Mainstreaming The Coworking Franchise Model: A Q&A With Venture X President Jason Anderson

Published on April 2, 2019 - By Cat Johnson

• Venture X is a franchise coworking brand that aims to be the third largest coworking company by 2022.
• The company started franchising in 2016 and it  currently operates 14 locations, it has 7 more near opening, and 63 in the pipeline.
• Jason Anderson, President at Venture X, talks about franchising, the third wave of coworking, and the parallel between WeWork and Tesla.

In 2016, Venture X became one of the shared workspace companies to try its hand at a franchising model. The company now has 14 locations opened, with seven more near opening, and a total of 63 locations sold. The company’s goal is to be the third largest coworking space, by actual units opened, behind Regus and WeWork, by 2022.

Venture X president, Jason Anderson, has a long history in both franchising and shared workspace. A licensed real estate agent who made the first Forbes 30 Under 30 list, Anderson brings an interesting perspective to the coworking conversation.

Allwork.Space spoke with Anderson about why franchising is the right fit for Venture X, the emergence of what he considers a third wave of coworking, and the parallel between WeWork and Tesla. Here are the highlights of the conversation.

Allwork.Space: Let’s start with some background. How did you come to coworking and Venture X?

Jason Anderson: I joined the service right out of high school and was active during 9/11. After the military, I moved to Dallas and started buying, selling and flipping houses. In Dallas, at the time—around 2007—coworking didn’t really exist. You had executive suites and Regus. I consider that timeline to be coworking 1.0. I went into an executive suite in Dallas but, at that point, executive suites were really frowned upon. You were looked upon as a second-class business.

I then opened a second location in a Regus, then I opened a retail location. By 2011, I had 200 agents and about 80 of them had Regus community membership where they could go around to all the offices in Dallas, meet people, have coffee, use their resources.
That year, I made the cover of Realtor Magazine, ultimately franchised my business, then sold it, and made the Forbes “30 Under 30.” When I sold my real estate business, I signed a non-compete in residential real estate and scratched the surface of the franchising industry with my business. That’s how I came across United Franchise Group.

Venture X is owned by a larger organization named United Franchise Group. We own and operate nine franchise brands with roughly 1,600 franchisees in every industrialized country. Our largest concept is Signarama, followed by Fully Promoted. We own Transworld Business Advisors, Experimac, two food-based concepts, Venture X and a home-based franchise as well.

Allwork.Space: And you’ve since become president of Venture X for United Franchise Group?

I started with Transworld, then moved down to the company’s headquarters and took over as the director of franchise development. Then when we acquired the full rights to Venture X, I took over the Venture X brand. I’ve been a real estate broker for 12 years—I’m actively licensed in California, Texas and Florida.

I ran my business, and still have businesses running, out of coworking and executive suites in the Dallas marketplace. I’m a big fan and proponent of the coworking industry and the franchising industry, as well. I’ve written a book on how to franchise your business, worked with close to 250 companies helping them become a franchisor. I consider myself to have advanced-level understanding both of coworking and the franchising industry.

Allwork.Space: As coworking has grown from a movement into an industry, it’s interesting to see who is drawn to the franchise model. I understand that Venture X was started by a father and son, is that correct?

It was started by Brett and David Diamond. David owns a company called DeAngelis Diamond, a monster real estate construction company that deals with hospitals and apartment complexes. They started Venture X as a passion project of the son, Brent Diamond, over in Naples, Florida. They opened up and were essentially sold out. They were one of the first well thought-out and developed coworking concepts in Naples. They did a great job establishing the business and developing out the concept.

Allwork.Space: It looks like Venture X is focused on serving smaller, and underserved, markets. It that part of the business model?

It’s part of the model, but not the only focus. Part of the reason for that is because there’s such a huge demand and need in this industry for flexible workspace in those secondary and third markets that the WeWorks of the world would never go into. We’ve opened in Harlingen and Brownsville, Texas, Mississauga in Canada—places people have never even heard of.

We’re established in Dallas, which is a first-tier market. It’s not that we’re not gaining traction and interest in the metropolitan areas and marketplaces, but we like coming into suburban markets and markets where WeWork isn’t. WeWork’s big focus is obviously the main metropolitan hubs.

