111. Franchising Your Coworking Business: HOW IT WORKS AND WHY YOU'D DO IT

Everything Coworking Featured Resources:

Transcription

111. Franchising your Coworking Business: How it Works and Why You'd Do It

Susan: Well, thank you for having me. I'm always happy to talk coworking in franchising.

Jamie: Awesome. Okay, so you have an interesting background. Tell us a little bit about tell us the story of both. How did you get into coworking and how did you get into the franchise world?

Susan: So, into coworking because I wanted a coworking space for me and it wasn't anything close by and primarily I've always worked from home in the franchise space for the last 15 plus years, and it was time for me to get out of the house a little bit more. I was looking into a coworking space and there wasn't anything nearby. I was like, well, I might as well open one but I kind of fell into franchising a little bit. 

My previous life was as a social worker, and I was a military spouse at the time. I found myself in San Diego and had the opportunity to meet a woman who was starting a pre and postnatal fitness brand and didn't know at the time that she would franchise it, but we ended up franchising it and so I helped grow that brand and that team for, 12 years and I've been in franchising since like 2000. It's been a long time, but mostly in the service sector. So pretty wholesale fitness. 

I've worked with some senior care brands, kids’ activity brands, and now I'm in the orthopedic wellness area actually. We are franchising an orthopedic wellness brand called Structural Elements. It is the first franchise brand that is using a coworking model in wellness. It has been really neat but not only are we dealing with franchise law issues, we're dealing with medical issues, right stuff and corporate practice of medicine and all these different practice regulations. So, by utilizing coworking model and wellness, it's basically the clinic will be owned by one franchisee, and then each therapist or practitioner in the clinic who's performing our services will also be their own franchise business utilizing the spaces within the clinic. 

Jamie: So similar that they’re interesting.

Susan: Yeah, yeah. With shared cost model where you know, the clinic franchisees providing managed services, or, you know, booking patients, they're taking payments, they're providing all the support to allow a therapist and a chiropractor or physical therapist do what they do best and do their work on their patients and have all the other work be done by someone else, just like a coworking community manager would be helping, you know, facilitate their businesses. 

Jamie: I mean, yeah. Did you have anything to do with that model? Or had they come up with that before you crossed paths?

Susan: No, we actually came up that while I was on board.

Jamie: Yeah, very interesting. We assume you do this as an independent expert, or what is your model for this?

 

Susan: My model, which actual elements, I had been a consultant with them for about nine months or so and then went on full time as VP of operations. We had a few pivots over the last 18 months or so. Because of these medical regulations that, I wasn't aware of, I know the franchise space, but a lot of these medical issues that had come up around practice, we kind of we landed on this, this new model. We are breaking the mold of franchising once again. I tend to do that; I tend to go with brands who are changing things up which is fun. Yeah. So yeah, it's pretty exciting because you know the shared cost model makes so much sense as we know, because that's why we're working owners. We know that shared cost model works and so extending that into the wellness space and allowing chiropractors and physical therapists and massage therapists to do what they love and to do what they were trained to do. In a space that's, you know, modern and has all the entities and do it on it in a shared cost ways is fantastic for everybody involved.

Jamie:Totally. Don't you just want to apply this model feel like everything that they've run into? They're a little bit of a tangent, but we were talking on one of our flight group calls, I think shared space in Atlanta has, I can't remember the brand name, but they do orthodontist work, or they do whiten so it's a something dental related.

 Susan: Yeah, but their company's strategy is to locate within coworking spaces, like they're not taking their own real estate, they're getting offices and they see all their clients. They don't need any special attention. I think they just do the measuring and yeah, so there's no special plumbing or office, but you don't need any of that. Their strategy is just to locate in coworking spaces, which I think is super interesting. Not the same thing that you're talking about. But again, sort of a very similar. 

Jamie: Yeah, yeah. Blending. Okay, so we will get into the franchise piece, but I want to talk about you basically work full time and run a coworking space. I think there are other people, I am sure there are other folks listening who are doing that now or like you want to start a space and think, well, I might start space and still keep my full-time gig. Can you just talk about what does that look like for you some of the challenge’s tradeoffs, you know, considerations people should have if they're thinking about that?

