Editor’s Note: Francisco J. Morales is the co-founder and CEO of Costa Mesa’s 5.11 Tactical, one of Orange County’s largest, and fastest-growing apparel companies. On this week’s list of apparel companies with operations based in Orange County, 5.11 reported its OC employee count grew 48% year-over-year to 200.
Morales, who in March won a Business Journal Excellence in Entrepreneurship Award, wrote this Leader Board for the Business Journal.
In 2003, my partner Dan Costa and I founded 5.11 Tactical with the vision to create purpose-built innovative products for the men and women who protect our countries and communities.
In our first year, we generated around $2.5 million in sales. Last year, 5.11 grew to $485 million in sales, with a 17.5% operating margin.
How does a kid born in Venezuela and who migrated to the USA by himself at the age of 19 become part of such a great business journey? Let me tell you a story.
My mother, Dirurantzis De Morales, was a CPA while my father, Fernando Morales, was a tailor who had immigrated from Spain’s Canary Islands.
They opened their first factory in 1980, making pants for other brands. I was 6 years old, and my brother Fernando had just been born. It took a lot of courage from my parents to put all their life savings in the line and bet on themselves.
There were many tough years ahead, but they succeeded, eventually building a large apparel business that included factories and retail stores.
A big part of my upbringing was going to their factory on Saturdays and in the summers. At a young age, I did everything in that factory, from sweeping the floors, sewing, designing and even managing from time to time.
My father and mother went out of their way to teach us their craft by exposing us to the different areas of the business.
The most important thing that my parents’ business taught me was the importance of a winning team. Everyone worked hard and my father just had a tremendous love for the people who worked with him at the factory.
At 15, I got bored with school and decided to work full time at the factory and finish high school in the evening through the equivalent of a GED.
It did not take long to realize that working at an hourly wage at the factory was limiting the potential for earnings.
So, I became a salesman where I apprenticed under an independent rep who taught me that your earnings potential is only capped by how hard you work.
After a few years of being a sales rep, I thought that if I traveled to the U.S. and learned English, my earnings potential could increase as well. My problem was that I wasn’t a good student.
While in the U.S., I attended Jefferson University, which at time was called Philadelphia School of Textiles and Sciences.
It was amazing because I could study things I cared about like textiles and not have to bother with other subjects that bored me.
I decided to apply myself, eventually graduating cum laude, which isn’t bad for someone with English as a second language.
Even in school, I had the entrepreneurial spirit as I would buy closeouts and sell them at flea markets as well as working at a high-end men’s store as a salesperson on commission.
After graduation, I went to LL Bean, where I worked in a variety of roles. I built from scratch a unit in charge of the engineering, procurement and global sourcing of all raw materials for the company.
Then it was off to Dick’s Sporting Goods where I helped build its first private label lines from inception to $100 million in revenue by the time I left. Both companies taught me that there are plenty of entrepreneurial opportunities within large organizations.
In 2002, I joined forces with Costa, an iconic entrepreneur, at Modesto-based Royal Robbins, which was founded by Royal and Liz Robbins, pioneers of the American climbing movement.
Costa and I also started Invigour8 Trading Company in Hong Kong to source products for Royal Robbins as well as other brands. Invigour8 proved to be an instrumental component of aggregate business growth by leveraging buying power across the purchasing for various companies.
A special Royal Robbins pair of pants was called 5.11, which at that time was the technical term for the most difficult kind of rock climbing. These elite climbers wanted durable yet flexible and comfortable pants as they scaled the most extreme rock walls in Yosemite National Park.
In the early 1990s, the 5.11 pants were adopted by the FBI National Academy and became standard training issue because of its superior design and performance. People from all over the world come to the FBI to train and to this day they are given 5.11 pants as their uniform.
We saw an opportunity because there was a void in clothes that are practical and durable—like pants that hold different gear. In 2003, we spun 5.11 off into its own company to innovate around the problems faced by military and first responders.
Given that neither Costa or I came from the military or were first responders, we had to heavily rely on the direct input of end users. This is one of the key differentiators of how we innovate at 5.11. We seek the direct input of the people who use our products, which means they are put to extensive field testing. Our innovative employees have generated 40 patents, which includes six issued to me.
In 2007, when we reached approximately $70 million in revenue, we sold a majority stake to private equity company TA & Associates. In 2016, TA and most of the founding team sold a controlling interest for $408.2 million to Compass Diversified (NYSE: CODI), which has its unofficial headquarters in Costa Mesa. I’m still the second-largest shareholder in the company and fully committed along with my partners at Compass to build 5.11 into a global iconic brand.
We moved the company’s headquarters from Modesto to Orange County to tap into its great creative pool. There’s a lot of synergy in apparel in Orange County, which is where the surf apparel industry began decades ago. Companies like Quiksilver, PacSun, Tilly’s and Boot Barn have all reached national levels of success, showcasing the talent available here.
I take pride in creating new businesses within 5.11. Besides apparel, we have a broad selection of footwear and gear to outfit anyone for any mission. We opened our first retail store in 2014 and now have 118 and growing. We see a big opportunity internationally where we already do around 25% of our business.
I’m proud that our products have appeared in countless television and movies, including Amazon Prime Video’s “Jack Ryan” and “The Terminal List” series. When Ukrainian President Volodymyr Zelensky recently visited Washington, D.C., he was photographed wearing one of my personally designed pants that’s one of 5.11’s all-time best sellers.
Like many entrepreneurs, I’m attracted to opportunities. I built a 250-acre almond farm operation in Oakdale. I also grew a manufacturing group in Vietnam that today operates with around 800 people (Arksun Vietnam JSC; www.arksun.com). The group also owns the best fashion school in Vietnam (London College for Design and Fashion—Hanoi; www.designstudies.vn) in the city of Hanoi.
OC is a very special place that offers everything an entrepreneur would want, from a strong business community to talented employees to great weather with beautiful ocean and mountains.
A lot of my success is because I have worked with amazing people, including those at parent Compass. I’m also an immigrant who knew that to get ahead, I had to work hard and smart. I live in America, and in particular, Orange County. I’m happy and fortunate to be here.