If you’ve been researching franchise ownership, you’ve probably encountered the term “turnkey.” Turnkey franchises are franchises that come to you ready to operate. The franchisor (parent company) finds the location, purchases or leases the building, manages the buildout, stocks your startup inventory, hires and trains your staff, and does the launch marketing for you. You just have to “turn the key” to start doing business.
Sounds fantastic, right? Wait just a minute: as wonderful as turnkey franchises sound, they have both advantages and disadvantages. Let’s look at some of the key factors you should consider if you’re interested in turnkey franchising.
The Cost of Turnkey Franchises
For obvious reasons, turnkey franchises generally cost more. After all, the franchisor is incurring significant costs to get you up and running. If you’re trying to decide whether the extra cost is worth the convenience, do a little research to determine how much it might cost you to do the buildout, staff acquisition, and other startup tasks on your own.
Once you factor in your direct costs and the cost of your time, you may find that the higher franchise fee is a good trade-off. Your franchisor may get discounts with suppliers, contractors, and employment agencies that are not available to you. On the other hand, you may find that the increase in your franchise fee is much more than the cost of handling the startup process yourself. Especially if this is not your first franchise, you may be able to draw on your own relationships with vendors to obtain discounts or other concessions.
Setup Times for Turnkey Franchises
You should also consider the time involved in setting up a turnkey franchise. Your franchisor has probably gone through this process dozens, if not hundreds, of times. They may have everything down to a science, with vendors at their beck and call, so that they can get a franchise up and running more quickly than you could on your own. On the other hand, you may have to get in line behind other franchisees who are going through the same process.
Also consider the value and availability of your own time. If you’re working a day job, live in another city, or plan to be a semi-absentee owner, you may not be willing or able to manage a buildout, interview potential employees, and coordinate a grand opening. A turnkey agreement may be just what you need.
Turnkey Franchises And Flexibility
Another possible drawback to turnkey franchises: lack of flexibility. When the franchisor is paying for and managing the startup process, they’ll probably also be the ones making the decisions. You’ll get little to no say in the timeline, the look of your space, the launch-marketing plan, or even who your staff are.
If you’ve never run a business before, you may want this kind of arrangement. You can lean on your franchisor’s experience and connections to help get you off on the right foot. On the other hand, if you’re the kind of person who likes to be in control of a situation, or you have business experience, you may prefer to make certain decisions yourself. In that case, a turnkey arrangement is probably not right for you.
The Middle-of-the-Road Option
When it comes to turnkey franchises, be aware that many franchisors offer a middle-of-the-road option. They may handle the startup process but give you significant input, or they may manage the buildout while you handle the marketing. This kind of arrangement can be less expensive than a full turnkey agreement. It can also be helpful for franchisees who want to be involved in the startup process but don’t have the time or resources to handle it all. If you’re not sure whether a particular franchisor offers full or partial turnkey services, just ask.
It’s Still Your Business
Remember: even if you purchase a turnkey franchise, it’s still your business. You’ve invested in it, and the profit or loss will affect your bottom line. So make sure you ask plenty of questions. Get an itemized breakdown of where your money is going and the timeline for each stage of the startup process. Your franchisor should provide regular updates and be responsive to your questions or concerns. If you can, stop by the location periodically to check on the progress of the buildout. Ask to meet new employees before the grand opening, and do your part to spread the word about your new business.
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