12/12/18

Wework VS Regus Franchise Model

The coworking business is showing a remarkable expansion. The world’s leading coworking space providers are increasing their presence in different corners of the world. While WeWork sustains an impressive growth in Southeast Asia, its main rival Regus is entering the UK franchise market. Regus prides itself on being a pioneer of flexible spaces solutions and the largest commercial space provider with over 3000 business centers in 120 countries across the globe.

Regus Is Expanding Internationally

However, there’s more to come. The company wants to have even a wider coverage using franchise as the brand’s growth strategy. Regus has signed a deal with the UK-based ACCA Office Ltd (whose portfolio also includes franchises with Costa Coffee, Anytime Fitness and Pizza Hut) to meet the growing demand for flexible office spaces. In the nearest future, the company is looking to sign agreements with at least 5 other franchise partners in 5-9 months to come.

Regus franchise is an answer to a growing demand for coworking spaces

However, it seems that Regus franchise is not a novelty. Back in 2000, the company went along the franchising route but, it seems, the latter had only limited success. Could there be any underlying problems with Regus franchise?

There used to have both Regus-owned and franchised properties in the same area, which eventually led to competition between them. Eventually, Regus would acquire the majority of its franchises while the rest of the franchises would function under a different name. This time, however, there could be a synergy between the company’s franchised branches and the owned ones. It is believed that the company is choosing the franchising model to expand its presence and increase its value while keeping the capital costs down.  

This could also lead to higher returns to investors and a stronger competition with WeWork that is said to attract an enormous $15-20bn investment from Softbank, a Japanese technology investor.

WeWork's Expansion Model

Unlike Regus, WeWork does not offer a WeWork franchise. The corporation leases commercial spaces, remodels them by creating trendy offices and shared areas, fits with the necessary amenities and offers to companies of different size while charging them a monthly membership. The company is now the largest corporate office occupier in Central London and on Manhattan. It is also considered to be the fastest growing co-working space provider in the world. Perhaps one day the company will offer a WeWork franchise, but for now, there’s no such need as the company attracts enough investment to expand its activity in many places across the world.

WeWork has 42 spaces in London, 61 buildings in NYC and 20 location in Shanghai

In the meantime, there is a cut-throat competition between Regus and WeWork not only as far as expanding of operation and sharing the market goes. Currently, there is a dispute over usage of the term "HQ" which, as it appeared, has long been a registered trademark of Regus. However, recently the term was used by WeWork as well. That served as a basis for Regus to file a lawsuit against WeWork. Moreover, Regus blames its competitor for poaching their clients and making unfair deals with commercial estate brokers who get up to a 100-percent commission for convincing coworking members to choose WeWork over other service providers. This hinders an equal competition.

We’ll see how the battle ends, but one thing is clear: both coworking giants are strengthening their positions in different ways.

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