When I look at the industry, I look at 2000-2010 as coworking 1.0. I think WeWork hitting the scene when they did, up until 2018, is coworking 2.0. I think they’ve done almost everything right. It’s an amazing company, great systems, processes, procedures, development, they’re raising capital. I put WeWork in the very same light and perspective as Tesla—and I mean that in a very high regard. In the same way Tesla did not invent the electric car, they just made it cool and mainstream and brought it to the forefront of the automobile industry. I think WeWork has done the exact same thing for flexible space worldwide—they’ve made it very cool, mainstream, and they’ve raised a ton of money.

Some of the things that have allowed what’s happening right now to happen, and to start what I call coworking 3.0, which I think started last year, is the advent of proworking. That’s really the space Venture X is looking to fill. We don’t have beer on tap, we’re typically more expensive than WeWork, and we don’t mind opening down the street, or a floor above, because we’re catering to a different segment of the marketplace.

Typically speaking, somebody who would prefer to be in a Venture X probably wouldn’t want to be in a WeWork, and somebody who wants the WeWork atmosphere probably wouldn’t want to be in a Venture X. We see them as a collaborative resource more than a competitor.

Allwork.Space: I’ve learned, in my years working in this industry, that there’s room for every type of space, and one space is not going to be the right fit for everyone. Will you tell me about the community and purpose aspect of Venture X? The website mentions paying it forward, social impact, sustainability. I’ve never been into a Venture X, so I’d just like to get a sense of what the vibe and culture is in a Venture X space.

Our key element that is very difficult for the WeWork or even Industrious—which I think is another great space—to do, is the fact that we’re owned and operated like a local entrepreneur. At the heart of coworking, people want to get together. It’s interesting to me that 15 years ago, the word coworker meant someone who worked next to you in a company. Today, it’s an industry.

What we’ve started to find is that our members’ businesses are growing, not only because of the coworking element, and the collaborative nature of just being a coworker, but directly because of the influence of other business connections or partnership to our owners and us, as a multi-brand franchisor.

We do a monthly member vendor spotlight, which goes out to all our owners, for a vendor that provides some type of service they can potentially use, and they write a testimonial for us. Then our owners write a testimonial for them, and we send it out to the members. So, we’re collaboratively helping, not only our owners, but our actual members, develop and grow their business through our infrastructure and resources. It’s really cultivated the “venture” word in our name. It’s a very collaborative workplace and environment, on a local level, a national level, and we already have an international level.

Allwork.Space: Do you have a breakdown of the ratio of private offices to open coworking to dedicated desks in Venture X?

It varies for us by location. We don’t have a standard model—some of ours are standalone 35,000 square foot facilities; some of them are in Class A office buildings; we’re doing a development in a redevelopment area that’s a warehouse space.

One of the mistakes other companies that have tried their hand in franchising have made is making everything the same. One of the biggest benefits we have is that we’re privately owned and have the backing of United Franchise Group, which has decades of franchising experience. There’s no board we have to go in front of, we don’t have to answer to investors.

We’re much more entrepreneurial than what you typically find in franchising. We allow a lot of localization. Our Farmington, Utah location has a very heavy Mormon population, so there are a lot of women who have kids. We allowed them to convert a one-person office into a lactation room, because they said that was a big need in their marketplace. The furniture, color schemes and certain things are the same, but a lot of stuff we allow them to change.

Another scenario is our location in Brownsville, Texas, which is five minutes from the Mexican border. Their biggest driver there is the conference rooms and daily rentals because business people are coming in from Monterrey and Mexico City to have meetings, so we have much more conference space at that location.

Allwork.Space: But each location has a mix of office space, meeting space, open coworking and dedicated desks?

Yes, as well as virtual memberships, mailbox memberships and, now that we’re at 21 locations, we’re going to be launching a national membership.

Allwork.Space: One of the challenges in the coworking industry, is educating smaller towns and markets about coworking—introducing them to the concept. Have you found that to be a challenge, and how do you go about that with the Venture X brand?

It absolutely is a challenge, and a good example of that is Brownsville and Harlingen, Texas. We partnered with a large real estate developer that’s built a lot of developments in that area. The first thing is getting somebody that’s local—knows the area, knows the languages, knows the people—to be in that marketplace.

