Turnkey Franchise Minnesota

On the surface, this sounds like a great idea. You pay your fee and the franchisor researches the location, signs the lease, builds out the unit, supplies you with start-up inventory, finds and trains the staff, and orchestrates the grand opening. All you have to do is “turn the key” to open your new business.

There are plusses and minuses to a turnkey franchise. It could be a great advantage to you because of the work and aggravation it can save. It may also be an unnecessary expense if the package is overpriced for what it offers.

If the business you are looking at getting into says it is a turnkey opportunity, here are some ways to evaluate the value of the package offered.

1. Most franchisors offer only a partial turnkey program, doing some but not all of the items mentioned above. Make sure you understand what they will help you with and what tasks you’ll need to tackle yourself.

2. You should expect to pay a reasonable price for the labor involved in putting the package together, but not an outrageous price. If the price seems high, ask for a breakdown of the services provided.

3. Group purchasing power is a definite benefit of franchising. You can expect to get a good deal on the components needed for the business since you are taking advantage of the buying power of the chain. Make sure you have an understanding of the savings.

4. Ask the current franchisees about the value of the turnkey package. You’ll be calling them anyway as part of your due diligence so be sure to cover this topic thoroughly. Ask them if they feel they got a fair value for the turnkey package and if the process went as smoothly as they expected.

5. Finally, remember that you are paying a large up-front franchise fee and substantial ongoing royalty payments to this franchisor. These are accepted costs of a franchise business. You should not also have to pay a large markup above the actual costs to put the turnkey package together. Take the time to understand all facets of the process and the associated costs.

That being said, there are always exceptions to the rule. Some franchisors do not charge a royalty but actually make their profit by selling you the components of a franchise. For example, a smoothie franchise may sell you their proprietary kiosks and ingredients rather than charge you a royalty fee. The franchisor’s profit comes from the mark-up on the products they sell you.

Again, you should expect a fair price and the best way to determine if the price is fair is to ask the existing franchisees. Ask them if they are happy with the prices they are charged and if they shopped around before signing with the franchisor to see if this was the best deal they found.

Hellmuth & Johnson, PLLC

952-941-4005
10400 Viking Drive, Ste 500
Eden Prairie, MN
http://www.hjlawfirm.com