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What is a "turnkey contract?"

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Quick Answer

A turnkey contract is a business agreement in which a company is given the responsibility of planning and building a product that can generate cash flow for the client upon completion. Cambridge Dictionaries Online uses the example of a stadium being built, while Investopedia describes Subway sandwiches as an example of a turnkey business that requires only capital and labor to begin.

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RICS explains that the advantages of turnkey contracts include the possibility of more efficient work produced by a developer and increased time for the client to seek financing and investors. Turnkey contracts are also helpful for inexperienced clients who lack the knowledge to oversee progress. However, RICS also points out that turnkey contracts do not allow clients to have input during design and construction, which sometimes results in a less satisfactory end product. "Turnkey" is also used to describe buildings or the sale of goods and services.

In real estate, Wikipedia explains that turnkey refers to a location ready for occupation. For example, a turnkey hospital is a complete medical center that comes with a full range of pre-installed medical equipment. The term is synonymous with "off the shelf," and as a consequence, products are less customizable, such as in the sale and purchase of a turnkey car that includes the drivetrain.

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