You may have heard the word ‘turnkey’ used to describe their investment opportunity. But if you’re going to put your money into a new venture, you need to make sure you’ve got all the facts. We ask ‘what is a turnkey business?’ and find out how you can make an informed decision.
Put simply, the word ‘turnkey’ is used to describe a ready-made business opportunity; entrepreneurs can simply turn the key, walk in and get started. Usually, investors skip many of the traditional business set-up steps, such as refurbishing the premises, buying initial stock and recruiting and training staff. So, they can get started straight away and work on attracting customers and developing the business.
Investors often decide to put their money into a turnkey business because it eliminates much of the stress other entrepreneurs face when building a new start-up.
Note: Investing in a turnkey business is not always the same as investing in a franchise. As a franchisee, you often play a big part in your unit’s set-up. The franchisor will offer you training and ongoing business support, but you may be expected to do everything else, from fitting out your premises to hiring staff and marketing the unit. As a result, DIY franchise opportunities are often more affordable than turnkey ones.
Advantages of a turnkey business
- It’s a relatively easy and stress-free way to start a business - Turnkey businesses allow you to get started without putting in all the hard work. If you’re willing to pay for the privilege, you can fast-track your way to business ownership.
- There are no limitations - Turnkey businesses usually come without set guidelines, so you can grow it without feeling constrained. The exception to this rule is turnkey franchise models; you’ll have to stick to the regulations set out in the contract agreement.
- There are no ongoing fees - It’s unlikely you’ll have to pay royalties or marketing fees - but you won’t get ongoing business support as you would with a franchise investment.
- Expand quickly - If you can afford the initial investments, you can open multiple business units through the turnkey model. This is useful if you’ve never launched a business before or are interested in multi-unit franchising but want to avoid setting up each branch and paying ongoing fees.
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How to choose a turnkey business
Many people use the word ‘turnkey’ quite loosely, so before selecting your investment opportunity, make sure you do your research. A true turnkey package should include everything from the business concept to equipment, operational strategies and marketing materials.
If you invest in a turnkey business without checking what’s included in the package, you may be wasting your money. There are a few ways to make sure you’re getting a good deal:
- Research, research, research. Take a close look not only at the opportunity you’re interested in, but also other similar turnkey businesses advertised by other organisations. By putting the packages side by side, you’ll be able to get a good idea of how your choice compares.
- Meet with the business owners. Request a breakdown of costs in advance, as this will allow you to make sure none of the individual components have a huge mark-up. Having read through this breakdown and discussed the opportunity with the business owners, you should be able to ascertain whether the convenience of the package is worth the money you’ll pay.
- Speak to existing business owners. They will have no reason to lie to you. Ask whether they feel satisfied with the experience they’ve had and whether the process went smoothly. Take their advice on board and use it to inform your decision.
- Consult a specialist solicitor. Once you have a copy of the business agreement, ask a legal expert to review it for you. They’ll be able to alert you to any red flags and minimise the chance of you encountering nasty surprises further down the line.
- Check and check again. Once you’ve signed the agreement, there’s no going back, so make sure you’re happy with your decision and feel you will be for years to come. Be extra careful if your chosen turnkey business is also a franchise opportunity. If this is the case, you may be hit with a double whammy – extra costs to start the business on your behalf and ongoing royalty fees. Make sure the support you’re getting is worth the money.
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Turnkey business examples
Here are a couple of examples of franchise food brands offering turnkey business opportunities:
If you want to run a business under a big-name brand without the hassle of setting up the site yourself, sandwich franchise Subway could offer you the opportunity you’re after. If you buy a turnkey outlet, you’ll be able to buy a furnished store complete with everything from menus to marketing materials.
In return for using Subway’s internationally recognised branding, you’ll have to pay the franchise fee and any ongoing costs.
Canadian fast-food franchise Tim Hortons also offers a turnkey model. The business will set up your unit and appoint a team of staff. It will also help out with admin, promotions and national marketing schemes.
As a Tim Hortons franchisee, you’ll benefit from the brand’s powerful global presence, but you’ll need to be willing to pay for the luxury. Investors must have over £1.1 million in assets, as well as £376,000 in capital.
Here at Point Franchise, we help savvy investors find the perfect business venture. Franchising gives you the chance to become an entrepreneur without the added stress that comes with setting up a site from scratch. Whether you’re interested in becoming a franchisee or investing in a full turnkey model, we have opportunities to suit your requirements.
Take a look at our UK franchise directory to see our full list of current openings. Alternatively, use the menu to sort businesses by sector or investment price. No matter your criteria, there should be a franchise for you.
Alice Tuffery, Point Franchise ©