Kinko's - The Free-Agent Home Office

Paul Orfalea, founder and chairman of Kinko's Inc., hates his office. The problem isn't what the place looks like. It's what happens when he's there. The phone rings too much. Trouble knocks too often. "If I stick around that office long enough, I guarantee that every problem in the world will come to me," says the lanky, 49-year-old Californian, whose kinky red hair inspired the company's offbeat name. "Having an 'open door' doesn't mean people can lay a mess on my desk."

In one sense, it's a strange attitude. Orfalea is a genuine business mogul with a huge company to run. The first Kinko's opened 27 years ago in a converted hamburger stand. Ten years later Kinko's was a funky, mid-sized, anticorporate company, with 80 stores located primarily near college campuses and staffed mostly by part-time student workers. Today it is a global juggernaut. The company has 865 locations in six countries, 23,000 employees, and estimated annual revenues of $800 million. Talk about a copying machine! In 1997 Kinko's bought 90 million pounds of paper and made more than 12 billion copies. (That's two copies for every man, woman, and child in the world.) All this growth has created lots of wealth. In 1996 Clayton, Dubilier & Rice, the Wall Street merchant bankers, made an investment in Kinko's that valued the company at more than $600 million which puts Orfalea's personal wealth at an estimated $225 million.

In another sense, Orfalea's disdain for his office is perfectly appropriate. Kinko's began as a low-price copy shop for college kids. But it has become a business powerhouse, a state-of-the-art service center for self-employed professionals for people who, like Orfalea, hate the headaches that come with working in an office. Better and sooner than their rivals, Orfalea and his colleagues figured out who these people were, how they worked, what they needed and reinvented the company around this new population. Kinko's became the home office of Free Agent Nation.

Today Kinko's is to self-employed artists, accountants, and consultants what Starbucks is to coffee fanatics or what Nike is to sports-crazed teens. It is a mass-market enterprise that has prospered not by cutting costs but by redefining standards. And it is as much a cultural phenomenon as a business phenomenona place that customers look to for great service and a sense of community.

Kinko's feels that sense of community too. "Our coworkers believe that they are contributing to something larger than Kinko's," says Orfalea. "They are helping people find jobs and advance their careers. They are having an impact on how things work out for people. And that's extremely important."

Focus on Free Agents

No one had heard of free agents not in business, not even in baseball when Paul Orfalea opened his first copy shop outside the campus of the University of California, Santa Barbara. A tall, skinny college kid with a knack for peddling things to other students, he'd built up a small school-supply business when, during a trip to the library, he encountered a big opportunity: the copy machine. The price10 cents per page seemed absurdly high. Orfalea figured he could cut it in half and still make money.

He was right. His first shop was so small that he had to wheel its one machine onto the sidewalk to make copies. But it quickly made money, and Orfalea, along with friends, relatives, and business partners, began spreading the gospel of cheap copies across the country. By the end of the decade, the company's 80 stores had an average size of 400 square feet. And as bizarre as its name first seemed ("Some landlords didn't like the name and wouldn't rent to us," Orfalea recalls), it became part of the language: "Kinko's" is to copy centers what "Xerox" is to copy machines.

From the start, Kinko's was a funky sort of place. Students were the target customers, the main pool of workers, the driving source behind both store atmosphere and corporate culture. Even its corporate structure was slightly offbeat. The operation was neither a series of franchises nor a chain. As Kinko's grew, Orfalea shared ownership of the stores with local investors in different regions nearly 130 partners in all. Organizing as a loose confederation brought real benefits. Local ownership meant more grassroots innovation and less bureaucracy. And Kinko's was able to expand without assuming lots of debt; the partners financed growth. By the end of the 1980s, there were 420 Kinko's outlets, and their average size had grown to 1,500 square feet.

But there were also disadvantages. Inventory and services weren't consistent from one city to the next. Retail operations didn't even look alike. If a hardware store had a sale on pink paint, company veterans joke, the Kinko's nearby would be pink. "I used to build the furniture for my stores in my basement and install it myself," recalls Brad Krause, 49, a surfer and Vietnam veteran who in 1971 became Orfalea's first partner and who eventually became a 50% owner of a 65-store division. "We all did it that way back then."