The primary issue to consider is that the current owner will be placing a value on the business above and beyond the cost of franchising.  So you will need to evaluate what you will have to pay the franchise to take over the business, and what you will pay the current owner to sell it to you. In short, you will be paying the current owner an amount that represents what he or she believes it is worth in addition to what you will pay the franchise system.  This means that you will almost certainly pay more for an existing franchise than if you started as a brand new franchisee.  In most cases, though not all, the franchise will want to have the opportunity to approve you as a franchisee, and obtain a franchise fee from you.  Certainly any ongoing franchise payments such as royalties, and advertising fees will also continue to be due.

In contrast if you purchase an existing non-franchised business, the value of the business will be entirely determined by what the current owner believes it is worth.  In most cases the owner will back up his or her beliefs by accounting reports, sales figures etc., but at the end of the negotiation it really just comes down to what you as the potential buyer is willing to pay.  It is often well worth the expense of bringing in a CPA to help you evaluate the purchase price.

When purchasing a franchise directly from the franchise system, the cost of the purchase will be detailed in the Franchise Disclosure Document and of course the final purchase contracts.  The cost will almost certainly include a franchise fee, and may include separate items such as training costs, travel for training, equipment purchases, the cost of leasing space if you operate a retail location, lease holder improvements if necessary, grand opening expenses etc.  While this list is long, just remember that it will still probably cost you less than purchasing an identical existing franchise, but you will be responsible for building up the business and creating cash flow for your operations.  In the best of circumstances, when you purchase an existing business you may have the benefit of immediate cash flow.

When evaluating a franchise opportunity consider involving an attorney who specializes in franchise contracts.   If you choose an experienced attorney it is likely that they will have already reviewed the franchise contract for another client, meaning that your costs should be reduced for the same service.  Similarly if you are evaluating an existing business opportunity, give serious thought to including a CPA in your negotiations.

In any case, don’t let you passion get ahead of your due diligence, and enjoy the process of becoming your own boss.