Susan: Yeah, no, I mean, luckily, I do have a partner and so she does spend some time working space as well. Certainly, in the beginning, when we were starting your space, it was made easier to juggle everything. My Space is open 8:30 to 6:00 and so my workday is longer. Even if I'm taking a break to go make the coffee or something like that, there is still plenty of time to get my full-time work done. I have always worked 60 or 70 hours a week, and so it's okay for me to have things going on. But certainly, once our space started getting busier, it was a little hard to juggle. Now, I'm usually there, two to three days a week and so I have, you know, the other days on I'm home and in my home office focused on my full time job, but when I am in the space, I do finally now have a part time employee to help out, which has been really, really nice, because I'm able to get that focus time. Also, he's been doing a lot of things for me that I don't need to do like Instagram and doing stuff like that. That has been fantastic having him and also having a partner I couldn't do it without having a partner as well. 

Jamie: Just wait logistically when you're there, do you see any open space? idea?

Susan: I think part of it is our community like everyone's super respectful. They know that my partner also has a full-time job, so they know that we're here working too. You know if they see me with headphones on they know what to call or they know that you know. If it's something that can wait they'll wait and you know, write a note or whatever, but I'm also a really small space so I'm only 1700 square feet. This is very different than someone who's running a bigger space and trying to work a full-time job. The number of people in my community on a daily basis or more like 10 or 12am a day, it's a very different experience to it's almost like I'm here working, and you know, as my office and I had some officemates.

Jamie: Totally right which is very different. It is very Different, although I think that's a model that I mean, to your point that was your need. Right? And yeah, it seems like you love the work that you're doing. It's super interesting and you know, we won't go into another topic and another day we'll talk about what the future would look like. I think there are a lot of people like you who are like, I want a community, I want a peer group, and I'll take on the risk of taking a lease and have some people to work with. Setting that cultural expectation from the beginning, like, I'm not going to hover around waiting to see if you need me to, you know, make your cup of coffee and bring it to your desk. It's a different culture, but when you set that from the beginning and sort of set that like, I’m taking the risk, I'm making this possible for you, but my headphones are on.

Susan: Yeah, it's worked out really well. And you know, like I said, with it being a smaller space, it works, but I can see where if it was a larger space, there's no way it would be costly. 

Submitting to you, it gets hard, like when you have more meeting rooms and more external traffic where people need more help and attention it gets harder to manage and you have no intention of leaving my full-time work. I love my job and I love to do, and you know that's always going to be a part of me being a space owner. It's is just who I am. 

Jamie: So yeah, but so that's the thing. I love your case study because I think there are other folks who are thinking like, what could I do both and it's totally okay to have a small space if it's not your primary source of income, right? 

Susan: Yeah, we talked about this all the time in our groups and when I help people with new spaces, you just have to know what you're getting into and you know what the potential is. You can totally have a smaller space and sort of make it get out of it. What you want to get out of if it's not paying your mortgage. 

Jamie: Right, exactly. Okay, great. Let's talk about your work in the franchising world. I think probably we will start a little one on one here because I think maybe people know of some examples of franchising your coworking business, but I would guess most people don't know anything about how it works. And certainly, the fact that the legal costs and timelines and so kind of walk us through the basics.

Susan: Sure. So, there are probably a lot of brands that people don't realize our franchise. You know, when people think franchising, they first think of the food brands, like a McDonald's. Honestly, I think the last stat I saw, it was less than half of franchise brands are food related. There's certainly other service type brands, you know, the maid services, the plumbing, the deck surfaces, and the skidding, ding, ding and all of junk removal and all those kinds of things. Certainly, even kids service brands, right. You think of brands like engineering for kid.

There's some coding ones that are starting out, so all of those kinds of kid’s activities, dog services, so, dog topia or Camp Bow Wow, those are all franchised brands for boarding and for doggie daycare. There's definitely a lot of different brands that you know, and it's what it's a balance because on the one hand, a franchisee in your community is still a small business owner, right? Invested their money, they are still part of that community and they are a small business owner, but yet they're operating a brand. There's this weird dichotomy of people thinking, well, they're a big company. 

Jamie: That is such a good insight. You're totally right. It's like they are small business owners just like we are. Yeah, they just bought into a brand, right? I didn't talk about this a little bit like yeah, brand provides a certain amount of support, but they're still like in a market on their own.

Susan: Exactly. So franchising is regulated by the Federal Trade commission with 15 states having additional requirements for filing Federal Trade Commission came upon it of most of these laws, 20 plus years ago to protect consumers around business opportunities. There's a lot of regulations around what franchise ORS are required to provide to their franchisees or potential candidates. The business model itself, franchising is around because it's a way to scale a business. 

