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Taking the financial opportunity to be flexible when the economic times are uncertain

Written by Martin Morris on Thursday, 07 October 2021. Posted in Interviews

IWG plc invented the serviced office business model with Regus more than 30 years ago. More recently it has added franchising to an already impressive bow.

Taking the financial opportunity to be flexible when the economic times are uncertain

IWG plc invented the serviced office business model with Regus more than 30 years ago. More recently it has added franchising to an already impressive bow. Julian Chambers, Head of Partnership Growth, explains how he arrived there and what the franchising opportunities are, going forward.

Julian Chambers can call upon more than 30 years' working experience in the franchising industry - roles ranging from operations, to business development and franchising development. 

Prior to taking up his role at IWG - the result of a random call from IWG asking if he'd be interested in joining their business as they’d determined franchising was the way to grow - Julian was Head of Partnerships – Travel, Leisure & Ireland at Costa Coffee UK & Ireland.

As he puts it: "My experience in franchising was exactly what they were looking for as they wanted someone who had experience building and growing franchising businesses.

Given the different markets they operate in Julian's move from Costa Coffee UK & Ireland to IWG is not immediately obvious. However, the key words are 'Head of Partnerships' and as he is quick to explain, the roles are very much the same.

"Here I am responsible for driving growth through Partnerships across the UK and Ireland and with IWG our Franchise Partners have access to all of our core hybrid & flexible workspace customer facing brands, such as Regus, Spaces, HQ & Signature," he notes. 

Yet in many ways, his move from Whitbread/Costa to IWG was in part down to Costa having become a 'victim' of its own success.

"When I joined Costa we had just over 300 stores across the UK, fast forward 12 years we’d grown the brand to more than 2,300 locations across the UK, and more internationally. 

In short, it was getting challenging finding locations for new stores. "One of the biggest challenges from my network of Franchise Partners at Costa and other F&B brands in the UK was the lack of new growth opportunity." says Julian.

The flexible workspace market, on the other hand, was seen by Julian as still relatively small and similar to Costa back in 2006 in that it still had lots of opportunity for growth.

"The experts of our sector had identified that the amount of flexible workspace across the UK was at 2% and organisations like JLL and Instant were saying this market could get to 30% of all Corporate Real Estate becoming flexible by 2030.

"That being the case I felt it could provide an incredible growth opportunity and one that many Franchise Partners who are looking to continue to invest, grow and develop would be keen to participate in.

With 3,300+ locations in 1,100 towns and cities across 120+ countries, IWG is  the unrivalled global leader in the flexible office market.

And despite the COVID-19 pandemic having led to more people working from home, for example, Julian points out the company's business model hasn't fundamentally changed and has in fact substantially benefited from this shift to the hybrid model Work in the future will be happening almost everywhere. The future is about providing local workplaces for people to access throughout the country. 

"We provide flexible workspace to individuals and companies and through times of uncertainty we’ve always done well as a business," he points out, adding that throughout the various lockdowns many of the company's customers who couldn't work from home needed to access their office, while many who were working from home needed IWG's services. 

While the business model hasn't altered, the company has continued to innovate during the pandemic by accelerating the development of products and services it had been working on previously, including its product enabling those working from home to work more productively by helping them stay connected and operating in a hybrid way.

For now though, more people are going back to the office and are increasingly demanding more flexible working conditions. Which begs the question as to whether this is an opportunity for the company to consolidate its position, going forward.

"Like most sectors through times of uncertainty and changes in market forces, you expect consolidation. We saw the same in the F&B sector through the global financial crisis; there were successes and failures as well as new entrants to the market, " says Julian. 

"We expect the flexible workspace market to consolidate in much the same way; we are the global leaders and more than 4x larger than our nearest competitor and when you’re in that position you get to see most things across the markets.

"For me, in the UK, I'm seeing increased interest from smaller independent operators who are interested in joining our brands as they see the benefits of working in partnership with a strong global and national brands as a much safer option," he notes. 

He adds: "We’re also seeing a good (and increasing) number of enquiries coming in from building owners who are also seeing demand shift away from conventional lease requirements to much more flexible options; they see our flexible workspace solutions and recognise it will be a challenge to replicate, therefore (they) are now more than ever looking for partnership opportunities, which we think can work well for us as well as many of our Franchise Partners."

In the meantime, Julian notes that being flexible isn't a recent phenomenon. As he puts it: "We’re already seeing the benefits of many forward thinking companies who

have been shifting to a flexible model for years, they use our business and build their own ‘hub and spoke’ model by using our national and global network."

The office hub-and-spoke model is not a new concept, in fact it has been used for many years in the real estate occupier sector. In simple terms, the idea is that a company will have a headquarters, which serves as the hub of the business while the spokes are a geographically distributed network of offices usually based on talent and client needs. The hub can generally be found in a core location (city-centre) with excellent access to public transport and acts as the cultural centre of the business. 

It has also meant new customers being added to IWG’s platform through a mix of both its membership products as well as many new private office clients. 

"Two companies that were reported on earlier in the year were Standard Chartered Bank, who have taken about 95,000 memberships for their employees and NTT, who provide their more than 330,000 employees with membership to use the IWG network wherever is most convenient and productive for them," he confirms.

