271. Why the Coworking Brand The Wing Failed
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TRANSCRIPTION
271. Why the Coworking Brand The Wing Failed
00:00:02 Welcome to the Everything Coworking podcast, where every week I keep you updated on the latest trends. And how-tos in Coworking. I owned and operated Coworking spaces for eight years and then served as the executive director of the global workspace association for five years. And today I work with hundreds of operators and community managers every month, allowing me to bring you thought-provoking operator,
00:00:29 case studies and inspirational interviews with industry thought leaders to help you confidently stay on top of what's important and what you can apply to your own role in the Coworking industry. Welcome to the Everything Coworking podcast. This is your host. Jamie Russo. Thank you for joining me. We're gonna dive right in with one quick reminder, which is that our next cohort for the creative Coworking partnerships course,
00:01:02 AKA management agreements, rev shares, things like that starts September 27th is our first call. So if you wanna join us, get all the details at Everything Coworking dot com slash management agreements. So we're gonna talk today about why the Coworking brand, the wing failed. So there are a few things going on here, so let's just set the stage about, you know,
00:01:31 what is the wing? What is its business model? Our series that we're working on this month is the Coworking business model. So we talked last week about small spaces, the challenges, the opportunities. And we're gonna talk about the business model around the wing, cuz I think it's a really interesting case study. So the wing just announced a couple weeks ago that it permanently closed its doors was very abrupt,
00:01:54 no transition for its members. So we're not really gonna talk about that here. The wing had been absorbed or, you know, kind of bought on a fire sale by IWG, which is the one of the very few public shared office space brands. It owns brands like Regis and spaces and others. So very big thousands of locations around the world and the wing had become part of that brand of families.
00:02:19 And I suspect they were kind of on, you know, probation and had to really kind of have a strong comeback or else they were going to be let go. So the wing is a brand for women. It's a little bit of a political brand gorgeous spaces. So I've been in two of their locations in Georgetown and Washington DC and in San Francisco,
00:02:42 roughly 10,000 square feet. I love their aesthetic, really beautiful, you know, pretty feminine spaces. They probably spend $200 a foot on their build out, give or take, but pretty high end build out all open plan. So they have meeting rooms, but no offices and very, you know, sort of well known for a couple of amenities, one being their like beauty bar.
00:03:09 So this idea that you could work out, I think they had some pelotons and the mirror product and then gorgeous, gorgeous locker rooms and like sponsored products in the beauty bar. So you could go work out and then get beautiful and stay and work. They also had small cafes, only open to members, coffee, light bites, things like that. And then kinda big like event areas cuz they would bring in speakers.
00:03:35 So that is kind of like, you know, just to sort of set the stage. Why do people join the wing? So I think people joined the wing. When I visited the location in Georgetown, it was empty. There might have been a handful of people in there by a handful. I mean seven to 10 in 10,000 square feet. There was no one there.
00:03:55 And why is this? I don't know really hard to say. So another important aspect of their model located in central business districts, right? Downtown, very high rent districts. So in San Francisco they might have been paying $80 a foot, maybe $90 a foot in Georgetown. I don't know what Georgetown rent looks like, but they were in the very high rent shopping district or although like,
00:04:20 you know, high end clothing stores are so probably also a pretty high rent district. So central business district, high rent, 10,000 feet of open space. So I will say the Georgetown location when we toured it was during the week, very quiet said they have a thousand members paying roughly $200 a month. So that's kind of interesting. And so my takeaway there is people in that market at least wanted to be a part of something.
00:04:47 They really resonated with the messaging of the wing, which I will know is very like female forward and pretty political. So if you're not political, you may struggle with their messaging. And I would say, I, you know, without getting into like politics on the podcast, I just don't align with like, I don't need politics in my workspace to overlap.
