Lesson #2: Grab a Partner and Go

Orfalea recalls the way in which he first came up with his idea for Kinko’s: “It was an easy business…My dad made women’s clothing, and he had all this inventory to worry about. So I thought, this inventory thing is bad news. I don’t want anything to do with it. With a Xerox machine, I can dial a button and what comes out the end I can sell. It’s actually a simple, dumb business really.”

Although he downplays the significance of the idea behind Kinko’s, he does admit to the importance of his decision when it came to looking for ways in which to expand. Kinko’s was experiencing much success and Orfalea knew there was still tremendous room for growth. But what route should he take, he wondered.

“We decided not to franchise because we like the idea of making money with someone on the bottom line rather than on the top line,” he says. “We thought that was a better way of doing business, sharing the profits. The franchisor takes money from the top, he takes a percentage of sales. I just like the idea of working with people.”

Orfalea decided that franchising was not the best plan for growth for Kinko’s. “It just seems like it would set up an adversarial relationship,” he says. “I think all organizations have difficulties with this. The franchisee has an expectation that the franchisor is going to make [it] successful. We wanted to have a good relationship with the field.”

For Orfalea, there lay greater value in establishing a partner relationship with someone versus a franchise one. “Imagine yourself if you were in business with someone, and you sold $100 worth of stuff, and they took $6 off the top. Or if you made $6 in profit, and you split...with the other guy,” he suggests. “What would you rather be, splitting the profit or having it taken from off the top? I'd rather have it on the bottom line where you split the profits. It is a little more equitable, and the other guy listens to you.”

Orfalea understands that it’s “different strokes for different strokes. In certain instances, it is a good deal, but generally I have drifted away from the traditional franchise.”

Over the years, Kinko’s had morphed into a compendium of 128 joint ventures, small companies and partnerships. That is until 1997, when a New York investment firm bought one-third of it for $214 million and helped reshape it into a single corporate structure. Then, in 1993, the company went public.

“I think we are blessed with one of the only recognized trademarks in a $100 billion-a-year business called printing, and all of that printing world is coming our direction,” says Orfalea. “It is all going digital, and we are perfectly positioned in the digital world.”

To other small business owners, Orfalea offers this advice: “Do it yourself or maybe go in as a partner with someone, 50-50 partner or 60-40 partner would be better.”



Lesson #2: Grab a Partner and Go

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