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Absentee Ownership in Franchise: A Win-Win Solution for Both Franchisor and Franchisee

Win-win solution

Win-win solution

A conventional wisdom on franchising says that absentee ownership is not ideal in running franchise units; Therefore, most franchises offer franchising opportunities that do not allow absentee ownership. Perhaps they should think about allowing absentee ownership, as it presents a win-win solution for both franchisee and franchisor.

Absentee ownership means owners who are not physically present on-location to manage their franchise unit’s daily operation.

Non-absentee ownership requirement is justified due to the fact that franchisors need to maintain franchise operation quality standard across their franchisees, and to achieve this, they require non-absentee franchise unit owners. Of course, there are some exceptions, such as in semi-automatic franchises, e.g. vending franchises, convenience store/mini mart franchises, etc.

Today’s trends show that the issue of absentee ownership has shifted, favouring franchises that allow absentee franchise unit ownership. Let us explore a bit deeper about absentee ownership in franchise unit ownership.

Why absentee ownership is highly desirable

Absentee ownership is probably most franchisees’ dream – The ability to own performing franchise units that are run automatically with the help of the franchisor.

Let us take a mini mart franchise as an example (I assume the franchise practices system automation well and allows absentee ownership.) A mini mart’s daily operation is “predictable” – POS (point-of-sale) system, stock control, product display system, cash management system and the general management system. By nature, it is made for absentee ownership, as long as the franchise is doing a great job in setting up the system automation.

What makes the mini mart franchise interesting is that the owner/franchisee is only required for basic management. Finances are managed by the franchisor, as well as the daily operation. Quarterly, you will receive your financial statements and reports.

The bottom line is, being an absentee owner allows you to receive passive income (semi-passive income, to the least) from your business.

Absentee ownership is a win-win solution for both franchisee and franchisor

From my experience, having franchisees involving and mingling too much with the daily operation can be ineffective, especially with those who are pure entrepreneurs (uncomfortable in following set rules) or “rebels” (if things aren’t broke, they break them – With the hope for the better.)

Franchising works wonder if the owners follow every detail in the franchise operating manual. Due to that, allowing absentee ownership, logically, can help franchisors to manage franchise units better and allowing franchisees to have their “liberty” and let them focus on better things – How to promote their franchise unit.

A win-win solution still needs strong franchisee-franchisor collaboration

Even a win-win solution needs exceptional collaboration and team-working between a franchisor and the franchisees.

Franchisors must understand that allowing absentee ownership will put their proven systems on test – Will they constantly work well in any given situation? This could mean much more resources are needed to maintain a well-oiled system.

On the other hand, franchisees must understand that being absentee owners will put more responsibility on them – Will they be able to manage their franchise units without the franchisor’s close supervision? Will they be able to grow their franchise units, even if they are not physically around?

Again, finding the right balance is the key in every sense of franchising, including in the issue of absentee ownership.

Ivan Widjaya
I fave absentee ownership
Image by gabivali.

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