00:05:11 So I was very into their aesthetic. I joined the location in San Francisco in March of 2020 pre pandemic. So I wanted a place that I could go sometimes in the city. And I wanted a place that was open on the weekends because real estate is so expensive here. That coffee shops, you cannot go and have a coffee and think, and sit in a coffee,
00:05:34 you can't do it. They're too busy. They don't want you to stay. You gotta keep moving. You cannot go sit at a Starbucks, not happening. So there's no place to do that. So I said, I'm gonna join the wing. And on the weekend I can go use their cafe and do some thinking work sometimes or during the week when I wanna go,
00:05:50 you know, get out of the house, Hey, we'll be right back. I just wanna share a couple of opportunities from our show sponsors as a Coworking space owner, you are always looking to provide more resources and programming for your members, right? How about access to financial education and even investment opportunities? Well NEWA is the number one community for freelancers and founders looking to grow their businesses.
00:06:27 So NEWA and Coworking spaces go together like peanut butter and jelly. We found that over 75% of our community already work in or are seeking out a Coworking space. We'd like to help our members connect with you and find your space anywhere in the world. So join our Coworking space directory to be featured in our community and give your members access to a whole library of entrepreneurial resources and financial education programming all at no cost to you,
00:07:00 by the way, visit newa.pro/ Coworking to fill out an interest form that's N O U M E N a.pro/ Coworking. We will include that link in the show notes for anybody who's walking around and doesn't have time to write it down. You can find it in the show notes for this episode at Everything Coworking dot com, NEWA financing. The future of work.
00:07:33 The amount of opportunity in the Coworking industry is absolutely mind blowing. It's projected to grow by 13 billion in the next five years, just staggering numbers. Now you've probably seen success magazine it's hugely popular and focuses on professional development, personal development and business coaching. While they're branching out with their own franchised Coworking business called success space. It's actually a brilliant franchise model with three revenue streams recurring and on demand revenue from Coworking memberships,
00:08:12 a full service cafe and success certified business coaching for small business owners to executives to learn more about this exciting new Coworking business opportunity. Check it out at success, cowork.space, that's success, cowork.space. We will link that up in the show notes as well. So love their aesthetic. Don't really align with their very political messaging. But I think there's a segment of folks in major cities where there are a lot of women who are just maybe like out there looking to be a part of something and align with something and have disposable income because they were not,
00:08:55 didn't seem to be using the space very often. So they don't need the space to them. It's more of a social membership. So think of like the social club model, where I have access to this place. I'm gonna go listen to speakers. I can bring my girlfriends. I think you could bring a large number of guests so I could have my girlfriends.
00:09:13 We could have a glass. I think you could have wine. We could have coffee. We could have lunch, great place to meet people, which is another reason I thought I'm gonna join. Cuz if I have people in town, I could meet them there. And I love that great atmosphere, perfect location, all of those things. So a high volume of people not actually using the space in a high rent district,
00:09:34 purely open space. So very discretionary membership. I don't need to be a member at the wing. I don't need it for my business. I want it. And that's was certainly my thing. I don't need it. I want it. They did require at the time that I joined you to commit to a year. So it was pretty inexpensive, 200 bucks,
00:09:52 which I think was full access, which is very inexpensive for San Francisco in your market. That may not be that inexpensive for San Francisco for full access past. You just had to commit for a year. You didn't have to pay up front. So I, when I went into the San Francisco location, I was only there twice. I think I toured.
00:10:11 And then I went in and joined no one there on the weekend. I was there on a Saturday, fully staffed. I think there were four or five people working the floors and the cafe had to be staffed. No, there was like one other person there. I'm not exaggerating. So they're open on the weekends. There's no one there. This is pre COVID.
00:10:29 It was a beautiful day. There was no reason for people to not be there except who goes to a Coworking space on Saturday. Not very many people. So, you know, they had really deep staff, big spaces with no offices. And so it was completely discretionary. And my company, Everything Coworking accelerates the launch and growth of Coworking spaces. We spend lots of time helping a lot of operators decide how big their space should be,
00:10:56 what their product mix should be based on their profit goals and their access to Startup capital and not ever. Would we tell someone to open 10,000 square feet of open space in a high rent district, very challenging model, even pre COVID. So post COVID, some of this is just timing, right? Bad luck, bad timing for this group. They had some leadership problems.