You then still have to provide pricing, details, and an understanding. When you come into a small market like that, where coworking doesn’t exist, it’s easy to be the cool kid on the block. It’s like the big fish in a small pond perspective. We could open up a million square foot coworking space, with waterslides, free food, free beer, sommeliers. If we opened in Manhattan, we probably wouldn’t even make the local news because it’s such a crowded market.

But, if you launch a decent—much less a Class A development like we have—you can make a very big impact on the smaller community. We’ve had chambers of commerce, the local newspaper, and mayors’ offices requesting proposals to move their office into some of our second or third-tier offices so they can be close to the entrepreneurial community and market. That’s one of the tactics and tools we’re using in these second and third-tier markets. It’s the people—having connections and relationships—and providing that resource that has probably never existed there.

Allwork.Space: From your perspective, why is the franchise model a good fit for the workspace industry?

With the costs of getting started in coworking, it’s impossible for most small businesses or entrepreneurs that are starting a mom and pop coworking space to expand beyond their own geographical region. That’s not to say you can’t survive being a mom and pop in the coworking space, but it’s extremely difficult to scale beyond your city, town, county or state for a couple of reasons. Even if you have the money, you probably don’t have the time or resources for traveling in-between.

With franchising, you’re only paying us two fees. If you’re looking at it from a hedging your risk standpoint, a franchise becomes a no-brainer. To use a franchising 101 example, most people can make a better hamburger than McDonalds, or a better sandwich than Subway, but you’d probably be ill-informed to open up a mom and pop burger or sub shop right next to one of those two—even if you did an unbelievably better job—because you can’t replicate the history, the branding, the system, the processes or the scale they’ve already grown to.

When we launched, nobody was doing a 100 percent franchising model in coworking. Everybody who has tried has done both things at the same time: opening up corporate and some locations franchised. The problem with that type of scenario is that you don’t want to compete with your franchisees, so we decided to go 100% in on a 100% franchise model.

The franchisee pays us a flat fee upfront—the fee is currently $79,500—for the right to use our name and the instant reciprocity of 21 different locations. Having built 21 locations, we can help them save money on construction or real estate; we have a two week training program that we’ve curated with Jamie Russo from Everything Coworking; we’ve spent a significant amount of money developing a Gensler architectural blueprint, which is more expensive than our franchisee fee; we’ve developed exclusive agreements for our products and services from Sit On It and Herman Miller, which, when you add up all the furniture is more of a savings than our franchisee fee; we have in-house training where we pay for your flight, hotel and lodging during school; you get the website; you get the blueprints.

Everything you would ever need—even if you’d never been in a coworking space—you show up in your space and it’s ready to go. They instantly get the backing, credibility and ongoing support, then, ongoing, they pay us 6% of their revenue. So, as long as we can show you 7% value, to help you generate 7% more than you would have on your own, the royalty and franchise fee negate themselves.

This is not a knock on independent coworking spaces—it’s just a different segment of the market. When we meet someone who’s hyper-entrepreneurial, who wants to do a niche coworking space for females or minority entrepreneurs, we tell them it’s not the right opportunity for them—that they’re not the person we’re looking for. But, if you own a building and are considering leasing it to a coworking space, we’re a very viable option.

Allwork.Space: The thing that is not easily scaled in this industry, is the community aspect—the human aspect. With a franchise, how do you go about teaching people how to do community building and network support—the stuff that actually happens on a day-to-day basis in the space.

That’s always going to be an ongoing work-in-progress, regardless of who and where you are. The first thing is helping people understand that this isn’t just a click a button and everything works. Now we’re getting into the human element of the business, and this is where we spend quite a bit of time.

We’ve built the most significant coworking training in the world. Every month, two weeks out of the month, we have a two-week, in-house training program. It’s a college-level course on how to operate and run a coworking space. All of our community managers and community coordinators go through this course, and we continue to bring in industry experts.

So our training is two weeks, then we spend another week on course curriculum and development, and another week with our director of training doing ongoing training for the locations. Many of these things are directed at involvement, spotlighting members, consulting with those members, offering how to franchise your business classes. It’s extremely collaborative, and the benefit of franchising is that it has to be a win-win scenario. We don’t make money upfront off the franchise fee. We truly have no benefit unless the franchise is successful.