Exploring the Coworking Space Franchise Model

Expanding your coworking space is an exciting step in the evolution of your business.

You’ve proven your concept, grown your member base, and now you’re at the point where you’re ready to grow.

There are many different ways of expanding your business, such as opening a second location or moving to a bigger space. One popular expansion strategy we’re seeing more and more often is franchising. 

In this article, we’ll walk you through what the coworking space franchise model looks like from the perspective of both the franchisor and the franchisee. Understanding both sides can help you decide if franchising is right for you.

Let’s dive in!

What is a coworking space franchise?

According to the International Franchise Organization, a franchise is a method of distributing products or services which involves a franchisor and franchisee.

The franchisor is the original business. They sell the right to their intellectual property including the use of their name and business model.

The franchisee is the person or group that buys the right to sell the franchisor’s goods or services under an existing trademark.

The franchisee runs the day-to-day operations of the business using the manuals, guidelines, products, and training that the franchisor provides. In return, the franchisor receives a percentage of the revenue (8%-12% on average).

In the coworking industry, the franchisor sells the right to use their name, idea, and trademark to the franchisee. The franchisee is then responsible for owning and operating the individual coworking space under the franchisor’s name.

Examples of coworking space franchises

There are many big name coworking space franchises around the world, many of which you’ve probably heard of. Some of the most popular franchises are:

• Regus (3,000 locations)
• Office Evolution (70 locations)
• Venture X (45 locations)

Take a look at the examples above for some inspiration – seeing how other spaces make the franchise model work for them can help you visualize it for yourself.

At Optix, we support quite a few franchises with our management software, due to the ease of multi-location management. Click here to learn more. 

Coworking space franchise vs. coworking network

There is virtually no difference between a coworking franchise and a coworking chain, or network from the perspective of the end user. From inside the business however, the two are quite different.

With a coworking space network, the parent company maintains full ownership of each individual location. They expand using their own money and they own the business entirely. Therefore, they take on 100% of the risk and they reap 100% of the rewards.

With a coworking franchise, the parent company sells their business model to independent investors. They do not own each individual location, thus alleviating a significant amount of risk and upfront capital investment. They also collect a fraction of the overall revenue as a result.

Each model has their own benefits and challenges. Which one is best for you in your expansion journey depends on where you’re at in your business and what is most important to you.

For example:

• If you want to expand quickly with limited upfront investment, then you may want to consider the franchise model
• If you want to maintain a high level of control over your business, then operating a network may be a better fit

Take some time to consider all of your options as a business owner looking to expand before taking the leap.

Opening a coworking space as a franchisee

Understanding what it’s like to open a coworking space as a franchisee can help you, as a franchisor, better empathize and understand their perspective.

The benefits of being a coworking space franchisee

The greatest benefit to being a coworking space franchisee is getting to operate a brand that has already proven successful.

Becoming a recognizable and beloved brand is a massive hill to climb. It requires a tremendous amount of time, energy, and marketing dollars.

With the franchise model, the hardest part is already over. Franchisees don’t need to guess as to whether or not the space is well-liked and by whom – they already know. This translates to less money spent on marketing, and a higher overall rate of success compared to starting their own business.

Some other benefits to being a coworking franchisee are:

• Training, guidance, and support is provided by the franchisor
• Less initial market research involved as the business model is already established
• Community of fellow franchisees to learn and grow with

In general, operating as a franchisee provides less risk and more structure than starting a business from scratch. This is probably going to be the primary reason why someone may want to operate your franchise.

The drawbacks of being a coworking space franchisee

Some of these benefits can also be a drawback, depending on the type of person someone is. Having a lot of structure and limitations on what can be done may be incredibly frustrating for some entrepreneurs.

There is often a lot of rigidity with the guidelines that are provided by the franchisor, as you’ll work hard to protect the integrity of your brand. There are also requirements on the franchisee to run sales and promotions that they may not want to, if direction is given by the franchisor.

Thus, the biggest drawbacks we see to being a franchisee are:

• Less control over the business
• Less earning potential overall
• Possible internal competition with other franchisees in the area if this isn’t properly managed by the franchisor
• More difficult to differentiate from other spaces

The chances of success as a franchisee may be higher, but the potential earning amount is lower due to having to pay a percentage of the revenue to the franchisor. However, many franchisees view this as a fair tradeoff – 80% of $100 is better than 100% of nothing.

Expanding your coworking space as a franchisor

Now, we’ll explore the benefits and drawbacks to expanding your coworking space as a franchisor under the franchise model.

The benefits of being a coworking space franchisor

The number one reason why we see operators turn to the franchise model is the ability to expand their operations at a faster rate.

It’s difficult to grow to hundreds or even tens of locations as a single leadership team. It requires a significant amount of time and energy invested up front.

With the franchise model, the franchisee handles most, if not all of the actual expansion. You simply license the information and collect a royalty check each month. Thus, you’re able to grow your business with limited capital investment and limited involvement.

Some other benefits we often hear are:

• Reduced risk (due to the franchisee taking on much of the costs)
• Increased brand equity (because you can grow at a faster rate)

While you set the tone for the entire business in the beginning, you can be relatively uninvolved in the day-to-day running of the business. This can be incredibly appealing for some coworking business owners.

The drawbacks of being a coworking space franchisor

While the reward of being a franchisor is significant, it doesn’t come without its drawbacks.

When you become a franchisor, you essentially become a people manager. You aren’t running the business, you’re directing the people who are running the business. Therefore, a major challenge in being a franchisor is managing your franchisees.

• How do you determine their competency?
• What kind of training will you provide?
• What do you do if there is a disturbance or disagreement?
• How much ongoing support do you provide your franchisees?

If you don’t spend some time answering these questions, your franchisee will be unsuccessful and your brand will suffer because of it.

Another major drawback and consideration with becoming a coworking space franchisor is control over the business.While the franchisee has less control of the business, so do you.

You will not have complete visibility into the day-to-day operations of the business, and you won’t be able to drop in everyday to see how your brand is being represented in the market. This can prove very difficult for some operators.

Some other drawbacks we see are:

• Developing the model can be expensive
• Can take a while to work out the kinks in processes and flows

Developing the tools and resources needed in order to help franchisees be successful can be incredibly time and resource intensive. It often proves to be a significant up-front investment, but can get easier over time.

There are a number of things to consider before expanding your coworking space under the franchise model. Ultimately, how beneficial the model is will depend on the unique needs of you and your business.

Take some time to research the different expansion models that are available to you as an operator before taking the leap into franchising.

Looking for more resources to grow your business? Here are a few to check out:

• 3 questions to ask yourself before expanding your business
• 4 ways to scale your coworking space business