Kinko’s Intent on Branching Out : Growth May Affect Upper Avenue

At a time when most companies are cutting back and laying off, Ventura-based Kinko’s Service Corp. has its own construction company to build the 70 photocopying stores added yearly.

At a time when most companies are hesitant about expanding too aggressively, Kinko’s is pushing into the international market, adding stores in Japan and Europe.

At a time when most companies are reluctant to make major investments in new products, Kinko’s has embarked on a $20-million gamble to build video-conferencing rooms in most of its 696 stores.

Kinko’s, which got its start catering to college students, is at a critical juncture in its development as the company changes its focus from the university crowd to corporate clients.

And on a local level, the multimillion-dollar photocopying firm is causing a stir by backing a project in one of the city’s poorest neighborhoods. That project could make Kinko’s a major part of the revitalization of Ventura’s old industrial area.

“We think it’s one of the most exciting years in our history,” President Dan Frederickson said. “Our image is changing from a campus-based copy shop to the world’s branch office.”

The branch office campaign emphasizes that Kinko’s offers more than photocopy machines: It touts video-conferencing, free local calls, faxing, mail service, printing and computer rentals--all geared toward business clients.

And while the firm works to increase its presence internationally and locally, company officials say they hope to expand Kinko’s corporate headquarters at 225 W. Stanley Ave. in the next few years.

Critics, however, say Kinko’s is wasting time on video-conferencing, which they view as a fad.

And some neighbors of the headquarters are resentful and wary of how the corporation may change the Ventura Avenue district, which has traditionally served the oil industry and not service-oriented companies such as Kinko’s.

Kinko’s began in Santa Barbara 24 years ago in a former taco stand.

With a $5,000 bank loan, founder Paul Orfalea--who named the company after the texture of his hair--opened a copy business in a storefront so cramped that the copy machine had to be wheeled onto the sidewalk when a customer wanted to squeeze into the store.

Over the years, under the guidance of Orfalea, Kinko’s grew by successfully targeting the college market. Many Kinko’s stores stayed open 24 hours to attract students.

The company moved to Ventura in 1988, when it outgrew its corporate headquarters in Santa Barbara.

Since its arrival six years ago, Kinko’s has made a considerable impact on the community. By all accounts, the firm has been a generous corporate donor, giving thousands of dollars to various charities and sponsoring the city’s recycling program. When Kinko’s opened its newest store on Main Street in November, it donated $5,000 worth of copying service to the city.

“Kinko’s goal is to be a good corporate citizen in our communities,” Frederickson said. “The company culture of being a family gets extended into the community.”

Kinko’s recent moves have also attracted industry attention.

“Kinko’s has woken up to the fact that there’s a much bigger market out there than the college market, which had traditionally been their core business,” said Jeff Hayzlett, a consultant to the printing industry. “Kinko’s carries more marketing muscle than most, and they’re becoming a brand name.”

Carol LaPorta, marketing director for the Agoura Hills-based printing company PIP, said rival printers are looking at Kinko’s with more alarm.

“Many printers in the industry did not regard them as serious competition,” LaPorta said. “They were pretty much restricted to a niche in the industry. They’ve changed all of that. . . . I think Kinko’s can be a formidable competitor.”

Kinko’s officials say their $20-million investment in video-conference rooms is part of their overall strategy to lure more business customers to their stores. By June, the first 100 rooms will be connected in an electronic network, and the goal is to install them in most of Kinko’s stores within two years. The project, a joint venture with long-distance phone company Sprint, will create the largest video-conferencing network in the world.

Sprint spokesman Norman Black said the idea is to take video-conferencing to the average consumer.

“What we saw in Kinko’s was the commitment of a company to spend the time and money to drive video-conferencing down to the mainstream,” Black said. “They were convinced that video-conferencing had reached a point, in terms of costs and ease of use, that it was something they could take to mainstream America.”

Some experts, however, say Kinko’s is getting entangled in an expensive and fruitless endeavor.

“It’s completely bogus,” said Thad McIlroy, a San Francisco-based electronic publishing consultant. “Teleconferencing will be convenient when it’s in offices. People aren’t going to want to go down to Kinko’s for a phone call. The people they’re marketing to can’t even program their VCRs; they’re not ready to go into Kinko’s and do teleconferencing.”

But Kinko’s executives say the company is on the cutting edge of something exciting.

“We’re confident that we can make this successful,” Frederickson said. “Our customers told us what to focus on.”

Part of the reason that Kinko’s moved beyond the college market stems from a 1989 lawsuit the company lost.

Kinko’s paid $1.9 million in damages after eight publishers successfully sued the company for copyright infringement.

Kinko’s had come up with the idea of approaching college professors and offering to create customized anthologies by copying different portions of textbooks. But textbook manufacturers said the company frequently neglected to get permission or pay royalties.

“They didn’t want to bother; it was easier to go ahead and just copy without getting permission,” said Carol Risher, vice president of the American Assn. of Publishers. “They were becoming publishers, but they weren’t paying royalties and doing it with permission.”

