Trying to figure out which way to go? Franchise or business opportunities come in all shapes, sizes, colors, and risks. For the new and aspiring entrepreneur we’ll explore yin vs yang with respect to both and then “you” decide!
This really has not been a big topic of discussion in the past as the phrase “Turnkey” used to relate to the franchise business only. Only in the last 10 years has turnkey business opportunity’s become a major competitor to franchise ownership. But really, what’s the difference?
Differences of Turnkey vs. Franchise
Well, the most obvious difference is in the price to get started. Typically franchise business startups, cost more to get involved in, whereas the turnkey system is a bit less expensive. Franchises take a little longer to get started (usually months) and turnkeys can be rolled out very quickly (days our hours in some cases).
RELATED: What is a Turnkey Operation?
Franchise openings are much like closing on an expensive piece of property with lawyers involved and boiler-plate language with page after page of contracts. Turnkey opportunities can usually be agreed in writing with a few pages and less legal issues (or no attorney fees). Some often have agreed language when the purchase is made like on the receipt or posted on their websites. So which is better? Who reigns supreme? Well let’s discuss a little bit more before those questions are answered.
The way I like to look at the difference between a franchise and turnkey opportunity is like David and Goliath! With David being turn-key and Goliath being franchise business. Or maybe a better way to look at it is in terms of established investment -vs- risky investment. The franchise would be more like a company that has a track record and is profitable although the only way they are profitable is through their network of franchises. The turnkey business opportunity is more like a company with great vision, younger in life and ready to seek VC funds for the next step in building their model, again the only way they are profitable is through their network of partners.
Similarities of Turnkey vs. Franchise
Similarities you ask? Yes they both have some similarities:
Both rely on outside funding and operational help to fuel revenue. The outside funding comes from you the potential franchisee or partner. Your success is their success. They both have agreements in place and provide support for their investors (franchisees and partners). Both will provide training and some will even offer incentives (like free leads, discounts on services, accounting support, etc).
So who is the big winner? Which is the model investment for an aspiring entrepreneur? Please tell me please!
Well, my rule of thumb for an entrepreneur looking for a solid future investment in another firm’s products or service is to look for future growth and expansion opportunities. What is it that you want to accomplish as an entrepreneur? Most franchises have limitations on what you can do as far as putting your own outside the box creative thinking into the business. A franchise: it is what it is, but that’s not to say that you cannot be successful. For the most part franchises (well established ones) are safer as far as return on investment – it just takes longer to be profitable. You know that Subway is not going to go under and people will walk in everyday and buy the sandwiches. A turnkey opportunity is a lower cost / high risk investment that you can usually be more creative with.
They usually call for low or no overhead (operating expense) and the entrepreneur can come up with cost effective and creative ways to market and sell their systems. Turnkey business opportunities are frowned on by the public and institutional investing community, however for creative and passionate entrepreneurs – they welcome those naysayers and they usually desire to prove them wrong! “Bring the frowns on Mr. Stuffy Wall St. guy, but I own 25 small turnkey businesses that generate an annual gross revenue of $600k”…. is what most turnkey business owners and entrepreneurs want to say! That is the one advantage for an entrepreneur if they choose turnkey solutions – they can (and most do) afford to invest in multiple business ownership. Yes, franchise owners can do the same but at a much greater investment price.
If you are a beaming entrepreneur or entrepreneur to be, why not try out some low cost turnkey business opportunities first? This will give you greater experience if you have limited business knowledge. It also allows you to be extremely flexible and creative in your marketing and sales approach, and offers just as much profit potential as well established franchised businesses.
- Knowing the Do’s and Don’ts in Buying a Franchise
- Researching Franchise Opportunities through Franchise Exhibitions
- How to Raise Money to Finance a Franchise
- What is a Turnkey Operation?
- Pros and Cons of Starting a Franchise Business