Mr. Bunce with the bank is doing an inspection of the hotel and is not planning on extending Kate's financing. Wealthy socialite Clara Watkins checks into the hotel with her son Sonny. Bunce will only extend Kate's financing if Mrs. Watkins recommends the hotel to her friends. Meanwhile, annoying Sonny is constantly chasing after Billie Jo. Mrs. Watkins wants the two of them to get married. While Kate has done whatever she can to please Mrs. Watkins, she has to say no to that. Uncle Joe decides to romance Mrs. Watkins instead and she soon accepts his marriage proposal. Kate comes up with a plan to save Joe and the hotel.

Kate receives a telegram from Railroad President Norman Curtis that he is sending Homer Bedloe with someone named Fred. Fred is actually Mr. Curtis' housekeeper's aged basset hound. Curtis believes Fred needs some good country air and space to re-energize himself. Curtis also hopes that Bedloe will soften his ways in the process. Bedloe comes up with the plan to "ruin" Fred and have him return to Curtis in worse shape than he arrived. That will hopefully sour Curtis' view of the Shady Rest and what it stands for. Kate figures out a way to bring back spirit to Fred and a way to break Bedloe's spirit.