Teaching Factory is one of the activities in vocational education to produce products that are managed by teachers and students. The main function of Teaching Factory is: to improve student skills and knowledge in the real job conditions, can substitute industries for being a place for industrial practices and entrepreneurship. The purpose developing Teaching Factory is to increase productive competence abilities of students and school income generation. The productive competence of the students is reflected in the students’ ability to finish a job and soft skills. Income generation is intended to supplement school operating expenses and improve the welfare of teachers and schools. The research results showed that the teaching factory development model implemented is based on: 1) oriented to the consumer needs, 2) human resources capabilities, 3) infrastructure and equipment effectiveness, 4) project-based learning and productive development, 5) increased students’ ability through training, and 6) development of marketing through print and electronic media.