A turnkey business can be a great deal or a scam.
According to entrepreneur.com, the term "turnkey" refers to a package so complete in providing everything you need to start the business, that you only need to "turn the key" to get it started. A true turnkey package includes everything from locating the site to buying equipment and training employees. Unfortunately most turnkey businesses are not this robust, but they do offer a partial package that will cover most details related to starting a business. A turnkey business, often in the form of franchises, can save you lots of time and money during the start-up phase, but it must be able to generate considerable profits to cover franchise fees and operational costs.
Instructions
1. Research the franchise fee. A turnkey business will profit by charging you a fee to opt in to the opportunity. This price will vary depending on the type of business. You should look into similar turnkey opportunities from different companies and compare fees. If the fee is too high for the type of business, you may have a difficult time making a profit. You should also look at the ongoing royalty payments that the company is going to charge you; make sure this royalty fee doesn't make it impossible for you to make a profit. Compare with other businesses in the same industry.
2. Contact existing owners. Ask the company to list current clients who have purchased the turnkey business. Contact the current owners and ask about the process of obtaining the business, the fairness of the costs and the amount of support from the franchise. List the areas where the clients had difficulty, and clarify these areas with the company.
3. Ask for a cost breakdown. The turnkey business should come with a cost breakdown detailing every individual component. Ask if the labor cost is included in the cost breakdown.
4. Get financing. If the starting cost of the turnkey business is out of your reach, you will need to seek loans or investment from local lenders. Often the company offering the turnkey solution may offer their own in-house financing help.
5. Sign and commit to the turnkey agreement. Consult an attorney and a Certified Public Accountant (CPA) prior to signing the agreement. Have them look over the agreement and flag any potential troublesome areas, or areas that need clarification.
