm-hmm. JOSE: But everybody went to church on Sunday.

That was something that my mother is adamant about it, and she's still adamant about it now.

HATTIE: Great. Do you think your faith helps you through hard times?

JOSE: It does. It helps. It always helps. Faith is something that you have to have. And you hang to it. Sometimes you need it and you go there and you reach and you find it. Sometimes when you need it, you know, when you find that things are not working out, you know, you have to reach down there and find your peace.

HATTIE: And you know you're not by yourself?

JOSE: No, you're not. No, you're not. I consider myself extremely lucky that I was able to get the three kids interested to come into the business.

PATRICIA: It's nice to follow the dream that your dad had and--you know, and to make it your own. And it's become our own.

GABRIEL: There's no doubt at all. Look at those before us, my grandfather, my father, my uncle, you know, did the hard parts. And we've been given a gift. And to think that I can have a role in making it grow and making it bigger, it's flattering, but it's a challenge.

MARCEL: My dad has always been, `You know, if you want to do something, just go ahead and do it.'

HATTIE: Did he say to you, `Look, all three of you, look at the business and tell me what's interesting to you'?

MARCEL: Absolutely. Absolutely. He's--`Whatever you want to do, just go ahead and do it. You know, there's enough work for all of us. So if you find something you like, just go ahead and run with it.' LUIS: We're always the front line in this health-related business.

HATTIE: Is that what makes you glad you do this? LUIS: It is rewarding, in a way. And I guess that's why we all do it.

JOSE: Find what you like. Don't get into something just for the money because that will not do it. If you want to do something for the money, it will not happen. OK? You want to do something because you love it, and then you dedicate to it, put all your heart into it and money will come by itself.

HATTIE: (Voiceover) Sergio Campo is using technology to bring Navarro to the world.

SERGIO CAMPO: There's two ways of communicating with the pharmacy. One is with our interactive voice response system, which will--which integrates to our RS6000, our host system, on to each one of the pharmacy systems. HATTIE: Mm-hmm. SERGIO:

So the actual customer can call the store, and is prompted by this interactive voice response system and their order gets placed. Refills, new orders. Even the pharmacy assistant can call the doctor for you if you get--if you run out of refills. The same service is offered to the Internet. If through the Internet you actually request a prescription, it basically goes into the same field queue integrated in all the stores. It goes from our main system that holds the Internet application or the Internet program and actually communicates automatically to each particular store where your client profile sits.

Or you can actually request to pick up their order at the store level.

HATTIE: OK. Or you can mail it to me, or whatever?

SERGIO: Or we can put it on--or we can put it in the mail for you.

HATTIE: If you don't have regard, respect, admiration and appreciation for your customers, you'll never build the kind of loyalty we see from the customers of Navarro Pharmacies. I'll see you next time.

The Closing of the Show

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