Venture X UK & Ireland is the master franchise development partner for Venture X, a premium coworking provider with a focus on member wellbeing, high-end design and inclusivity. It was one of the fastest growing brands in the US last year and now has 29 locations open globally and has signed master licence agreements in 35 countries with plenty more in the pipeline. They recently opened their UK flagship space on the renowned Chiswick Park – 1.8 million square feet of grade A office stock 20 minutes from both Central London and Heathrow in the other direction. According to Venture X, Chiswick Park’s location has opened with a bang and hit 90% occupancy in under three months, building a really exciting mix of tenants and a great community. We have interviewed Tom Foster, CEO and Head of Franchising at Venture X UK & Ireland to find out more about their franchising model and his knowledge, insights and thoughts about franchising in the coworking industry.
Hi Tom. Venture X has been expanding rapidly in the US thanks to a franchising model. How does the model work?
The franchising model is statistically an incredibly successful and stable method for growing a business. From a franchisee perspective, you follow a model business plan that has been proven over time to be successful. There’s no need to learn lessons the hard way as any new entrant to a sector would inevitably have to – the franchisor has been through the pain for you and passes on the knowledge base. From the franchisor perspective the model really is an investment in time and people. Time because initially you first have to prove the concept and get people to believe in what you’re doing. It can be harder and take longer than going out to raise money from one VC investor to fund expansion. With franchising you will manage dozens, maybe hundreds of relationships with franchisees who will all tell you the moment something doesn’t work or isn’t value for money. So why go through the headache? In the medium to long term the model provides a structure for a highly durable business model as individual franchisees are by nature highly motivated, highly incentivised, and certainly in the case of Venture X, seasoned investors experienced in owning and running successful businesses. For a typical corporate to create a structure where each manager is as incentivised and aligned as under a franchise model is a real challenge.
You follow a model business plan that has been proven over time to be successful. There’s no need to learn lessons the hard way.
What is the typical profile of your franchisee?
The first thing to note is they tend to be people who have owned and often sold successful businesses. 25% of Venture X’s network has come from the hospitality sector, including myself. When you discuss the concept with hotel investors they quickly understand it and want to learn more. That’s not to say you need to be from a hotel background to be successful; coworking is attracting investors from a range of different sectors all of whom are witnessing the significant changes to workplace practices and patterns going on around the world and recognise that coworking is part of this.
Coworking is attracting investors from a range of different sectors all of whom are witnessing the significant changes to workplace practices and patterns going on around the world and recognise that coworking is part of this.
What does Venture X provide with?
Venture X shares with the franchisee its accumulated experiences relating to what it takes to open and run a successful coworking space; everything from initial site selection, to fit out, to hiring staff, to setting pricing, to member engagement and all in between. It has developed a design and layout blueprint with the renowned architect, Gensler, which has proven highly successful and is flexible enough to adapt to different markets and asset types. You simply cannot replicate this knowledge base as an individual, and to hire a consultant to get you to the same level would likely be prohibitively expensive or time consuming, if it is possible. The biggest single asset Venture X provides you with from my perspective is the network of franchisees. We have direct relationships with a like-minded network all of whom are proven operators and likely going through the same high and lows as you are. If you need to trouble shoot a problem, you are very unlikely to be on your own.
The biggest single asset Venture X provides you with from my perspective is the network of franchisees. We have direct relationships with a like-minded network all of whom are proven operators and likely going through the same high and lows as you are.
As previously said, franchising is a very popular model in the hotel, restaurant or retail industries. Does it really work as easily with coworking?