Kinko’s argued unsuccessfully that its copying of the textbook excerpts was allowed under the “fair use” clause of federal copyright laws.

Kinko’s executives acknowledge that the lawsuit was a blow to how they operated their campus-area business. Eventually, Frederickson said, “the complexity of compliance with copyright laws” spurred the company to expand to other markets.

Kinko’s still caters to college students with some of its 24-hour stores, but the company is no longer pursuing professors. In June, the company announced that it would stop publishing customized college course packets and concentrate instead on its branch-office concept.

“Obviously, the effects of the lawsuit affected how we did business,” Frederickson said. “But we’ve seen a natural evolution in our business that’s more driven by the marketplace than anything. As our business developed, we had many opportunities in the commercial market. We went where the business was.”

The company prides itself on emphasizing customer service. Every Kinko’s employee undergoes vigorous customer service training and takes refresher courses periodically.

Kinko’s employees say they like working for the corporation, with its progressive management, competitive salaries and generous health benefits. In September, 1991, the company built a 5,500-square-foot child-care center at its corporate headquarters and pays half of its employees’ day-care costs.

The profit-revenue sharing plan is a big motivator, employees say, and turnover tends to be low. About 375 employees work at the corporate headquarters, and the company employs about 11,000 people worldwide.

Kinko’s has an egalitarian corporate work culture; people are referred to as co-workers, and no one is called a boss.

“They’re so good to us,” said Mona Hernandez, who works at the Kinko’s copy store on Garden Street in Ventura. “They’re always stressing family.”

Kinko’s shops are run as partnerships, similar to franchise operations, between the company and 120 independent entrepreneurs.

Orfalea, 46, is still involved in running Kinko’s and owns most of the corporation.

Kinko’s executives declined to release sales figures or other financial data, but a 1993 Dun & Bradstreet financial report lists sales of $70.4 million for 81 of the 696 stores.

City officials said they had only modest hopes for the photocopying company when it moved to Ventura six years ago. Much to their relief, Kinko’s had decided to pay $13.5 million for a 122,000-square-foot facility that had been vacant for years in the Ventura Avenue neighborhood.

City Manager John Baker recalls that Kinko’s employees filled barely a quarter of the sprawling, two-story stucco-and-glass building formerly occupied by Vetco Offshore, a manufacturer of automated equipment for oil platforms.

“Now they’ve gone bonkers, and they’re bursting at the seams,” Baker said. “They’ve gone well beyond our expectations.”

But Kinko’s arrival has not pleased all its neighbors. Some businesses say Kinko’s is unfairly using its clout to help push a project that could dramatically change the character of the old industrial neighborhood.

The company is endorsing a development proposal on the upper Avenue that would add 330 townhouses, a park, bike trails and business offices to the neighborhood.

The Neel and Huntsinger families of Ventura, with Kinko’s support, are lobbying city officials to change the zoning from heavy industrial to allow residential and commercial office uses. The two families own property adjacent to Kinko’s headquarters.

Although the project would be built on about 55 acres, the Neels and Huntsingers are requesting that the City Council change the zoning on about 25 acres of their neighbors’ properties to help upgrade the area. A majority of the council members said they are in favor of the project, and a final vote is expected later this year.

Kinko’s executives say they have not yet decided to expand their corporate headquarters, but changing the zoning in the neighborhood would influence their decision. The company is considering a 60,000-square-foot addition.

“You wouldn’t want to build an office on one parcel and next door someone could come in and put an auto repair junkyard there,” said Greg Lowe, facilities manager for Kinko’s.

Some neighbors say they don’t care about Kinko’s expanding or even the proposed townhouses, but are fighting the change in zoning that would benefit the development.

Lynn Menick, who owns Lynn’s Heavy Duty Towing, noted that Kinko’s would be allowed to expand without the development proposal.

“They knew the area where they were buying into,” said Menick, who has owned his business on the Avenue since 1980. “They’re trying to push out other businesses in the area.”

Dave Prince, whose wife owns a plumbing supplies company near Kinko’s, said he doesn’t think that city officials would be as enthusiastic about the development proposal if it were not for the endorsement of one of the city’s biggest employers.

“Kinko’s wanted it, so it got shoved down our throats,” he said.

But city officials and real estate agents say the proposal could be the start of a revitalization of Ventura’s west side, which has been sagging since the oil boom ended.

Kinko’s presence in the area may eventually draw other companies to the neighborhood, said Everett Millais, the city’s community development director.

“I think we’ll see it incrementally,” he said. “As more people move into the area, it will take away from the stigma of the Avenue and cause people to take a second look in investment as the opportunity arises.”

Although Frederickson said Kinko’s has no plans to move from Ventura, he doesn’t know if the company will relocate later.

Kinko’s will concentrate more on expanding its foreign stores, as well as continuing to push its branch office concept, he said.

Kinko’s has six stores in Canada, two in Japan and one in the Netherlands. Another is scheduled to open in Japan next year. International domination of the market is the company’s long-term goal.

“We’ve enjoyed good growth as a company,” Frederickson said. “Our vision is to be the branch office for the world.”