Kinko's Incorporated

views updated

Kinko's Incorporated

founded: 1970

Contact Information:

headquarters: 255 w. stanley ave.
ventura, ca 93002 phone: (805)652-4000 fax: (805)652-4045 toll free: (800)254-6567 url: http://www.kinkos.com

OVERVIEW

Kinko's is one of the biggest chains of document copying and business services stores in the world. The company has more than 850 stores equipped with high-speed, digital, and black-and-white copiers; computer rentals; custom printing and finishing services; faxes; mailing services; and overnight drop-off services. Almost all Kinko's stores (company officials prefer to call them "branch offices") are open 24-hours-a-day, 7-days-a-week. The company's goal is to have 2,000 stores by the year 2000.

On January 2, 1997, Kinko's announced the roll-up of the 130 decentralized joint venture, corporate, and partnership entities operating under its name into a single corporate structure. Kinko's founder, Paul J. Orfalea, stated, "Having a more centralized structure offers numerous benefits, including more standardized product, service and pricing structures, more consistent operating principles, . . . and more ownership and career opportunities for our co-workers."

In April 1997 Joseph Hardin, Jr. was named Kinko's Incorporated's president and chief executive officer. Hardin left his post as president and CEO of SAM's Clubs, the wholesale club division of Wal-Mart, to join Kinko's. Orfalea, the company's single-largest shareholder, was named chairperson of the company's 13-member board of directors; seven of its members would be nominated by Clayton, Dubilier & Rice (CD&R) Incorporated, a New York City-based private investment firm. CD&R had invested $214 million in Kinko's stock, representing 30 percent of Kinko's equity; Orfalea and the owners of existing Kinko's entities accounted for most of the remaining equity.

COMPANY FINANCES

Founder Paul Orfalea does not disclose annual sales figures, financial details, or ownership arrangements. However, according to one Los Angeles investment banking firm, the company's annual revenues from its stores exceeded $525 million when it had about 800 locations, based on an estimated $700,000 per store. Forbes magazine estimated that the chain posted more than $400 million per year in sales.

ANALYSTS' OPINIONS

Kinko's, once a tiny entity led by a counterculture figure, is now viewed as anything but small. Locally owned copy shops across the country see the California-based firm as a corporate Goliath. In the early 1990s the owners of eight printing, secretarial, and copy services in Sausalito, California, complained to the city council about Kinko's plans to open nearby. They, like the owners of many independent stores nationwide, were certain that Kinko's arrival would hasten their demise and quicken the arrival of a caravan of other national chains ranging from Burger King to Wendy's.

Kinko's has also raised the ire of publishers. A coalition of publishers sued the company for photocopying excerpts from copyrighted books as a service to professors and binding them into anthologies without permission. Kinko's lost the suit and was ordered to pay the plaintiffs $1.9 million in damages and legal fees.

Small business owners and others who use Kinko's 24-hour-a-day services are glad the company exists. One small business owner told the Greater Lansing Business Monthly, "Kinko's keeps me looking good with my clients. It's nice to know that if my equipment fails, I can zoom over to Kinko's." Similar opinions are echoed on the company's web site, where users are encouraged to post their own Kinko's stories.

HISTORY

In 1970 Paul Orfalea launched Kinko's with a $5,000 bank loan. The University of California at Santa Barbara graduate opened his first photocopy shop in Isla Vista, California, and christened it Kinko's—the nickname he was given because of his curly reddish hair. The first store, which he leased, shared space in a building that housed a hamburger stand. Orfalea's 100-square-foot establishment contained a rented Xerox copier, an offset press, and some stationery and school supplies. Once the store's clientele grew, the copier was rolled out onto the sidewalk and used as a self-service machine.

To finance new locations, Orfalea took on fellow students, who scouted the West Coast in search of colleges with more than 20,000 students. Once they found the colleges, the scouts set up shops close to the campuses. To save money, the student scouts slept in fraternity houses. Orfalea stuffed flyers in mailboxes and delivered orders, and spent the rest of his days working with fellow hippies he had hired to operate his company's machinery. In 1985 the company opened its first 24-hour store in Chicago.

Kinko's grew rapidly, and by 1990 there were 480 Kinko's locations. Around 1989 the company began moving away from serving college students and began targeting small-business owners. Kinko's operated 635 stores by 1993, 780 in 1995, and more than 850 by 1997.

