What Is a Turnkey Business?

A turnkey business is a business that is ready to use, existing in a condition that allows for immediate operation.

The term “turnkey” is based on the concept of only needing to turn the key to unlock the doors to begin operations. To be fully considered a turnkey solution, the business must function correctly and at full capacity from the moment when it is initially received.

Key Takeaways

1.A turnkey business is a for-profit operation that is ready to use as-is the moment it is purchased by a new owner or proprietor.

2.The term “turnkey” is based on the concept of only needing to turn the key to unlock the doors to begin operations, or to put the key in the ignition to drive the vehicle.

3.Turnkey businesses include franchises, multi-level marketing schemes, and among others.

How Turnkey Businesses Work

A turnkey business is an arrangement where the provider assumes responsibility for all required setup and ultimately provides the business to the new operator only upon completion of the aforementioned requirements. A turnkey business often already has a proven, successful business model and merely requires investment capital and labor.

The term refers to a corporate buyer just having to “turn” a “key” to commence business activity.

A turnkey business is thus a business that is ready to use, existing in a condition that allows for immediate operation. The term “turnkey” is based on the concept of only needing to turn the key to unlock the doors to begin operations. To be fully considered turnkey, the business must function correctly and at full capacity from when it is initially received. The turnkey cost of such a business may involve franchising fees, rent, insurance, inventory, and so on.

Turnkey Businesses and Franchises

Often used in franchising, a firm’s high-level management plans and executes all business strategies to ensure that individuals can buy a franchise or business and start operating immediately. Most franchises are built within a specific pre-existing framework, with predetermined supply lines for the goods required to begin operations. Franchises may not have to participate in advertising decisions, as those may be governed by a larger corporate body.

The advantage of purchasing a franchise is that the business model is generally considered to be proven, resulting in a lower overall failure rate. Some corporate entities ensure that no other franchise is set up within the territory of an existing franchise, limiting internal competition.

The disadvantage of a franchise is that the nature of the operations may be highly restrictive. A franchisee may be subject to contractual obligations, such as items that can or cannot be offered, or where supplies may be purchased.