Glenn Sanford created eXp Realty and built the cloud-based real estate brokerage to more than 71,000 agents globally. Now the billionaire chairman and CEO of eXp World Holdings has his sights set on coworking with the launch of a new franchise as providers of flexible office space see a post-pandemic path to growth.
“I’ve been following coworking for a long time,” said Sanford, whose companies also include virtual communication platform Virbela. “We think demand for coworking is going to be quite high as companies adopt hybrid work environments.”
Recent research from McKinsey reports 75 percent of employees prefer a hybrid working model, while 25 percent would opt to be fully on-site. The largest operators of flexible office space are beginning to see the effects of that preference.
Coworking giant WeWork, which two years after a failed IPO and subsequent valuation plummet went public in October 2021, reported its open locations were profitable in the fourth quarter of 2021. In the first quarter of this year its gross desk sales hit prepandemic levels. (The company is still operating at a loss, though a narrower one.) Switzerland-based IWG, with more than 3,000 office spaces around the globe operating under brands including Regus and Spaces, signed agreements last year for 150 new franchise locations. The company in March also announced it was investing $350 million in Instant Group, which runs an online listing site for office space.
“We’re certainly not trying to be a WeWork and buy Class A office space and manage all those leases,” says Glenn Sanford, whose Success Space is will open in suburban markets.
Sanford’s franchise, called Success Space, combines coworking spaces in a model that also includes an open-to-the-public cafe, certified Success coaching services and Virbela technology for virtual collaboration. The coaching component, he noted, is a requirement for the franchise and is an extension of his Success Enterprises, a multi-platform media company that includes Success Magazine, which he bought in 2020.
“My M.O. as a business person—you have to figure out what is your differentiator,” he said of the decision to offer professional business coaching to Success Space members. It’s also another revenue stream for franchisees, he added, as is the café.
“We wanted something that was open to public … both as a marketing tool and a value-add,” he said. “Cafes done properly are great revenue streams for the owners.”
Success Space coworking members get “by-the-minute usage” options in addition to hourly, weekly or monthly space rentals, another differentiator, according to Sanford. “Drop in, use a hot desk and do it on a more granular offering than some others in coworking,” he said.
A handful of franchise agreements have been signed, all, noted Sanford, with existing eXp Realty agents; the first location is slated to open in August. The franchise has an initial investment range of $454,650 to $776,150.
Success Space franchisees Adolfo and Lisa Guzman are also agents with eXp Realty.
San Antonio real estate agents Lisa and Adolfo Guzman are among the first crop of Success Space franchisees. The cafe and coaching components of the model appealed to them, as did the connection with Sanford. “This is backed by Glenn, so it was a no-brainer,” said Lisa Guzman.
They’re looking for about 5,000 square feet of space in a San Antonio suburb—“where people actually live, where their gyms are, where their grocery store is,” she said—and also plan to market the concept’s event space offering and host their own speakers “to foster that professional growth.”
There’s huge demand for event space in the San Antonio area, she continued, especially within the real estate industry. “You have people fighting for dates on the calendar,” she said, to host everything from buyer appreciation events to realtor classes.
Additional franchise agreements have been signed in markets such as Long Island, New York, Jacksonville, Florida, Huntsville, Alabama, and Carmel, Indiana, with franchisees also targeting suburbs in those markets.
Cafe and lounge space is part of the Venture X model, with 55 locations open and now under United Franchise Group’s Coworks division.
‘The Marriott of flexible coworking’
With the formation in May of Coworks, United Franchise Group created a coworking division that includes its Venture X concept and Office Evolution, which it added as an affiliate brand in a deal with Office Evolution founder and CEO Mark Hemmeter.
The move to create a new division, said Jason Anderson, president of Coworks and UFG’s chief strategy officer, is “a big opportunity to become, let’s call it the Marriott of flexible coworking,” with multiple brands in a setup similar to the numerous brands operating in different categories under the hotel giant.
“I was shocked that this wasn’t already happening, that we weren’t seeing consolidation in the industry,” said Anderson, who was part of the team that helped launch Venture X as a franchise six years ago.
Founded by Hemmeter in 2003 and now with 75 locations, Office Evolution was Anderson’s “No. 1 company” to target because he said it’s “the most experienced brand in coworking,” and its smaller size and focus on suburban and secondary markets separates it from Venture X. “So more like your Courtyard by Marriott,” he said of the 10,000-square-foot locations with office spaces of 225 square feet.
Jason Anderson leads the new Coworks division at UFG, where he’s also chief strategy officer.
Venture X is more like a premium Marriott, Anderson continued, as it targets Class A real estate for its 20,000-square-foot locations, of which there are 55, and markets itself to companies needing 15 to 20 offices versus the small business owners who largely use Office Evolution. Venture X also offers event space, podcast rooms and other services, and has a higher franchise investment range of $360,000 to $3.6 million. The cost to open an Office Evolution is between $389,650 and $1.3 million.
Office Evolution, said Anderson, “can target more of the mainstream franchise buyer,” while franchisees of Venture X “need to have the financial wherewithal to open a 20,000-square-foot space.”
Hemmeter said he started talking seriously with Ray Titus, founder and CEO of United Franchise Group, in September 2021 and “we both agreed it made a lot more sense to partner up rather than go it alone.” Office Evolution will benefit from shared resources and tap into UFG’s franchise development prowess.
“We started off much more as an operator,” said Hemmeter and Office Evolution “has never been great at selling, awarding franchises.” UFG, meanwhile, “has always been about growing brands.”
UFG’s brands include franchise consulting companies Accurate Franchising and FranchiseMart, Signarama, and restaurant concepts Jon Smith Subs and Graze Craze, among others.
Office Evolution demonstrated the resiliency of its coworking model through the COVID-19 pandemic, noted Hemmeter. “At the worst of the worst of the worst … 87 percent of our clients were still paying us,” he said. “At the very bottom it didn’t get that bad.” Average per-location billings in 2021 were $420,108.
The Coworks division under UFG is better positioned for stable growth, noted Anderson, with franchisees who have local market knowledge. “We’re privately owned, we don’t have all the baggage of a publicly-traded company or private equity … we’re run like a family business,” he said.