As Kinko's sought to expand the range of services it offered, it entered into joint ventures and strategic alliances with other companies. For example, it teamed with GTE to link its stores to the World Wide Web through high-speed ISDN connections, and with Netscape Communications' Web browser for its growing fleet of rentable personal computers. When it decided to offer videoconferencing at selected locations, Kinko's teamed up with long-distance carrier Sprint.

FAST FACTS: About Kinko's Incorporated

Ownership: Kinko's Incorporated is a privately owned company.

Officers: Paul J. Orfalea, Chmn.; Joseph Hardin, Jr., Pres. & CEO; Karen Sophiea, VP-Marketing

Employees: 23,000

Chief Competitors: Kinko's competes with other companies that offer copying and printing services and access to computers and other business machines, including: Sir Speedy; PIP Printing; American Speedy Printing Centers; Office Depot; and Office-Max.

In 1997 the company obtained much-needed financing for its expansion strategy when the private investment firm of Clayton, Dubilier & Rice (CD&R) purchased a 30-percent interest in the company for $214 million.

STRATEGY

When competitors such as Sir Speedy and PIP Printing began offering copying services similar to Kinko's, Orfalea shifted gears. His focus centered on a new clientele: small-business owners. A growing number of them were seeking more realistic copies of documents, in larger sizes and in color, as well as sophisticated graphics. So Orfalea began opening 7,000-square-foot stores in suburbs and business districts. In doing so, Kinko's has cashed in on medium and large companies, as well as the small-business market, particularly the growing number of self-employed and home-office workers.

To service all of its new customers, Orfalea provided them access to sophisticated equipment such as laser and color copiers. Instead of buying the machines, he leased them, reducing the need for fresh capital and allowing the company to constantly upgrade its equipment.

Kinko's also introduced new telecommunications and technological services, such as videoconferencing, Internet access, document delivery, e-mail accounts, and other services that would be useful to people conducting business on the road or at remote locations.

In April 1997 Kinko's newly formed alliance with Clayton, Dubilier & Rice was expected to help finance Kinko's international expansion and its ongoing penetration of the U.S. market. Investment proceeds were also expected to be used to finance communication and computing technologies. Prior to forming the alliance, Kinko's launched Kinko's Corporate, an initiative aimed at servicing the needs of larger companies.

INFLUENCES

Over the years, Kinko's has developed a customer base whose loyalty to the company has as much to do with its accessibility and plethora of products and services as it does to the company's focus on customer service.

"Our primary objective is to take care of our customers," the company says in its philosophy statement. "We are proud of our ability to serve them in a timely, helpful manner, and to provide high quality at a reasonable price. We develop long-term relationships that promote mutual growth and prosperity."

CURRENT TRENDS

With the growing number of home-office workers, telecommuters, and self-employed people working at home, Kinko's began promoting itself as "The New Way to Office" in 1997. It began offering a wider range of services, from faxing and Internet access to electronic document distribution and computer rentals. These services also address the needs of mobile professionals who often find themselves away from their offices.

Small businesses continue to be an important target market for Kinko's. By offering access to expensive office equipment and services, Kinko's allows customers to "test drive" high-end technical equipment before making a purchase decision. In many cases, customers can access the equipment at Kinko's without having to make a large capital outlay to own it.

Kinko's recently expanded into new geographic locations to better serve its core customers (small office and home office workers and owners) and closed some of its locations in college towns. In 1997 it announced plans to open more than 30 new Kinko's branches in the metropolitan New York area, especially in suburban Westchester County and Connecticut's Fairfield County, between 1997 and 1999. The fact that Fairfield County is home to more Fortune 500 companies than any other county in the United States also fits in with Kinko's plans to market its services to larger corporations.

In 1997 Kinko's announced plans to open two branches in London, England, in a joint venture with the Virgin Group, a diversified British company that operates music retailing and recording businesses and an airline.

CHRONOLOGY: Key Dates for Kinko's Incorporated

1970:: Paul Orfalea opens the first Kinko's
1973:: Kinko's opens a Los Angeles branch in an old photo booth
1982:: Color copies become available at Kinko's
1985:: Kinko's opens its first 24-hour shop in Chicago, Illinois
1993:: Sprint and Kinko's announce an alliance to offer videoconferencing
1995:: Kinkonet, Kinko's electronic document transfer system, is introduced
1997:: Clayton, Dublier, & Rice purchase a 30 percent interest in the company

Another recent development took place at the Kinko's Copy Center in Riverside, California, when the Glendale Federal Bank opened a mini-branch there in mid-1997. The bank, believed to be the first to open a branch in a copy center, opened its first branch in a Kinko's in February 1997 in Simi Valley, California. That location attracted $3 million in deposits within the first few months. The bank hopes to reach the small-business owners who use Kinko's services and plans to open in as many as 20 California Kinko's branches over the next year.

