INCO Commercial specializes in commercial and industrial real estate, which is commonly associated with apartment buildings, warehouses, offices, industrial parks, and more.
We are also involved with restaurant spaces, some of which can be purchased as turnkey businesses. Turnkey restaurants or businesses are an excellent opportunity to make an investment and have the potential of generating cash flow from the first day you take over the operations. Here we explore the benefits of owning a turnkey restaurant, and other things to look out for.
Advantages of Owning a Turnkey Restaurant
The known benefit of a turnkey restaurant is that everything is already established and ready to go. There is no time expense of building up and designing your space or developing a business plan; and if it’s a full package turnkey business, then training and management support are already in place and only the investment capital is required. It’s a great way for newer business owners and restaurateurs to gain experience in the industry with a reduced risk of failure compared to starting a brand-new business from the ground up.
Often turnkey businesses are well-established franchises with a recognizable brand and a solid customer base. A large up-front cost can be expecting in acquiring a turnkey, but our agents can help distinguish whether there has been an exorbitant mark-up, and, if possible, even inquire with other franchisees if necessary for comparison. A franchise fee, and on-going royalty payments to the parent company are also common, or their money may be earned on proprietary products or recipes which must be purchased for the franchise. The regular operating costs of a restaurant are still applicable: utilities, rent, product inventory, insurance, building maintenance, and so on.
If this franchise is not a new location, finding out why the previous franchisee is selling can give insight to the success of your future investment. The reasons can be harmless; perhaps they were instrumental in getting the business up and going, and it’s time to move onto their next venture, or maybe they are simply retiring. Even if the reasons may indicate a slight risk, it could have been a poorly managed operation, and you may have the skillset and strategy to turn it around and see success and higher profit margins. We are ready to help you examine all of these factors and determine whether a particular turnkey is the right investment for you.
If you are planning on taking over an existing operation, INCO Commercial can guide you through the necessary particulars to get the overall picture. A review of the full inventory can be requested to get an idea of the regular purchasing costs. Finding out if the current staff will remain or if a hiring process is necessary is important; sometimes the parent company can assist with hiring procedures, but typically it’s up to the franchisee. If the current staff does agree to stay on, expect a discussion of salary negotiations, which often happens during a time of ownership or management change. If the turnkey is of a well-established franchise, then a good marketing plan should already exist. However, if it’s a newer brand or lesser known business, then discovering what kind of marketing strategies have been successful (or not) in the past can help guide the planning of your marketing campaign in the local area.
INCO Commercial will also assist in performing due diligence on a prospective turnkey business to protect against any surprises and ensure your decision to invest will be an informed one.
Things to Consider with a Turnkey or Franchise Business
A turnkey franchise is great for people who have the investment capital and are looking to enter the restaurant industry without all of the risk of building a business or brand from the ground up.
However, there are some limitations, which largely have to do with creative and procedural decision-making. Because the customer base of a well-established franchise is expecting the same quality and similar experience from each location, franchisee operators must follow strict guidelines provided by the franchisor. These already-proven models guarantee the success of the franchises and ultimately the parent company. Any breach of contract or failure in complying with the standards are grounds for termination of contract between a franchisor and franchisee owner. Expansion is another limitation; franchisors will not want individual franchises competing with each other, so owning two of the same franchise within a small geographic area is unlikely.
Is a Turnkey Restaurant for You?
The largest advantage of a turnkey restaurant still remains that the business is generally ready to go when you take over operations. Depending on the kind of turnkey restaurant, you may want to consider a few things about your business style before choosing what you’d like your investment to look like.
If your turnkey restaurant is part of a well-established franchise, make sure you are agreeable to working within a highly structured organization. If you enjoy more creative control or flexibility, then independently owning your own restaurant might be the better direction for you. If you’re at the early stages and unsure which path is better, INCO Commercial always performs a Client Needs Assessment to help us understand your priorities and requirements. We can help you better understand your options and which would be the right match for you.
When you’re ready to venture into the restaurant industry, whether you’re looking for a turnkey restaurant, or break ground and independently own and operate an establishment, INCO Commercial is here to help! Check out our inventory of turnkey and restaurant spaces, and contact us through our website or give us a call at one of our locations most convenient to you!