There's certain kinds of businesses that it doesn't make sense for to be a corporate location. You think of a clothing store, you know, whether it's gapper, old neighborhood, whatever, that's a business model. It's a corporate structure that people will go buy clothes to go buy clothes, people, businesses, such as your maid services, dog grooming services, you know, even you know, some of your restaurants where people want to relate to in their community with that service provider, so there's no way that I could from a corporate location somewhere on the spectrum, could manage a dog walking service in another state. 

They don't know me; they're not going to trust their dog to me as a corporate entity. They'll trust a local person in their community who's operating that business. It is a way to scale so partly it is about the business philosophy of what makes sense to be a corporate entity, like a grocery store and what doesn't. The other reason it's a path to scale business is financial, your franchisees are buying into your business and investing their investors in your business to help you scale that business because they're paying their own retirement fund. The franchise in their community is helping you get a footprint across the country without you spending money. 

You spend money on support, you're going to spend money on legal news, spend money supporting, you know, construction and all of those things for those franchisees, and you're building a long, very long-term revenue stream. You're not footing the bill on opening that doggie daycare location that's going to cost a million dollars. You're not putting your own million dollars into that store. The franchisee is, so they're building your business is one thing, right?

Jamie:The franchise store is kind of serving as the central functions like marketing and then put the local footprint is being created by right the individual and invested in. The truth that big things about the franchise or is going to provide business systems and processes, they're going to provide, what POS (point of sale system) they're going to use. They're going to give you the operations manual on how to operate that business. They're going to give you the ability to use their trademarks. They're going to give you specifications around what that product or service is that you're going to offer so there's going to be a rule book to follow and there's going to be an operations plan to follow but you're still putting in your own money as the franchisee. You're taking a risk on that franchise. 

Susan: I believe in your business model, right to invest and open one in my community because I think your business will work here. It is a balance of risk and a balance of responsibilities. As a franchisee you have responsibilities to operate that business according to what those brand guidelines are. You have a responsibility to provide the services that the customer expects in the way that they expect. For example, there was a pet store franchise in our market who ended up doing some really bad things and ended up getting shut down. My guess is that you know that franchisee probably didn't have a lot of oversight. They probably didn't have laughs, didn't have someone visiting them to do any quality assurance reviews. 

Yeah, you know, you are providing, let's say a maid service. You're providing these services in somebody's home but there's a level of expectation of what that brand wants you to do and how they want your employees to dress and how they want advertising done. You know, it's what I always say I'm a helper at heart, right? My previous life was as a social worker, I've been an entrepreneur as well, but what I love about franchising into this help somebody else have a livelihood and their own business with level of support. So, you know, if they're run into a problem with their coffee shop, have somebody to call and say, Hey, what's going on, what do I do? There's some things that franchise owners can say, this is what you do.

Jamie: Here's some possible things that you can do, but it's your decision, especially employment stuff. Afraid like franchise doors, we say out of anything limit related because they're not our employees. Right? They're the employee of that business.

Susan: So probably get legal advice. 

Jamie: I mean, the value in our business, we have to create our own networks of support, right? We have to sort of curate, like, okay, I trust these folks in my peer group to give me advice, but the value proposition for a franchise is okay. Like the coworking business, for example, if you want to start one, and you don't want to spend all the time to figure out how to do it, and you know how to do it successfully. You're looking for sort of a proven, you know, model in a box that you can invest in, and then you're paying into guaranteed support from a brand to your point that's been developed and that you trust to give you the right advice to run your business, but also it simplifies things like somebody centrally is running Google ads. For you and helping with social media and you know, like some of those things that just are real pain points for the local operator or kind of take it off your plate.

They can be in some franchise systems, and there are some that are not right. There's a mixture but absolutely the point being that there are if the franchise or isn't at least providing that service, they have a relationship with somebody that does. The other advantage about being a franchisee is the economy of scale. Right? 

Susan: So, you know, if I'm ordering massage tables to open a wellness clinic, I'm going to get a much better price because they're going to have business from 50 more units that are opening so as a franchise we can negotiate pricing with vendors. We can get better deals on things because of scale. As the franchise system grows and also building those relationships, so we're going to have a relationship with a Google Ads vendor now and they're going to have a negotiated price. It's not going to be you know, franchisee going to try to you know, get a do it themselves. That to figure it out, we're going to have a recommendation and have a strategy and how all that worked out. It's really just implementing it to franchise a business and we're talking about if you want to franchise your coworking space.

