Francisco Morales has always been in the business of creation, from his start working at an apparel factory in Venezuela to running his own apparel company in a niche market.
“Business for me is not a job, that’s where I get my satisfaction,” said Morales, the co-founder and chief executive of Costa Mesa-based 5.11 Inc. “A lot of that satisfaction comes from the ability to create something.”
The executive’s most creative project thus far is the tactical apparel and gear company he and Dan Costa built in 2003, one that manufactures “purpose-built” and versatile clothes, accessories, and footwear for military and first responders.
Morales saw the lack of innovation in the sector as an opportunity to create something different.
“You have to let your imagination run,” said Morales, one of five honorees at the Business Journal’s Excellence in Entrepreneurship Awards on March 9.
Finding the Challenge
Morales was born in Caracas, Venezuela to parents, Fernando and Dirurantzis De Morales, who owned an apparel factory. Growing up, he worked closely with his father, who was a tailor and shared with him the basics of the business.
He credits his father for the work ethic instilled in himself.
This led Morales to try his luck at building a new small business every year during his youth, such as screen printing punk rock T-shirts to sell at school. Morales said he preferred working over going to class and got his high school degree two years early in order to work full time.
He started on the sewing floor of his parent’s company but eventually left, citing the need for a challenge, and became an independent salesperson for the next few years. When he turned 19 years old, Morales decided to move to the U.S.
Morales began attending the Philadelphia School of Textiles and Science, now Jefferson University, in 1994. Despite struggles with concentrating in school, Morales said he set his mind to do whatever an A student would do and graduated cum laude four years later.
Morales then started working for Maine-based L.L. Bean as a raw materials engineer and was promoted to manager within two years. He then moved on to Dick’s Sporting Goods, handling production development and design for the private label division before landing at an outdoor and travel clothing company, Royal Robbins, in 2002 as vice president of product.
He there met his future business partner, Costa, who had purchased the company with plans to restructure the firm before selling. Morales was brought on to help with product design.
“In that journey, we discovered that there was a really large need and void in the market for police and military to have innovations designed for their particular needs,” Morales told the Business Journal.
The company’s goal is “to create solutions that make a difference on the front lines.”
A Pair of Pants
The company was built on a pair of Federal Bureau of Investigation (FBI) pants from the ’90s.
The partners decided to manufacture longer lasting and more durable pieces to sell directly to public safety professionals, and launched 5.11 in 2003.
The name comes from the difficulty level in the Yosemite Decimal System rating scale for rock climbing.
“We’re going to talk to the users and find out their pain points,” Morales said. They produced a polo, a vest, and a pair of shorts and ended the first year with $3 million in sales.
Numerous government agencies have become clients since, including the FBI and U.S. Secret Service. 5.11 says it now works with thousands of governmental departments and has since expanded to wholesalers and specialty retailers like Bass Pro Shops and Turner’s Outdoorsman.
Morales and Costa’s first private equity investment came from TA Associates in 2007.
In 2012, 5.11’s corporate headquarters were relocated from Modesto to Irvine. It now calls Costa Mesa home with around 200 hybrid employees.
By 2012, “we were across very different categories,” Morales said. Its array of products had grown from pants and shirts to include gear and accessories like boots and backpacks.
“Everything was user-driven,” he said. “We ended up with a head-to-toe solution.”
This led the manufacturer to open its first brick-and-mortar store in 2014. “A one-stop shop,” according to Morales.
With three stores under its belt, 5.11 was acquired by Compass Diversified (NYSE: CODI) for $401 million in 2017.
The retailer is now the largest of seven subsidiaries under Compass with over $486 million in annual net sales and 117 U.S. stores. An IPO has been considered for the company.
Morales invites groups of his main customers—EMTs, military units, even athletes—to test sample products so the team can make improvements before bringing them to market.
Changes have included designing more stretch in the fabric or reinforcing pocket seams.
Morales now holds more than half a dozen design and functional patents for its products.
5.11’s success with first responders spilled over into the consumer market, prompting the retailer to create new products and launch a retail expansion.
Customers such as industrial workers and “outdoor enthusiasts” were kept in mind as tactical features were added to denim and more casual pieces for everyday use.
The company’s pieces have made it on screen, appearing on Amazon Prime Video’s “Jack Ryan” and “The Terminal List” series, as well as the “John Wick” movies. Morales said they sell their pieces directly to the studios for their productions.
5.11 also counts popularity abroad.
President Volodymyr Zelenskyy of Ukraine made an unannounced trip to Washington, D.C. last December to meet with President Joe Biden while wearing the company’s best-selling Stryker cargo pants.
Morales remains on the hunt for expansion, even pitching to Steve Jones, founder of Santa Ana-based security firm Allied Universal, to use 5.11 pants for the guards’ uniforms during his acceptance speech at the Business Journal event.
“I hope they buy some pants from me soon,” he said with a laugh. “They’re great pants. A lot of stretch.”
Manufacturing remains top of mind for Morales.
In 2008, the executive invested in a Vietnam-based manufacturing group, Arksun Vietnam, to build an industrial park and factory which now employes around 800 people.
He has also invested in various real estate and other manufacturing projects through his family office, FSH Venture Capital and Project AD8.
In 2010, he purchased an area of undeveloped land in California’s Central Valley and built a 250-acre almond farm operation in Oakdale to establish a long-term business for his family.
“I’m being very purposeful about enjoying the journey,” he said.