Gig economy fuels Office Evolution
CEO Mark Hemmeter, has seized upon the shared economy trend with Office Evolution, the franchise that features shared work spaces like those shown in top photos.
There must be some great kindergarten teachers out there because we’ve all learned how to share really well. We share our rides, our boats and even our homes through various portals.
Office Evolution has jumped into that sharing economy by seizing on the growing shared-office trend. The Denver-based company has grown to 31 locations since founder and CEO Mark Hemmeter started the company in 2003. It started franchising in 2012 and has since awarded 45 franchise licenses that put more than 90 locations in the pipeline.
Big names in the industry try to look like a Silicon Valley-style place, seemingly keen on attracting entrepreneurs who hammer out code for the next hot app. But Hemmeter said there are a lot of seasoned independent business owners looking for a shared office environment.
“We have a very specific focus: local small business owners who live in the suburbs. Typically they are white-collar professionals, insurance agents, mortgage brokers, lawyers—that’s probably 80 percent of our clients,” said Hemmeter. “This is not a millennial tech startup world, it’s a 40-year-old.
CEO Mark Hemmeter
And unlike the cash-and-burn startup world, these remote and independent workers are the new—and stable—norm.
“The average tenure is well over three years, but I’ve had clients stay for much longer,” said Hemmeter. “I founded the company in 2003 and I still have many clients from back then.”
“Contingent” or alternative employment is growing for Office Evolution, whereas the startup world still hasn’t returned to pre-recession levels. According to the Census Bureau, startup firms created about 2 million jobs in 2015 compared to 3.3 million in 2002-2006.
Those independent workers, however, are growing across demographics. While it’s difficult to get much clarity on exactly how many contingent workers there are out there, the U.S. Government Accountability Office estimated that 40.4 percent of the workforce was already in an alternative work situation in 2010 (the last available data). And a recent Gallup poll showed that 43 percent of employed Americans worked out of the office at least some of the time.
Many of those workers need a place to meet clients, get mail or just take a break from a distracting home office. Office Evolution aims to capitalize on other trends around telework, remote teams used by offices to cut overhead or attract remote market expertise.
While the company reports a growth rate of 75 percent over the last three years, there’s still room for more.
“Of all the office space leases that are coming up for renewal, if you took 1 percent of those leases into a shared environment, you would double the size of our industry,” said Hemmeter. “So if you compare our industry to the traditional office industry, it’s incredibly small.”
That, he says, means growth opportunities for prospective franchisees.
It costs between $217,000 and $749,000 to start an Office Evolution franchise.
In exchange for the royalties, Office Evolution provides a central service center for technology, billing, call centers and lots of marketing collateral so the franchisees can focus on leasing more offices.
It costs between $217,000 and $749,000 to start up, including a $50,000 franchise fee. The cost, of course, swings wildly with rent from market to market. Generally, franchisees lease a part of an existing office building.
“The ideal franchisee for us is a husband-wife team, one of them still employed, somebody who isn’t looking to buy themselves a job but for a long term recurring income stream but also one where they play a big part in the community since they are a big centralized place for local entrepreneurs,” said Hemmeter.
According to the company FDD, affiliates grow gross billings from about $184,000 in the first two years to $454,000 beyond the three-year mark. Gross operating profits after royalties (7.5 percent of gross billings), technology fees and brand development fund (3 percent of gross billings) grow from an average loss in the first one to two years of $17,000 and grow to $163,000 at locations operating for more than three years.