Jamie: The most important things are that you want to make sure you have a strong brand, right? You want to make sure that you can replicate what you just did.

Susan: You’re amazing one location may not be competing, right? They know you need proof of concept. Open two more units to make sure that you can replicate it and it's going to work or that it's going to work in a different market. That was the big thing with the pre and postnatal fitness brand that I've worked with. I have done franchise sales, I have done like everything in franchising, but I became the first franchisee because we were in San Diego, Southern California. It was like we need to see if this is going to work in a different market. I was moving to Monterey and so I was like, okay we have done Monterey, but it works. Then we did 10 beta locations across the country. Is it going to work in a different market is going to work in a different climate, all those things. Coworking is it going to work in a large city, a small city of medium sized city? What are those metrics that you need to know to have a successful location? And can it be replicated there? You need a proven concept. The biggest thing is you need to the unit economics to work, right. And economics don't work. It's not a franchise. It's not a business that somebody's going to buy into, if they can't clearly see a path of those economics working in that model.

Jamie: Right. So. That I assume is part of the sort of legal requirements around franchising is that franchise or you're saying, well, you have to disclose all of your financials and you're not making, I don't want to call it promises, but you're sort of saying like, look we've tested this and it works. We've got this all packaged up for you and so the protection is making sure that that's reliable enough to sell it right so that a franchisee isn't being taken advantage of. It's like super clear what you're getting the History is with the, I don't know. Can you talk a little bit more about?

Susan: Yeah, definitely. So, the FTC regulations require you to provide something that's called a Franchise Disclosure Document. The Franchise Disclosure Document has our company that's new that we only have a handful of franchisees. Right now, so far, we RFID is like 160 pages long, like everything you need to know or ever wanted to know, it gives you the backgrounds of all of the executives in the company, it gives you audited financials of that parent company for the last three years. It gives you every detail of what you will be provided, what your responsibilities would be, what trading is like what's training is required, what you need to comply with, as far as state. Obviously, any state and local laws are either their responsibility but insurance requirements, everything that you could possibly imagine about a company is in that FDD. If you think of a bigger system like you know, some of the food brands, their FD are like thousands of pages. You're also disclosing the list of all your franchisees and all your past franchisees. 

When you get into a brand that has 500 units, you got a lot of pages of franchisees, and then you also get a copy of the franchise agreement that you would be signing FDA regulations, you have to hold those documents in hand for 14 days before you can do anything. It's very specific about what you can and can't do and in the franchise space one of the things you can't do is talk about basically performance representations. 

There's a piece of the FDD if anyone's looking into a franchise, there's a piece of the FDD that is called an item 19. Now in that item 19 we are allowed if we're doing it for everybody, we're allowed to give financial performance information of our franchise. Only under certain circumstances, so only so if let's say I have 100 franchisees, I can give information in my FDD about what those franchisees are bringing in for revenue. As long as I'm doing it for all of them, and I'm not keeping out the low performer. High performers have to be absolutely standardized across the board, how I'm presenting the information to you, the whole thing about FD is just having all the information so that you can make an informed decision about whether you want to invest in this company or not. 

If right now, in early franchise stages, people aren't going to have and I didn't mean to examine financials to show you like I have three four units open right now, but we just changed our model so and changing our model like I don't have any information to give you so like so people who are buying an early stage franchise. They're really taking the leap because they don't know the numbers and they can talk to an existing franchisee to get information but right now where I can't say a word about what kind of money they look to make, what they should expect nothing, it's really them investigating it. If you are looking at a franchise, you absolutely should get your own franchise attorney look at the agreement. We should work with your financial advisors to look at a business plan. That's interesting to you as a franchisee have your own business plan. You know, it's you are a business owner with your own business plan operating a franchise.

Jamie: A brand that doesn't have many locations to your point, what are they selling them, so they're not really selling like a proven experience. They're selling sort of the brand and the aesthetic and processes and the concept. That's the reality.

Susan: You're selling an idea you're selling the concept; you're selling a dream. I mean most you're going to have at least a couple units. Open whether their own your own corporate units or something closely held as a proof of concept. You're selling the idea and you're selling the promise of something bigger than you could do yourself. Right? 