00:11:18 I'm not gonna get into that. I'm I'm really just kind of analyzing what I think happened. I didn't work for the wing. I didn't see their P and L but I'm just guessing, because I know the Coworking business model really well. And sometimes I see people posting things on LinkedIn and I'm like, you have no idea what you're talking about. There are lots of reasons why this business model didn't work bad luck,
00:11:39 bad timing. COVID so post COVID they're all in CBD locations. So nobody's going, they're super high rent. They're not getting breaks from their landlords. So they're covering a huge rent nut every month for 10,000 square foot, a very premium location, no offices. So no one kept their memberships during COVID. They didn't even ask people to, I was a member COVID hits.
00:12:04 They put everybody on hold and then they say, you know what? We're closing indefinitely. Don't pay us. And so there was no liability to keep paying them at all whatsoever. They didn't even ask, you know, lots of us were trying to get our members to hang on with us and help us stay in business. They didn't even ask, they just gave it up and yet I'm sure they did not have rent forgiveness in the types of properties that they were in.
00:12:26 So, you know, that's a huge, huge liability for them that probably no one listening could have gotten through. So without some support from IWG that probably would've put them under just bad timing. And then coming out of COVID, you know, everybo. So they lost their entire membership, you know, because it was completely discretionary and they just let people out of their memberships.
00:12:47 So post COVID it would've a complete rebuild in locations in markets where people just aren't going, right. This is not a neighborhood location. It is the financial district in San Francisco. I think they were in the west loop in Chicago. They're in London, they're in Manhattan. So cities certainly are coming back, but it's discretionary. There are no offices,
00:13:09 people don't need this. And so they would only do it to become a part of something in, you know, in no private spaces where people feel safe and you know, the whole period sort of in 2021 where, you know, mass, no mass, very challenging for that model. Hey, I just wanted to jump in really quickly before we continue with our discussion.
00:13:30 If you're working on opening a Coworking space, I wanna invite you to join me for my free masterclass three behind the scene secrets to opening a Coworking space. If you're working on opening a Coworking space, I wanna share the three decisions that I've seen successful operators make when they're creating their Coworking business. The masterclass is totally free. It's about an hour and include some Q and a.
00:13:53 If you'd like to join me, you can register at Everything. Coworking dot com slash masterclass. If you already have a Coworking space, I wanna make sure you know, about Community Manager, University, Community Manager, University is a training and development platform for community managers. And it can be for owner operators. It has content training resources, templates from day one to general manager.
00:14:20 The platform includes many courses that cover the major buckets of the Community Manager role from community management, operations, sales, and marketing, finance, and leadership. The content is laid out in a graduated learning path. So the Community Manager can identify what content is most relevant to them, depending on their experience and kind of jump in from there. We provide a live brand new training every single month for the Community Manager group.
00:14:48 We also host a live Q and a call every single month so that the community managers can work through any challenges that they're having or opportunities get ideas from other community managers build their own peer network. We also have a private slack group for the group. So if you're interested in learning more, you can go to Everything, Coworking dot com slash Community Manager,
00:15:13 you know, but think about it. I think they were always gonna struggle no matter what, because how many times can you replicate that model in any smaller of a market than the ones they were in? I'm not sure it works. They would've had to have been doing much smaller spaces, which I think is an interesting discussion point about this business model.
