April 9, 2019

4 Coworking Scaling Models You Should Consider

Congratulations! You’ve decided or are considering scaling your coworking business. When growing your operation, there are a number of things for you to consider including how you are going to fund your coworking expansion, developing your location strategy, and more. Evaluating coworking scaling models and which one you are going to adopt is an important decision to make early – and yes, there is more than one way to grow! This blog highlights four coworking scaling models including one which has recently been getting more traction –  the coworking franchise model. Let’s jump in.

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Choosing a model that works for you and your business

Person evaluating coworking scaling options

Before learning about the different coworking scaling models you can adopt, you should develop your own set of criteria. Here is a list of questions you can ask yourself to begin to evaluate what is important to you:

  • What do you want to maintain vs. change as you expand? Ensure that you maintain what is working well in your first location. Take the time to think about what you want to change.
  • Do you want to be hands-on? Your first location will always be hands-on but your scaling strategy doesn’t have to be. 
  • Do you want your current community to have access to your additional locations? This is an important thing to consider. Would your community members value this?
  • Do you have to invest significant time, energy, and money to serve a new community? If you’ve built your first coworking space around a specific community, you may have to significantly invest to serve a new community vs. deploying a ‘plug-and-play’ model that you’ve already developed.
  • Do you envision your brand continuing to be front and center? How strong is your brand in the community you are looking to serve? 

There may be other questions or criteria that are important to you. It’s important to sit down with your founding team to discuss these before choosing your coworking scaling model.

Four potential coworking scaling models

Using the decision criteria you’ve developed, you can start to evaluate the different coworking scaling models to determine which one will best align with your goals.

Model 1: Multi-brand alliance

One of the fastest ways to scale your coworking business is by joining or forming a multi-brand alliance. Brand alliance involve the combination and collaboration of two or more brands. It is seen more frequently in the hospitality industry, especially with hotels. It includes many benefits to the brands involved including managerial, financial, and marketing benefits.

community101 coworking space

Optix Client: community101 by Bank of New Zealand

Multi-brand alliances enable you to maintain your current coworking brand while offering your members more value by granting them access the services offered by your partner brands. The Bank of New Zealand launched its first coworking space in 2017 in partnership with Optix and is now working with other coworking brands in New Zealand on developing a multi-brand alliance where members will have access to the services, spaces, and amenities of all the coworking businesses that are part of the alliance.

If you want to explore this option, start by understanding where your members travel for work, and seek out partners in those locations. This helps to ensure that the effort you are putting into creating an alliance will add value to your members.

Model 2: Franchise model

Impact Hub Honolulu - Coworking Franchise Model

Optix Client: Impact Hub Honolulu

Another growth model you should consider is licensing out your coworking brand to other coworking operators in different locations. Impact Hub, the European coworking powerhouse, deploys a coworking franchise business model.

To execute a successful franchise model, you need to have a strong foundation in place. This includes:

    • A brand: Having a strong coworking brand will help you sell your coworking franchise to interested prospective partners.
    • A replicable, successful business model: Franchisees will expect to see a model that works and is easy to replicate. They may ask for success metrics, financials, and references as part of their decision-making process.
    • A support team and resources: Providing resources to support your franchisees in building, operating, and marketing their coworking space is important. Once they’re up and running, having a formalized support process can help ensure your standards are maintained.
    • A strong due diligence process: Doing your due diligence on prospective partners is critical if you adopt a franchise model. You’ll want to ask whether the prospective franchisee has relevant experience and the same goals and values as you. This partner will be representing your brand and needs to be trustworthy and transparent.

Although there is some investment and effort required to set up this model, it enables you to be more hands-off once the franchise is up and running. Beyond this, partnering with franchisees can help your brand to go global.

Model 3: Coworking chain

Stratus Coworking Space

Optix Client: Stratus

One of the most frequently deployed growth coworking scaling models is to scale as a chain of multiple coworking spaces under the same brand and common ownership. Optix client, Stratus Offices, has successfully deployed this model, scaling from one to seven locations in a year and a half.  

When adopting this model, you need to have a clear financing strategy in place in order to support your growth. You also need to manage many of the aspects of growing any business. This includes hiring a team, ensuring you are consistently delivering on experience, managing operations, etc. One of the reasons why coworking founders chose this model is that this option provides more control over your brand and business.

Model 4: Mergers and Acquisitions

Workflourish Coworking Space

Optix Client: Workflourish

The decision to join forces with another coworking space in order to scale-up is one we are seeing more and more coworking giants take. This is especially prevalent in high growth, emerging markets such as China and India. This aggressive location expansion strategy requires heavy capital investment and significant due diligence efforts.

We do see this model amongst smaller coworking operations as well. An example is Optix client, Workflourish getting acquired by Craftwork Coffee Co. which combines coworking with coffee shops and has since scaled to three locations across Texas.

To learn more about mergers and acquisitions as a scaling model as well as a funding source, read our blog article here.

Evaluate your options before taking the plunge

Selecting a scaling model for your coworking business involves tradeoffs. Some options will involve relinquishing a level of control in return for reduced cost and risk. At the end of the day, you have to make the decision that will work for you and your team. Most importantly, make sure that you aren’t compromising on the factors that you’ve determined to be most important!

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