Like, it's the brand. The branding is hugely important if you don't have a strong brand, like, why is somebody going to sign on to you? What are the advantages for them as a franchisee to sign on with a new, you know, an early stage concept? Right? You know, if it's not a really compelling story, and a compelling brand, and a compelling financial opportunity, they need to see that there's hope they need to feel like there is an opportunity there. It's the brand and the brand is your business. I mean, everybody talks about branding, but in this is some. It absolutely is and it's your founder that people buy into your founder, they buy into their vision, they buy into their dream of what they're creating, their life's work, and they're buying your founder. Especially in the beginning, because that's the story they want to connect with, and I can absolutely do that.

Jamie: Right. That could be me, but in my market, I can write, and you can help me make that happen. So, I mean, one of the interesting things about franchising is, you go to the franchise shows, like the big events where there are lots of franchise doors, and there are people who know what they want to franchise. There are also people who just say well I want to start a business. So I'm going to go to one of these shows and sort of shop around concepts and then figure out what business I'm going to start.

Susan: Right. The biggest one is in New York; it actually just happened. But that yeah, that's the biggest one that happens every year in New York in June, and that's the international franchise Expo. So, the nice thing about those Expo is actually though, and not even necessarily that you're shopping brands, but there is a lot of education that happens at the expos. So, there's always a scalar. You have workshops that happen from the franchise or side, if you're looking to franchise something or from the franchisee side. If you're looking to invest in something, what do I look for and how do I decide all those kinds of things. There's a lot of that that happens at those events, which is fantastic, like even so my three boys, but my middle son has been very interested in business and franchising. He actually asked to go to a show we went last two years ago, and we sat in on some sessions about what franchising is, and this is how to go about it and how to decide and stuff like that. That's the huge value and it's really fun to walk the floor and see all the different concepts because you know, it's fun because you're like, wow, I thought of that or another younger concept.

Jamie: It is fun. There's a lot of food brands, a lot of staples and snacks at this franchise shows but I would say that the most valuable pieces probably those workshops that happen there today.

Susan: To help you, you know, hone in on whatever it is that you're trying to do. 

Jamie: Yeah. Would you recommend that Expo for somebody who's thinking about eventually franchising their brand?

Susan: I would and then I'd also recommend the International Franchise Association. Their website is franchise.org and that is an amazing organization. That's how I learned all that. I know in franchise news through those IFA events that have IFA networks of people. There's also groups in most major cities, there's something called the women's franchise network. If anyone didn't go into some women's franchise network events, there's some very active chapters and then there's also another group called Franchise Business Network and those are all volunteer committees’ organizations that happened through the international franchise Association. In their most major markets, a great place to get to know other people in franchising in your community. You don't need to be a member to attend, it's just an opportunity to get together to talk franchising.

Jamie: We probably should have started with this but there are a few brands that are already franchised in the Coworking space. I have a little list of those, but I might be missing some Hara hub spaces franchise, which is a Regis owned brand or was I think they've been trying to spin that off franchises. Venture x fueled collective both of those brands have been on the podcast before if you're interested in them and then serendipity labs. Am I missing one.

Susan: Did you say awesome?

Jamie: Oh, I hope Williams not listening.

Susan: Or Mark? No, thank you. Williams REWA board. Sorry. Yeah.

Jamie: Yeah, your hub is actually not a franchise anymore. Is it? Okay, to a licensing model.

Like Okay, yeah, well do you want to talk about the differences there and maybe why one would choose the licensing route.

Jamie: So, licensing anything in licensing you would license your logos, your trademarks, and the big difference between license be infringed. Thing is that franchising, you can provide support and in licensing, you cannot so much less control over license where you can give people all of your stuff to use. Yep, you can't make them use it the right way, or the way you intended to be used and you can only the amount of money that you can collect as a license in a licensing agreement is much lower than what you can collect or enforce as a franchise model. You have much more brand protection in the franchise model also means you have much more cost and a franchise model that you have control over your brand and what happens with it more than a license. I don't know if this is an easy answer. But if I wanted to franchise my brand, is there like a ballpark budget for getting set up to do this or some order of magnitude to help people think about what that takes in terms of an investment. 

Susan: So phase one, you really look at legal, ramifications and requirements creating that FDD making sure that you're ready to franchise the biggest things in that phase. One is looking at financials and making sure that you have a business model that the franchisee can make money and that you can make money as well as the franchise or not normally there's a royalty stream of some sort, usually somewhere between six and 10% of gross sales is going to go back to the franchise or and that's going to pay for that support team that's providing your marketing materials and that's providing your franchise support and giving you all those resources.