00:15:32 Because last week on the podcast, we talked about the challenges of small spaces with a traditional office heavy model. So the wing has no offices, but a thousand members in their Georgetown location. So what if they had a smaller space? And what if the space was primarily event space slash social club? And the occupancy is never actually that high, but they can,
00:15:58 you know, fit half of their members for an event. You know, the space is super flexible. Maybe it's 3000 feet, maybe it's 4,000 feet, whatever it needs to be in order to put half of their membership for a big name speaker in, or it's in a smaller market. And they're not getting, you know, headline acts in town,
00:16:16 cuz they used to have speakers that were very well known. I can't think of any examples right now, but big names. And so I think that was part of the excitement of being a member, but could the wing have succeeded with less than 5,000 feet? I suspect absolutely. In the markets that they were in, they simply did not need all of the space that they needed or could they do a larger space,
00:16:38 but put in some high power investors, you know, female run agencies in offices and then you've got the membership for everyone that is almost gravy, right? You pay your rent with the offices and the kind of anchor tenants as we sometimes, you know, refer to our bigger members. So really, really kind of go after the, this is the place where women high power women come to support each other.
00:17:06 I do think that the wing went after a segment who wanted to come together sometimes. So I don't know much about the model of the chief. Some of you may be following that I'm on their email list, they're for C-suite women and they're mostly online. I do think they're doing some physical spaces. I suspect they're probably let's see what their business model is,
00:17:29 but they started online I think. And so therefore connecting C-suite women who are not necessarily in the same town, I think the wing had attracted segmented people who wanted to be together. It was not an online community. And so that simply was not a transition. They were going to make post COVID. So, you know, kind of a lot to think about in terms of their model.
00:17:50 So timing ended up being not good for them making a big bet on a downtown location, which lots of Coworking spaces were doing pre COVID, their $200 foot build out that's a big risk, but could they have done a really premium build out at a smaller scale? Because if you can pull in a thousand members in a market that want that premium feel and custom look,
00:18:14 you know, or did they just completely overdo it? I do think that's a challenge with some of the premium brands. At some point there's diminishing returns on that investment on a per square foot build out. So you have to be very careful about your premium premium positioning. The cafe was members only. So I love the idea of diversifying your revenue was something like a cafe.
00:18:36 Although we have to be careful, you have to kind of know how to run both businesses. Jen, Tom key was on our podcast and she had a separate cafe and a separate Coworking space and they were two very separate businesses. We had the folks from success base on recently and they talked about how they're really integrating the cafe into their model and supporting operators in terms of learning both businesses so that they can diversify their revenue in a smaller footprint,
00:19:03 but the cafe is open to the public. And that's a big part of the model, the wing cafe, not open to the public. You have to have an extreme amount of traffic into a member's only cafe space in order to make the numbers work. Even if you're just serving coffee and paying a barista, unless you have a really premium priced model and that's one of your member benefits and then size.
00:19:28 So they, you know, produced a product mix that I don't think aligned with their size and you know, it just didn't hold onto members when the market shifted. So I think that's really it for the wing is they had a really, really challenging model. Maybe it worked in major CBDs, central business districts in very big markets like London, New York,
00:19:52 Chicago. Those are the biggest cities in the world, you know, but could you put one in Phoenix? I'm not sure, you know, could you put a smaller one in Phoenix probably, but they also did something. We talked about this on the podcast last week, which is if you're gonna go for a smaller model and you're gonna try to really make it something compelling,
00:20:14 you're gonna go after the high volume membership, you have to really have a platform for that. And I'm blanking on the woman who started the wing, but she was an actress and you know, well known. And they had a platform when they started, which started to attract women really quickly. They got big name speakers to come into their space. They had the platform,
00:20:36 the tools, the audience to generate memberships really quickly. And most folks don't have that. But if you have that or on a, even on a, a smaller level in a smaller market, then it may be something that you can accomplish. You just have to be really realistic and really kind of wave the risk if you're gonna go with that approach.
00:20:58 So just a few thoughts on the wing. If you have any thoughts would love to hear from you and stay tuned for next week's episode, we will continue our theme on the Coworking business model. Thank you for listening to today's episode. If you like, what you heard, tell a friend, hit that subscribe button and leave us a rating and review.
00:21:20 It makes a huge difference in helping others. Like you find us. If you like to learn more about our education and coaching programs, head over to Everything. Coworking dot com. We'll see you next week.
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