The timing indicates that they have sufficient revenue to offset the charge. The tax benefits were probably too good to pass up. To me, Kinkos, in the Washington, DC area, is a copier store where you can drop off FedEx packages. Because of their long hours (many stores are 24/7) Kinkos has long been one of the favorites of out of town government contractors who have to update their proposals overnight. FedEx bought a bargain when they bought Kinkos. I am sure that they would rather keep the name going but the tax savings were just too great to pass up in a declining economy. The IRS should watch to see how fast the signs come down.
Here is the interesting story about Kinko's:
Company History:
Kinko's Inc. was, in 1995, the leading retail provider of document copying and business services in the world. With more than 830 outlets in early 1996, located in every state of the union and four foreign countries--Canada, Japan, South Korea, and the Netherlands--it was providing photocopies, quick printing and finishing services, electronic document distribution and production, mailing services, and time rentals on personal computers, usually at any hour of the day or night. About 145 locations had a special room for conducting videoconferences. A private company, Kinko's does not release its sales figures.
Serving College Campuses in the 1970s
Kinko's Copies Corp. was founded in 1970 by Paul Orfalea, a young man of Lebanese ancestry who gave the company the nickname given him for his curly red hair. Self-described as mechanically inept and dyslexic, he was a "C" student at the University of Southern California, from which he graduated with a degree in finance in 1971. By then Orfalea had observed, "If you can't fix things and can't read things, then you can't get a job," but in fact he apparently never looked for one, for he had already concluded, as he later told a Forbes interviewer, "I'm sort of unemployable. I'm basically a peddler."
Seeking something to sell, Orfalea fixed his eye one day on the copy machine in the university library. Applying what he had learned from a marketing course that studied product life cycles, he decided, "This thing here is going to go for a long time." With funds from a $5,000 loan in 1969 from the Bank of America, cosigned by his father, he leased an 80-square-foot former hamburger stand in Isla Vista, near the campus of the University of California at Santa Barbara, and rented a small Xerox copier, charging customers four cents a page. He and a few friends also sold about $2,000 a day worth of notebooks and pens out of the makeshift store, wheeling the copier out on the sidewalk when the premises became too crowded. He supplemented his income by going from one dormitory room to another in the evenings, hawking his wares from a knapsack.
When this business proved a success, Orfalea decided to open other stores on other college campuses. Since he did not have funds to finance them and did not want to franchise them, he formed partnerships with owner-operators, retaining a controlling interest in each. These partners were other students who scouted locations along the West Coast, sleeping in their Volkswagen buses or fraternity houses. Publicity consisted of flyers stuffed in mailboxes; orders were taken and delivered personally.
Some of these Kinko's pioneers still were owner-operators many years later. Jim Warren was a surfer who met Orfalea at a keg party and was persuaded to take the enterprise to the Southeast. He and his wife rented a small storefront near the University of Georgia in 1978, where they kept a fire extinguisher handy because the copier they leased tended to burn paper. By 1995 Warren was president of Southeast Kinko's Inc. and a part-owner in about 120 Kinko's from Delaware to Florida. Tim Stancliffe opened the first Midwest Kinko's in a 175-square-foot space near the University of Colorado. In 1995 he was president of K-Graphics Inc., which owned and operated 90 Kinko's outlets in Colorado, Iowa, Kansas, Michigan, Missouri, Nebraska, New Mexico, South Dakota, and Wisconsin.
By the mid-1970s Kinko's was providing custom publishing materials for colleges, an innovation extremely popular with college professors. The company had 80 stores, averaging 400 square feet in space and located primarily near colleges and universities, by the end of the decade.
Reaching Out to Small Businesses in the 1980s
By the early 1980s Kinko's Copies was no longer content simply to copy documents for students. "At the time, no one was offering a low-end alternative to typesetting in the document duplication market," a marketing executive for Kinko's Service Corp., the chain's support arm, told a Computer World reporter in 1987. To exploit this emerging business opportunity, the company began to install typewriters in its shops.
This decision was soon rendered obsolete by the spread of personal computers. Kinko's then considered buying IBM PC clones but opted instead, in 1985, for Apple Computer's Macintosh as easier to use by customers who wanted to create documents without help from Kinko's employees. Another Macintosh advantage was that the documents created could be reproduced on Apple's high-quality Laserwriter printer. By mid-1987 almost one-third of Kinko's roughly 300 outlets were offering desktop-publishing services. Kinko's also began selling university-developed educational software for the Macintosh and Apple II computers in 1986.
In 1989 Kinko's Graphics Corp., operator of about 100 of the chain's copy shops, was slapped with a copyright-infringement lawsuit by eight textbook publishers for copying book segments of as long as 110 pages without permission. A federal judge found the company guilty in 1991 and assessed $1.9 million in damages and court fees. Kinko's Service Corp. then agreed that none of the stores would photocopy textbook anthologies in the future without permission for all copyrighted material.