 Revenue stream back to the franchise or is giving you those things that help you continue to operate. Figuring out if the financial model is going to work and those unit economics are going to work. That franchisee making a living and still working is part of a whole system. I would say between the accounting and financial planning stuff and the FDD work with a franchise attorney and if anyone wants some recommendations or franchise attorneys I'm happy to give them a list. So you know with legal and everything as I'm saying that first phase is you want to plan for somewhere between 50 and $75,000 between legal and finance work and making sure that your brand is you know make sure you have your all your trademarks on your logos and your brand marks so that you have that protection in place and that you're ready to move forward.

 Then I would say you know, initial sales and marketing timeline, nine to 12 months for that first phase of legal. You're also going to be fine tuning your operations manuals and making sure that they're ready to go so that when you do sell one of those franchises you're able to make that happen for the franchisee, so operations are ready to go. You need to figure out your all your architecture stuff, make sure your plans are ready, so that when you do sign that first franchisee, you can start looking for doing site selection and build out and all that stuff. I would say that first phase is, you know, that nine to 12 months 50 to $75,000, phase two being your initial sales and marketing of, you know, finding those first few franchisees. And so, you know, that's probably another probably 25 to 50 and then operations, you know, being that phase three of finding, making sure that you get those units open and get those units humming because those first few franchise units. They need to be open and thriving because those open and thriving units is what's going to sell your next five because those next prospects are going to talk to those franchisees and be like, hey, how was your experience, what kind of revenue you're bringing in, we can't talk about that stuff, but they can talk amongst themselves. You want those first few units to be super successful because they're going to help you sell the rest.

Jamie: So back to your point. You don't want to be tested. Your business model in a new market with your first few franchisees, because if they have a bad experience, it could really ruin your prospects, right? Your ability to sell. 

Susan: Yeah, absolutely. Yeah, I'd say your swim. And then in terms of timing, I mean, you mentioned kind of budgets, but this sounds pretty time intensive like the first year or two, it's going to take a lot of your time to get all these ducks in a row.

Jamie: Absolutely. And the other big decision to make is, do you want to run coworking spaces? Or do you want to support franchisees running coworking spaces? It's a completely different business, right? Because you're no longer you know, operating a coworking space. Your customer is now your franchisee who's operating coworking spaces? Right? 

Susan: Right. Right.

Jamie: What makes you tick is right to sort of the operations of the unit and the people engaged. You're sort of taking yourself out of that, and you're in a different business model.

Susan: You’re not satisfying your new customer who wants to be making money?

Jamie: Yeah, if you're someone who kind of loves like systematized thing and process, and I think being a franchise store probably is somewhat appealing, and then there's a ton of pressure because when someone buys into your model, it did better work, right. They want results, and they want that support. And so, it's not for the faint of heart. It's respect.

And it's fun, and I love it. You know, I mean, obviously, I'm still in and all this. You know, I do love it. Like, you know, it's right. Your role probably is to really support the folks that are saying, I want to do this and you're like, well let's make sure we can deliver on what we promised which is essentially why all the legal requirements are there to like sort of protect the person who's buying into this. I think I've been trying to think of what we haven't covered yet that we would. 

Certainly, there are folks who, so I just launched my last cohort of the Coworking Startup School in end of March. And I have some folks in there who are thinking about franchising. They're learning about the model, and they're trying to decide, do I want to do this myself? Or do I want someone to come in and just kind of put it all together and hand hold? I mean, it's real you know to your point. You're still a business owner, you still an entrepreneur, but how many of the pieces do you want to put together yourself and the branding piece. It's like it is part of what makes you tick developing your own brand or you want to invest in something that is already somewhat proven. 

I think one of the folks in our group who is part of a franchise has mentioned, one of the benefits he sees is the liquidity that you know, if you think you want to sell your business, I would be curious about your perspective on that sell your business at some point. You're better off not having to know serve an individual brand that only has a little bit of equity in your local market you're better off being able to sell How does that work? Do you have to sell it to another franchise or what?

 Susan: So yeah, I mean there's huge advantages in that brand piece that's absolutely a relevant thought because as a franchisee of a brand you're still your own business right? If I'm a franchisee it's still my business that I'm selling. That new person needs to be approved by the franchise or they need to go through the same steps that I went through to become a franchisee so they're going to go through that disclosure period of an FDD. They're going to but that being said, they're getting approved by the franchise or but they're buying my business. 

