Latest / Franchise Conversations with Fexingo: Buying, Running, and Scaling Franchise Businesses / How Franchisees Use Co-Working Spaces to Reduce Overhead
Transcript
- Lucas: So there's a sandwich franchise in Columbus, Ohio — six locations, all in suburban strip centers — and the owner told me that his single biggest fixed cost, year in and year out, is rent. No surprise there, right? But what he did about it is interesting. Luna: He subleased part of his dining room to a co-working operator. Lucas: Exactly. He had about 800 square feet that was basically dead from 2 PM to close. Lunch rush fills it, but after that, it's empty tables. So he carved off a section, put in a separate entrance, and now a local co-working company rents it for $3,000 a month. Luna: That's real money. On a typical franchise unit, that could be 15 to 20 percent of your monthly rent covered right there. Lucas: And that's the angle I want to drill into today — franchisees using co-working or shared workspace arrangements to reduce their occupancy burden. It's not for every concept, but for the right franchise, it can fundamentally change the economics of the unit. Luna: This is one of those conversations where if it gives you one practical idea you can take back to your own operation, that's the whole point. And by the way, the reason these episodes stay ad-free is listener support. If this kind of detailed, specific content helps you run your business better, you can keep it going at buy me a coffee dot com slash fexingo. No pressure, just a way to say this matters. Lucas: Yeah, and we mean that — it's how we keep doing deep dives on stuff like this. So back to Columbus. The owner I talked to, he's been a franchisee for about eight years. He said the idea came from a friend who runs a yoga studio and rents out space to massage therapists. He thought, why can't I do that with sandwiches? Luna: And the franchisor was okay with it? Lucas: That's the first hurdle. Most franchise agreements have pretty strict language about assignment and subleasing. But in his case, the co-working operator isn't selling food, there's no signage visible from outside, and he kept the lease amendment simple. The franchisor's real concern is brand control — they don't want a tattoo parlor next to the register. Luna: Right. So the key is finding a tenant whose use is compatible. Coworking is pretty benign — people with laptops, coffee, maybe some meetings. It's almost like an extended lobby. Lucas: But it's not just sandwich shops. I've seen this work in a gym franchise — a Planet Fitness or an Anytime Fitness type — where they subleased a corner of the floor to a physical therapist. The PT brings in clients who then sign up for memberships. It's a two-way street. Luna: And I've heard of a hair salon franchise that rented out a couple of stations to independent stylists on a daily basis. That's essentially coworking for beauty. Lucas: Exactly, that's the same principle. The numbers pencil out if you're underutilizing space for more than, say, four hours a day. For a quick-service restaurant, that afternoon dead zone is brutal. For a retail franchise that's slow on weekdays, same thing. Luna: What about insurance? If someone trips over a laptop cord in your sandwich shop, who's liable? Lucas: Big question. The franchisee I talked to added the co-working operator as an additional insured on his general liability policy, and the coworking company also carried its own. He said his premium went up about $400 a year. Worth it for $36,000 in annual rent. Luna: So the math works. But what about the logistics? Separate entrance, separate bathroom? Lucas: He built a simple partition wall — cost about $12,000. The coworking operator contributed $5,000 toward it. They also put in a separate door to the parking lot. The restrooms are shared, but he already had a public restroom, so that wasn't an issue. The key is that the coworking space doesn't have to be open during his operating hours. It has its own key system. Luna: So the coworking members come and go even when the restaurant is closed. That could be a security concern. Lucas: It is, but he mitigated it with cameras and a locked door between the coworking area and the kitchen. The coworking company handles its own member management. He doesn't even know who's in there most of the time. Luna: And the franchisor never tried to stop it? Lucas: Not in his case, but I've talked to other franchisees who tried similar things and got pushback. One pizza franchisee wanted to rent out his dining room after 9 PM to a local board game club. The franchisor said no — they were worried about the brand being associated with late-night crowds. So it really depends on the concept and the relationship. Luna: It feels like this works best when the franchise already has a flexible, open layout and the co-working tenant is quiet and professional. A pizza place with a loud game night might be a different story. Lucas: Right. And the trend is bigger than just one-off deals. There's a company called 'The Office Pass' that specifically partners with restaurants to turn their unused space into coworking during off-peak hours. They handle all the logistics — furniture, Wi-Fi, cleaning — and pay the restaurant a flat monthly fee. It's almost like a franchise within a franchise. Luna: So instead of the franchisee having to manage the sublease themselves, they outsource it. That lowers the barrier significantly. Lucas: Exactly. And that model is scaling. The Office Pass is in about 40 locations now, mostly in the Midwest and Texas. They target restaurants with at least 1,500 square feet of dining space and a lunch-heavy sales curve. The restaurant gets $2,000 to $5,000 a month, depending on the market. Luna: That could be the difference between a unit that's barely breaking even and one that's actually profitable. Especially in markets where rents have gone up 20, 30 percent over the past few years. Lucas: And that's the macro context here. As of mid-2026, commercial rents in many suburban strip centers are still elevated because there's limited new construction. Franchisees are getting squeezed. Creative solutions like this are becoming necessary, not just nice to have. Luna: But isn't there a risk that the co-working operator goes under and you're left with an empty partitioned space? Lucas: Absolutely. The franchisee I talked to required a six-month security deposit and a personal guarantee from the coworking company's owner. He also made sure the lease allowed him to reclaim the space quickly. His worst-case scenario is he tears down the wall and puts the tables back. That's about $3,000 in restoration. Luna: So the downside is manageable. And the upside is significant. I'm surprised more franchisees aren't doing this. Lucas: I think the biggest barrier is simply not knowing it's an option. Most franchisees are so focused on the core business that they never look at their lease and think, 'Who else could use this square footage?' But once you see the numbers, it's hard to unsee. Luna: So for a franchisee listening right now, what's the first step? Lucas: Pull out your lease. Look for clauses about assignment, subleasing, and permitted use. Then have an honest conversation with your franchisor — not asking permission, but saying, 'I'm exploring ways to make my unit more profitable, and this is one idea. What are your concerns?' Most franchisors will at least listen if you frame it as a partnership. Luna: And if they say no? Lucas: Then you've lost nothing but a conversation. But if they say yes, you could be looking at an extra $30,000 to $60,000 a year in effectively pure profit. That's not a small number. Luna: It's also a reminder that the real estate itself is an asset. Franchisees sometimes forget they're in the property business as much as they're in the sandwich or fitness business. Lucas: That's exactly right. The smartest franchisees I know think of their lease as a balance sheet item, not just a cost. And if you can find a way to make that asset work harder, you're building real equity. Luna: Alright, so to sum up: look at your dead space, check your lease, talk to your franchisor, and consider partnering with a coworking operator or going direct. The math is compelling. Lucas: And if you've already tried something like this — or you're thinking about it — we'd love to hear how it goes. That's it for this episode. I'm Lucas. Luna: And I'm Luna. See you next time on Franchise Conversations.