PRODUCTS

Kinko's "products" are actually services. One of Kinko's most recent services is Kinkonet (SM), an electronic document delivery service. It electronically sends documents from one Kinko's store to another anywhere in the world. With the aid of free Kinkonet software, a customer can send a document from an office, home, or laptop computer to Kinko's. A Kinkonet worker takes the work request, confirms receipt of it and quotes the customer a price, and then electronically sends it to one or more Kinkonet locations. The company said it built the system with full security devices to ensure that customer information would remain confidential.

On August 1, 1997, Kinko's began offering high-speed Internet access using ISDN lines, which were about 10 times faster than conventional Internet connections. These connections also allowed customers to check their e-mail.

Utilizing new digital printing technology, Kinko's can produce high-quality, full-color copies as fast as 40 copies per minute. Customers can also make use of Kinko's design services to assist in the creation of brochures and other materials.

Some high-tech services, such as compact disk creation and videoconferencing, are only available at selected locations. Videoconferencing is offered at approximatley 140 locations, and up to 15 Kinko's locations can be linked together. If a particular service isn't offered at a location, Kinko's can arrange to set up the services for customers.

In August 1997 Kinko's announced it would begin offering customers free e-mail accounts through a partnership with national e-mail provider Hotmail. Other recently introduced services include KinkoCards (SM), which allows customers to send a free animated greeting card.

CORPORATE CITIZENSHIP

Kinko's uses recycled and chlorine-free paper as well as computer programs that recycle copy paper waste. The company engages in numerous acts of good citizenship. In the early 1990s, for example, the 35 stores of Kinko's of Ohio Incorporated bought the states of Ohio, Pennsylvania, New York, and New Jersey 70,000 tree seedlings as recompense for paper Kinko's had used.

Kinko's "Environmental Vision Statement" includes the following principles: maximize the use of recycled and environmentally benign raw materials while minimizing the use of virgin natural resources; require waste reduction, product take-back, and sustainable natural resource management programs from our business partners; use energy-efficient technologies and renewable energy sources; continuously strive to eliminate all nonrecyclable waste streams; foster mutually beneficial relationships with businesses that use our by-products as raw materials; and promote the use and sale of environmentally friendly products.

GLOBAL PRESENCE

Only 20 or so of Kinko's 850 branches are located outside the United States. Those are located in Canada, the Netherlands, Japan, South Korea, and Australia. A couple of new locations in London, England, are planned for 1998.

EMPLOYMENT

Kinko's employed about 23,000 people worldwide in 1997 and operated approximately 850 branches, including about 20 in Canada, the Netherlands, Japan, South Korea, and Australia. The staff at a Kinko's location ranges from 20 to 60 people. Although Kinko's is an expanding business in an expanding business world, it tries to make its employees feel like they're members of the Kinko's family.

SOURCES OF INFORMATION

Bibliography

brooks, nancy rivera. "kinko's to enter virgin (group) territory." los angeles times, 15 july 1997.

crooks, michael. "depend on kinko's." greater lansing business monthly, november 1997.

karon, paul. "the cutting edge: small office/home office." los angeles times, 16 june 1997.

"kinko's announces new ceo." kinko's press release, 21 april 1997. available at http://www.kinkos.com/press.press/4964833.

"kinko's completes roll-up of its 130 ventures to become a unified corporation: clayton, dubilier & rice fund provides $214 million equity investment." kinko's press release, 2 january 1997. available at http://www.kinkos.com/press/press9176224.

kinko's home page, 19 may 1998. available at http://www.kinkos.com.

"kinko's turns 25 with a jolt." graphic arts monthly, december 1995.

mcauliffe, don. "glendale federal bets the bank on kinko's." press enterprise-riverside, california, 14 june 1997.

monnesh, sheldon. "original copy cats: founded with a loan from a bank once torched by 60s protesters, kinko's now has some 800 copy shops across the country. still, it's run by renegade hippies." 16 may 1997. available at http://www.wired.com/wired/3.06/departments/electrosphere/kinkos.html.

moukheiber, zina. "i'm just a peddler." (kinko's graphics corp. founder paul orfalea). forbes, 17 july 1995.

prenon, mary t. "kinko's unveils expansion plan." westchester county business journal, 18 august 1997.

stroh, michael. "kinko's graduates to a higher strata." the sacramento bee, 15 october 1997.