Franchising is more widespread than many realise, and while there are some products it is not the right model for, it is commonplace in businesses that are underpinned by real estate. As well as hotel, restaurants and retail which you note, petrol stations, estate agents, bars – I notice BrewDog is now franchising which is exciting – are all often franchised. Coworking is in large part a hospitality product, and most similar to the hotel model, where core fundamentals need to be instilled in order to be successful. Neither are highly complex business models, but they require flawless execution to set themselves apart to win business and retain business. It’s these aspects that make coworking suitable for franchising. The question of the purchasing cycle perhaps relates more directly to the brand and how brand loyalty might be created in the same manner as hotels where, for example, a business traveller might choose to stay at the Hilton Garden Inn repeatedly because they love the breakfast or the pillows, or they collect the rewards, but that is another discussion. Coworking has a little way to go before people understand each brand to that extent, although many of us might instinctively recognise that high-end feel of Fora, or the atmosphere of a WeWork on a Friday afternoon for example. As another illustration, I think a business which has grown successfully in Venture X Miami would certainly look at Venture X London as a starting point when considering UK expansion, because it is one less unknown.
Coworking is in large part a hospitality product, and most similar to the hotel model, where core fundamentals need to be instilled in order to be successful.
What is the Venture X positioning and how is the delivered experience different from other brands?
Firstly, being a franchise, each location is genuinely owner-operated, with the owners keeping a significant presence on site and there to interact with members. The space will also likely be in the owner’s home-town, where they are already ingratiated in the local community, and this helps to build a community within the space. In a more practical sense, this model means that members have a direct line to the top if there are genuine issues and won’t be routed via a manager and back office team to get the problem resolved. Secondly, Venture X is no doubt a premium product; we invest in high-end furniture and technology including electric sit/stand desks for all private office members, we give a large proportion of our space to the community and generous space per person inside the offices, and our staff receive hospitality training (Southern-style) at our HQ in West Palm Beach Florida. The offices themselves typically have glass frontage to provide light and a community feel, with solid partitions on the side and investment in acoustics to ensure the privacy of our members.
Why do you think franchising isn’t more developed within the coworking industry?
It will get there, and I’m sure there are plenty of industry partners of ours considering it right now. Longer term the sector might follow hotels, where the market is dominated by four or five large players, all with an army of brands catering to different price points and consumer experience. From an investment perspective franchising is sure to become a bigger part of the coworking landscape for two reasons; firstly, it brings in capital, particularly debt where credit committees in particular value what brands bring to the table and we need this to grow to grow the sector. Secondly, it means we can offer investment opportunities to the widest profile of investor, from those who want asset-heavy exposure through real estate ownership on one end, to those who want higher return on equity in the form of brand licence fees or royalties at the other. For a case study we can look at how the big hotel chains have steadily reduced their real estate exposure to zero or close to it over time, and even the move away from management contracts, as they look to provide the greatest return on equity to their shareholders. Franchising also provides an investor with a more liquid resale market and a likely higher value on exit, in the same way it is an easier process to sell a McDonald’s franchise than a local burger joint.
From an investment perspective franchising is sure to become a bigger part of the coworking landscape.
Venture X UK is the first branch in Europe. What are the expansion plans in Europe?
We are in the process of opening in Madrid which will be the flagship location of our master franchise development partner in Spain. We are also looking to have Portugal activated this year with a flagship opening in Lisbon. Additionally, we currently have interest in France and Germany and we anticipate having these countries awarded under our master license program this year.
Could the Covid-19 crisis impact in some ways your vision regarding a longer term future?
I’m wary of making a call too early on the impacts of this crisis – if there’s one thing I’ve learned in the last few weeks it’s that there’s value in pausing for breath before acting, and sadly it feels like COVID-19 has a way to run before we fully understand its impact on all fronts. There is however an obvious line of thought that any shake up of traditional workplace practices on the scale we are currently seeing can only be good for the coworking sector long term. This though will be likely be small comfort to those going through the pain now. In the shorter term your article on what operators in China and South Korea are experiencing now the crisis seems to be ending there, and people are going back to work, was illuminating, and it would be great to repeat this theme in the near future to see what more we can learn from their experiences.
Any shake up of traditional workplace practices on the scale we are currently seeing can only be good for the coworking sector long term.
Coworking Franchising will be one of the hot topic to be discussed at the Coworking Europe conference!