Switchyards to add 2 locations, after accidentally overselling Nashville memberships
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Switchyards to add 2 locations, after accidentally overselling Nashville memberships
The Atlanta-born co-working club slashed the price of the $100 memberships in half
An east Nashville office is in need of a waiting room. Switchyards, an Atlanta-based co-working brand, is scrambling to find space after “accidentally overselling” memberships for its Nashville location that opened last month.
The flex office space, which is housed inside an 8,000 square-foot century old church in east Nashville on Chapel Avenue, announced it would offer 500 founding memberships at $100/month in mid-July.
But a month after launching an aggressive Instagram ad campaign, Switchyards slashed the price of its monthly membership for what was supposed to be 250 spots.
It was a first for the office space operator. Switchyards didn’t discount memberships when it opened its nine other locations.
Were they struggling to sell memberships in a new market? CEO Michael Tavani claims that wasn’t the case.
“We wanted to create a buzz,” he tells Tennbeat. “It's our first location outside of Atlanta and our 10th total. We wanted it to be special.”
The bargain basement price created a buzz — and a problem. According to an email sent to waitlisters, the company sold 758 memberships — 508 more than they intended — at the $50 promotional price.
“We had 250 Memberships, but by the time we were able to pause sales in our stem, 758 had been purchased,” the company wrote in the email. “We planned for a number of scenarios, but not one where this many memberships would sell in a matter of seconds.”
Tavani dismisses the idea that there was any sort of software problem. Was it a marketing ploy, a sort of bait and wait? He insists that wasn’t it either. However, he doesn’t offer much explanation for how the “overselling” occurred.
Switchyards will honor the $50 promotion price for waitlisters when it opens its second Nashville location. But when is “when”? Tavani couldn’t offer an exact answer — only that his team is actively looking for the right lease.
“Our real estate team is laser focused on finding space,” he says. “We’re not just going to open one more, but two more in Nashville.”
The peachtree company already had plans to expand in Nashville prior to the membership mishap. It simply “expedited the timeline.”
Tavani says they will stay in east Nashville for their second location. However, they’ll likely head over to Wedgewood-Houston or West Nashville for their third.
“Now, when people go on our site to sign up for our Nashville waitlist, we’re asking them what area they want us to be in,” he tells Tennbeat. “We are going to use that data to help determine our third. We’ve received a lot of interest in those areas.”
Switchyards has just over a 1,000 people on its Nashville waitlist — including the 508 from the August offer.
The two slated spaces, Tavani mentioned, will be quite a bit smaller than the re-adapted chapel he dubs the “Nashville flagship”.
“Nashville is our largest location,” exclaims Tavani. “Most of our other locations are between 2,000 to 4,000 square feet. ”
He declined to disclose how many memberships the company will sell or if they'll offer fewer at each location — since the spaces will be smaller.
What’s the allure?
Why are Nashvillians clamoring to be a part of this co-working club?
There’s no shortage of alternative workspaces in Nashville. People can pick whatever panache they prefer — whether that’s women-only, targeted towards tech workers, or caters to creatives, there’s ample alternate workspace options to choose from, but they aren’t all 100% occupied. They don’t have four-figure long waitlists.
Could it be the cost? Sure, the $50/month promo price is certainly a rate to write down. There isn’t a cheaper flex office option in town.
$100/month — Switchyard’s standard rate — sounds like a steal, but in reality, the rate isn’t revolutionary. There are several comparable co-working options — offering 24/7 access and free coffee. $100 at the Nashville Entrepreneur Center gets you that plus a PO box.
Perhaps, it's the anthropologie-esque aesthetic? It's a stark contrast to the cold, often clinical design donned by most satellite spaces.
All of these attributes add to the overall allure, but they aren’t what sell Switchyards. The club’s unorthodox appeal is rooted in convenience.
Convenience
Most mainstream flex office operators set up shop in central business districts — where commutes are often 20 to 30 minutes one-way. According to a 2021 Costar report, WeWork members commute an average of 26 minutes one way.
Meanwhile, Switchyards selects sites in neighborhoods adjacent to urban cores — where potential members live and commutes are often under 15 minutes, if not walkable or bikeable.
“It’s convenient,” says Patrick Cason, a tech founder and Nashville Switchyards member.
John Stamps agrees. The location allows the 31-year-old entrepreneur and east Nashville resident to toggle between work and home.
“It’s close, he says. “I can roll out of bed and be there in a couple minutes. I don’t think twice about running home for lunch.”
Short commutes aren't the only convenience driving demand. Unlike WeWork where parking is a pain or not offered (50% of locations don’t offer on site parking) parking at Switchyards is simple thanks to on-site, surface lots with unassigned spots.
“It’s easy to get in and out of,” says 34-year old Kelley Griggs, a tech founder and busy mom of two. “You don’t have to worry about finding a spot or remembering to validate a ticket.”
The Investment Math:
Switchyards raised a $3.4 million seed round in March and has opened five new locations this year, including Nashville.
Some investors may be scratching their head wondering why anyone would put capital into a coworking company. After all, WeWork didn’t work out too well.
But the math works out, if a few variables are switched.
Variable 1: Location
Like Wework, Switchyards leases most of its locations. The Atlanta outlet only owns one of its buildings. But unlike Wework who pays a premium in rent, Switchyards pays a pittance.
Whereas WeWork hunts for high rises in downtown areas, where rent is notoriously expensive, Switchyard’s searches for avante-garde space — like the old chapel — in areas where rent is reasonable.
But rent isn’t the most salient variable Switchyard’s model swaps. Amenities — or rather its lack thereof — are what really solves the profit problem WeWork encountered.
Variable 2: Amenities
Wework has more amenities than a Hilton hotel. Each location has a full-kitchen and a myriad of meeting rooms — most have gyms, many have pools and some even have high-end golf simulators.
Amenities require maintenance. Maintenance means money. Kitchens need to be cleaned. Pools and hot tubs have to be treated. Gym equipment— bound to break — has to be serviced and often replaced.
Switchyards saves money by ixnaying expensive amenities altogether, and only offering one membership. There are no gyms, no pools, no kitchens, not even a microwave — just coffee. No amenities, no pricey problems.
The absence of amenities makes it easy and less expensive to manage. It’s not necessary to have a warm body in the building 24/7 like it is at WeWork. A single employee or as Switchyard calls them “community managers” can run several sites in a single city.
The outfit doesn’t offer designated desks, private offices or tech packages. There’s no customizable menu of memberships. It’s a simple, one-size fits all offer — $100 month-to-month, cancel anytime.
With a single tier, tours are short and decisions don’t take long. Designated leasing agents aren’t needed to explain or upsell options. In the event someone cancels a membership, there’s a warm waitlist of entrepreneurs all eager for the same offer.
A lesson to be learned
Like Chick-fil-A, Switchyards understands that customers care more about convenience, consistency and simplicity than a massive menu.