Kinko's opened its first 24-hours-a-day, seven-days-a-week, outlet in Chicago in 1985. According to the president of Kinko's of Illinois, the company made this decision when people "started knocking on the glass" after hours, "begging us to let them in." Soon more of Kinko's stores--which numbered 420 at the end of the decade--were operating around the clock to accommodate people who had to get it done right away, whatever "it" was: manuscripts, screenplays, opera librettos, resumes, posters, fliers, wedding invitations. A 24-hour Kinko's was installed in the lobby of Chicago's Stouffer Renaissance because foreign executives staying at the hotel wanted to communicate across time zones with headquarters at home.
The late-night manager of a Long Beach, California, store told about a man having a heart attack in his shop, a woman screaming for help with a copy job at three A.M., and a gang shooting in front of the store that left a man dead. By mid-1994 almost all Kinko's shops were open all the time. Manhattan's five stores filled at night with students and business people who rubbed shoulders with punk rockers and anarchists designing, copying, and faxing posters. Each of the five had its own cat as a mascot and dispensed coffee from a machine at no charge.
"Your Branch Office" in the 1990s
The Kinko's of the 1990s had graduated beyond a low-tech service for college students. The company began opening stores averaging 7,000 square feet in size in suburbs and business areas to attract small-business owners seeking more advanced document copies, sometimes oversize or in color or bearing sophisticated graphics. In a nationally advertised television campaign begun in 1992, small-business people were urged to use Kinko's as "your branch office."
By 1994 Kinko's had added sophisticated color copiers, high-speed, high-volume laser printers, and facsimile machines, leasing rather than buying in order to conserve cash and avoid commitment to equipment that rapidly became outdated. Kinko's shops also began leasing conference rooms. In 1995 only 15 percent of Kinko's sales were still believed to be college-oriented, with large corporations accounting for another 15 percent, miscellaneous community retail use for 10 percent, and small or home-based businesses for 60 percent. The number of Americans estimated to be working from home in 1995 was 40 million, up from about 28 million in 1989. The number of businesses employing between five and 100 persons grew by almost 40 percent between 1980 and 1994. Typically, such customers prepared documents in their offices, then brought them to Kinko's for the professional look possible only by using quality printing equipment.
In 1993 Kinko's introduced videoconference rooms to 100 of its 725 outlets. Bidding for trade from entrepreneurs, telecommuters, traveling business people, and local representatives of corporations based elsewhere, the company was expecting to invest $20 million in videoconferencing. For $150 an hour, customers were offered a room with a large-screen television monitor, a videocassette recorder, a camera with wide-angle and zoom capabilities for focusing on a group or individual, and a device resembling an oversized television remote control. U.S. Sprint provided the equipment and high-speed telephone lines for the voice-picture-data network. Kinko Service Corp.'s president said he believed that families might take advantage of a half-price holiday promotion to use such facilities for video "reunions."
In 1995 new Kinko's stores were, on average, four times larger than the ones they replaced, in order to find space for the equipment needed for updated services. (The Xerox 5090, for example, a high-speed color-printing machine, nearly filled an entire room.) The company was seeking more business from large corporations, adding a sales force dedicated exclusively to seeking corporate accounts. It also installed Kinkonet, a system enabling companies to send in orders by computer over modem lines, with Kinko's distributing the finished product, such as a training manual, to points all over the United States. Internet service was expected by the end of 1996, with some stores able to help business customers establish home pages on the Internet's World Wide Web. Test stores in Seattle, Houston, and Philadelphia were enabling patrons in 1996 to send and receive graphics over the global network. Kinko's own award-winning Website was introduced in January 1996.
A Kinko's outlet typically offered the following services in 1996: full and self-service copying, including four-color copies; desktop publishing, including laser typesetting and printing; onsite Macintosh and IBM computer rentals; office supplies and stationery; finishing services such as folding, binding, collating, and stapling; custom printing services; facsimile transmission; and mailing, pick-up, and delivery service. Some locations also offered one-hour photo service. Kinko's considered customer service of such importance that each location was being "mystery shopped" on a regular basis, with anonymous shoppers grading the store on 29 different points of customer service and store atmosphere.
Kinko's was sponsoring an annual five-day meeting for its international network of managers in order to enable them to interact on a professional, social, and recreational level. It offered its employees (whom it called "co-workers") a wealth of career opportunities, with an emphasis on promotion from within the company. A series of comprehensive management training courses were being held at the company's central office to help them develop skills necessary to success in management positions.
Of the 830 or so Kinko's in March 1996, which were said to average $750,000 a year in sales, about 100 to 110 were solely owned by Orfalea's Kinko Graphics Corp. He also had a stake--sometimes said to be a controlling stake--in all the others, which were in essence joint ventures held in partnership with one or another of 127 owner-operators. It was rumored, however, that Kinko's would be going public later in the year. Described as reclusive, Orfalea allowed Forbes to interview him in 1995, but only by videoconference. The bylined story by Zina Moukheiber reported that he "looks and sometimes talks like a rebellious student despite his 47 years." Orfalea was maintaining his links to the past by teaching a class in business on Mondays at the University of California at Santa Barbara, where he opened his first store.
Principal Subsidiaries: G & S Corp.; K-Graphics Inc.; Kinko's Graphics Corp.; Kinko's Northwest LP; Kinko's of Illinois; Kinko's Service Corp.; Southeast Kinko's Inc.
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