IWG's franchising model, like many others, follows a strict code of practice and ethics expected  of a BFA member. "We share the knowledge from within our business and provide our Franchise Partners with access to all of our know-how in order to enable them to sell our products and services using the brand marks; from a customer's perspective they wouldn't know the difference," he points out. 

He adds: "There is naturally a synergy between us as the Franchisor and the Franchisee because if they are successful we become successful; we have no minimum franchise fee (and) we only charge franchise fees as a % of revenue. 

Moreover, IWG has established franchise support teams in the UK, as well as abroad, who are dedicated to franchisees and are on hand to provide guidance and support to them.

"We also run all of the national and global marketing campaigns, while supporting our Franchisees with their own local sales & marketing activities We provide them with the framework and tools needed for every chance of  success," he notes.

As part of the process of becoming a Franchise Partner one major consideration for Julian is getting to know prospective franchisees well: "after all we’re aiming to set up a partnership that will last up to 20 years and more and we want to ensure they’re right for us as much as we’re right for them."

"We kick off with an initial call to understand why they decided to contact IWG and we then go on a journey through sharing detailed information. As the conversation advances we work with our prospects to help identify areas of the UK that will work for them and us in terms of developing new sites and we use this to help the prospects build their own business plans, as well as supporting and complimenting our own network development plans," he further notes.

Assuming agreement on territories to be  included within the Franchise Agreement can be reached "we then seek our own internal board approvals to progress with the prospective Franchise Partner together with the areas that we’ve selected," according to Julian. 

Once approvals have been granted and our Franchise Agreements have been signed Franchise Partners are welcomed into the network and provided with an all encompassing induction and introduction to the wider Franchise Support team.

Meanwhile, the investment required for our franchise opportunity will largely be determined by the method of acquisition as well as the condition of the building being used to operate the IWG branded centre from, according to Julian.

"We provide shoulder to shoulder support with our franchisees to enable them to properly evaluate each opportunity to ensure they can maximise the power of our brands and deliver a fully branded business centre in the most cost effective way," he says, adding "We also provide our Franchise Partners with access to our existing supply chains, which enable  franchisees to procure elements of their fit out at favourable rates."

When it comes to Franchise Partners, Julian says IWG remains open-minded to the type of individuals it's looking for.

Indeed, as he is quick to point out: "we’ve already signed up a fairly diverse group of partners, some with franchising experience and others without. In any event they will need to have some similar traits - we need them to be ambitious and motivated to grow a successful business." 

In addition, would be Franchise Partners will need to be fairly well connected to their local business community and be able to move quickly to secure property deals with building owners, as well as potential customers. 

"We’ll naturally need them to be able to follow our operating guidelines, which have been designed to ensure they can follow simple step by step process to deliver a successful business centre," he adds.

Also: "They will need to be interested in and care about their team members as well as their customers, we all know that if you look after your team, they will look after the customer. With all of this we’ll need them to be the type of individual or partnership that can thrive in a fast paced sales and customer focused business environment."

Given IWG's ambitions there is plenty of scope when it comes to future opportunities. At present it has just over 300 UK centres, with an objective to grow the number of centres to over 2,000 locations. 

"In order to deliver this growth we’re looking at every town and city with meaningful residential populations, providing employees with more and more options to enjoy the comfort of the 15 Min City concept. Therefore, we’re pretty flexible on the way to deliver that number of centres, in some areas we’ll be looking for a franchisee to open up a single location and maybe develop more over time," says Julian. 

"In other areas we’re looking for Franchise Partners who are interested in developing more than one centre across a multi-branded IWG centre approach, our early signings have set out to open 5 centres over a 3 to 4 year development term," he further notes.

For would be Franchise Partners who do eventually manage to jump through the proverbial hoops the obvious question is what level of support will IWG provide?

In short, it's comprehensive.

"We provide our comprehensive suite of operating manuals to our Franchise Partners, it takes them on the journey from their first day as a franchisee of understanding who is responsible for what, through a very clearly defined induction and introduction to our Franchise Support team. 

"We then provide them with access to all of the manuals for each phase of their journey, from identifying and securing the right building, to building it brilliantly, which is all about design, efficiency and fit out," says Julian. 

After this, IWG ensures they have a really good sales & marketing plan in place locally that compliments the company's national & global sales & marketing plans. Once the Franchise Partner is up and running - and with a building open and trading - Franchise Partners are then provided with "all of the support and guidance to ensure they can trade profitably; we carry out regular franchise business reviews and we spend time helping the Franchise Partner to look at their business through our eyes."

As he further points out: "We have a really easy to use platform that enables clients all over the world to access our products and services; we see demand for many more locations, therefore our business objective is clear – we want to continue to drive growth and development through partnerships with franchisees and building owners," he says, adding: "We’ve been growing typically at a rate of 10% to 15% per annum, our plans are to dramatically increase the pace of growth over the coming years. We genuinely believe that franchising will enable us to reach our goals much faster"

You wouldn't bet against IWG achieving precisely that.

About the Author

Martin Morris

Martin Morris has more than 30 years of experience writing about topics for national and trade papers, ranging from banking and investment through to energy and computer security. Technology is transforming the financial landscape and it is my job, I believe, to both engage with and inform readers about the rapid changes that are underway there and elsewhere.

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