Turn-Key Franchises & Investments

“The term “turn-key” refers to franchise support so comprehensive that everything an investor needs to launch is determined and executed on his or her behalf.”

A turn-key investment opportunity in the franchise world is almost an oxymoron – while there are certainly franchises that supply investors with businesses ready for immediate operation, there is always an element of work involved. Still, relative to other categories, turn-key franchises supply franchisees with significant planning and resources to get their businesses up and running. Just add time, energy and a bit of sweat to unlock a new, relatively streamlined revenue source.

The term “turn-key” refers to franchise support so comprehensive that everything an investor needs to launch is determined and executed on his or her behalf. The franchisee pays the fee and the franchisor researches the location, signs the lease, builds out the unit, supplies start-up inventory (if applicable), identifies and trains employees, as well as a host of other support activities. The idea is that the franchisee need only “turn a key” to open the door to his or her very own business.

But as with anything, not all turn-key franchises are created equal. Beware of franchisors that claim to offer a turn-key opportunity but won’t divulge adequate details of the arrangement – they may instead be offering overpriced turn-key franchises without the depth and breadth of resources one should expect for such an investment. On the other end of the spectrum, a strong turn-key investment that is well-rounded, thoroughly supportive and transparent can be a very wise endeavor.

Evaluation of a turn-key investment opportunity takes time, but here are some initial criteria to seek in a franchisor offering this type of package:

  • Most franchisors offer some degree of turn-key support – it’s one of the prevailing benefits to working in a franchise system. However, an investor should insist that the franchisor explicitly details what it will provide the franchisee, and what (if anything) the franchisee will need to manage independently

  • The ability to speak with current franchisees is crucial. As part of the due diligence process, ask them if they feel they derived commensurate value for their turn-key investment and if the process went as smoothly as they expected

  • Finally, don’t forget that franchisees pay a significant upfront fee and ongoing royalties to the franchisor. While these are accepted costs of a franchise business, investors should not also have to pay a markup above actual costs for the franchisor to build the turn-key package

The turn-key investment can be a great, low-maintenance way for an investor to take on business ownership, but it’s also a strategic offering by the franchisor. The franchisor that offers a turn-key franchise package does so because it helps to ensure consistency and quality across the chain. Both parties win when the franchisee is given all the tools it needs to execute the brand in the marketplace and succeed.