Jamie: Yeah. Okay. benefiting financially from selling that business because I've poured in, you know, my retirement savings that God poured into the franchise when I bought it. And I've now built my clientele and I built my base and I in that market, so it's still my business to sell. Then there's a transfer fee that gets paid to the franchise door, so you're going to pay a certain whatever's in your agreement, you're going to pay a franchise, the franchise or a transfer fee to transfer your business license technically your franchise, you're transferring it to a new owner who has been approved by the franchise door. You're collecting that money from that sale and just paying the franchise or transfer fee. 

Susan: Got it. The benefit there is likely that you've built a successful business and it may be easier to market the business for sale because it's a recognized national brand or international brand. 

Jamie: Yeah, yeah, I thought that was interesting.

Susan: You know, if that brand has a national footprint or even a regional footprint, there's much more brand value associated with that name, then if it was just you.

Jamie: Yep, makes complete sense. If you're looking at multiple locations are scaling or knowing like look, you want to build a business and eventually sell then that may be an advantage as well. 

If someone was thinking about franchising their coworking business, what are kind of the couple of key pieces of advice that you would give them as they consider that decision?

Going back to making sure that the economics work makes job numbers work, or it's just going to be an uphill battle?

Susan: Yeah, making sure it's going to work at least one more location, you need to at least prove that you can do it again. Whether or whatever it is, that's really key. The other really, really important piece is making sure you have the right partners in your franchise attorneys and you know, your strategists and making sure that you know, it's you have that team to help you get it off the ground because you mentioned it's not for the faint of heart, but it's also not something you can do alone. 

It’s not a solo job or things that you can do alone, it is something that you need a team to be able to do it and having those, you know, franchise attorneys that can be your advisors and who've been through before, it's important. Then I say franchise attorney specifically because, I've been a part of situations where founders have used attorneys that were not specialists in franchising, and let me tell you, it is a different world. Just because you're an attorney doesn't mean you understand franchising, so making sure that you get people that have valid experience, help you make those decisions moving forward and making sure your agreements are buttoned up and that you have the protections you need in addition to what the franchisee, you know, should be allowed to do. 

Jamie: Yeah, I think just getting those right people on board with you is huge. And like I said, you know, learn as much as you can, whether it's through IFA, or, entrepreneur.com actually has some great franchising articles on there as well, but learn as much as you can and making sure that you're making a sound decision to franchise because it's a very long term revenue play, you're going to get royalties. 

Susan: 15 years from now it's very time intensive in the beginning and money intensive in the beginning to get a long term royalty stream, later on and it's a huge commitment. You can't go into a franchise, can't open a start, opening franchises, and not have a long-term commitment to those franchisees because those franchisees are helping you scale your business. They're investing their life savings in what you're doing as a business concept, you can't just all of a sudden up and close. You know, it's a 2030-year commitment whether Easter maybe you sell your business as a franchise or take on Investment Partners or whatever, but it's a long-term relationship with your franchisees and it's important that they know that you're in it for the long Hall.

Jamie: Yeah, that's interesting. It's like there's sort of an extra layer of like ethical commitment. To your point, you can't just all of a sudden be like, you know what kind of done with this?

Susan: Yeah, and walk away you have 1500 business owners who are relying on you as their support system is their brand to do the right thing for one, but also to be there when, you know, just if they were there for you in the beginning. Most franchise agreements are 10-year terms or longer food brands are now. Wow, if you're talking a10 year or you know, 25-year agreement, it's a long relationship so you better have a plan to stick around or have a plan to sell to an investment group or something super helpful.

Jamie: I will make sure to list out the resources that you referenced in the show notes for folks that are interested in learning more. Thank you so much for sharing your experience. In this topic I have a million more questions and I'm sure people listening are interested to, but I think we'll wrap it up there and let people kind of dig around on their own. If they have followed up questions but thank you so much for jumping in and sharing your experience your own experience with coworking and with the franchise world. You are very welcome any turn. 

Awesome. Thanks Susan we'll talk to you soon.

Thanks for joining us on this episode of Everything Coworking. Be sure to click the subscribe button so you can stay up to date on the latest trends and how to until next time


For the full show notes of this episode, click here.

Want to join our coworking conversation in the Everything Coworking Facebook Group? Find us here!

Looking for a specific episode? Go to the episode index here.

Jamie Russo