Question 1

The Pepsi-Cola Company is an example of a product and trade name franchisor.

Accepted Answer

A) True 
 B)False  True

Question 2

Franchising offers both a proven line of business and reduced risk.

Accepted Answer

A) True 
 B)False  True

Question 3

Marvin is selling his business as a total entity.The buyer has offered a very large down payment,but Marvin would prefer a lower down payment and a longer repayment period.What is the most likely reason for this?

Accepted Answer

A) To reduce Marvin's annual tax liability on the profit of the sale. 
B) To allow the buyer time to turn a profit before having to make large payments. 
C) To provide a steady income to Marvin during his retirement. 
D) To avoid capital gains taxes on the sale of the assets. 
A) To reduce Marvin's annual tax liability on the profit of the sale. 
B) To allow the buyer time to turn a profit before having to make large payments. 
C) To provide a steady income to Marvin during his retirement. 
D) To avoid capital gains taxes on the sale of the assets. A

Question 4

Having worked professionally for 10 years,Tom and Kate have decided to start a new franchise.Considering their background,a disadvantage for them becoming franchisees is

Accepted Answer

A) the restrictions on business operations. 
B) unlimited company growth. 
C) the expectation to work more than a 40 hour work week. 
D) an increase in entrepreneurial independence. 
A) the restrictions on business operations. 
B) unlimited company growth. 
C) the expectation to work more than a 40 hour work week. 
D) an increase in entrepreneurial independence.

Question 5

RST,Inc. ,a franchisor,is requiring its franchisee,Raymond,to make significant changes to the equipment and interior appearance of his business as a condition of renewing the contract.Raymond suspects:

Accepted Answer

A) these changes will benefit his bottom line. 
B) he will be less competitive after the changes are made. 
C) the franchisor wants to sell the franchise to someone else. 
D) his customers will object to the changes. 
A) these changes will benefit his bottom line. 
B) he will be less competitive after the changes are made. 
C) the franchisor wants to sell the franchise to someone else. 
D) his customers will object to the changes.

Question 6

Match:
a.co-branding
b.master licensee
c.multibrand franchising
d.multiple-unit ownership
e.noncompete clause
f.non-disclosure agreement
g.piggyback franchising
h.product and trade name franchising
-An agreement in which the buyer promises the seller that s/he will not reveal confidential information or violate the seller's trust

Accepted Answer

The answer of Match:
a.co-branding
b.master licensee
c.multibrand franchising
d.multiple-unit ownership
e.noncompete clause
f.non-disclosure agreement
g.piggyback franchising
h.product...

Question 7

Match:
a.due diligence
b.fair market value
c.franchise
d.franchise contract
e.Franchise Disclosure Document
f.Franchise Rule
g.franchisee
h.franchisor
-A franchise arrangement whereby the franchisee obtains an entire marketing and management system geared to entrepreneurs

Accepted Answer

The answer of Match:
a.due diligence
b.fair market value
c.franchise
d.franchise contract
e.Franchise Disclosure Document
f.Franchise...

Question 8

What kind of training support might a franchisee expect from the franchisor?

Accepted Answer

Franchisors often provide both off-site

Question 9

Which of the following reasons for buying a business is also a reason for purchasing a franchise?

Accepted Answer

A) Reduction of uncertainty 
B) Acquiring goodwill 
C) Bargain price 
D) Quick start 
A) Reduction of uncertainty 
B) Acquiring goodwill 
C) Bargain price 
D) Quick start

Question 10

The franchise contract Pamela signed with DEF Company specified she would have an exclusive sales territory.While the contract was still in force,DEF opened a corporate-owned store within her territory.DEF is guilty of:

Accepted Answer

A) master licensing. 
B) encroachment. 
C) due diligence. 
D) churning. 
A) master licensing. 
B) encroachment. 
C) due diligence. 
D) churning.

Question 11

If a franchisor is guilty of encroachment of a franchisee,which agreement is it most likely to be in violation of?​

Accepted Answer

A) ​Nondisclosure agreement 
B) ​Franchise Rule 
C) ​Franchise Disclosure Document 
D) ​Noncompete agreement 
A) ​Nondisclosure agreement 
B) ​Franchise Rule 
C) ​Franchise Disclosure Document 
D) ​Noncompete agreement

Question 12

Annabell has been granted the right to conduct business according to specified methods and terms of another party.Annabell is a:

Accepted Answer

A) franchisor. 
B) franchisee. 
C) franchise. 
D) licensee. 
A) franchisor. 
B) franchisee. 
C) franchise. 
D) licensee.

Question 13

Match:
a.co-branding
b.master licensee
c.multibrand franchising
d.multiple-unit ownership
e.noncompete clause
f.non-disclosure agreement
g.piggyback franchising
h.product and trade name franchising
-An independent firm or individual acting as a middleman or sales agent with the responsibility of finding new franchisees within a specified territory

Accepted Answer

The answer of Match:
a.co-branding
b.master licensee
c.multibrand franchising
d.multiple-unit ownership
e.noncompete clause
f.non-disclosure agreement
g.piggyback franchising
h.product...

Question 14

Which factor is a non-quantitative factor of valuing a business?

Accepted Answer

A) Future community development 
B) Size of the buildings 
C) Number of employees who will stay with the company 
D) Employee salaries 
A) Future community development 
B) Size of the buildings 
C) Number of employees who will stay with the company 
D) Employee salaries

Question 15

In addition to the regular monthly payment of a percentage of gross sales to her franchisor,Wilma is required to submit a smaller percentage for advertising costs.She is willing to do this because:

Accepted Answer

A) otherwise she cannot operate her franchise. 
B) she receives a discount on the cost of her inventory. 
C) Wilma's budget is too small for her advertising to be effective. 
D) the franchisor promotes the business both locally and nationally,reinforcing the brand name. 
A) otherwise she cannot operate her franchise. 
B) she receives a discount on the cost of her inventory. 
C) Wilma's budget is too small for her advertising to be effective. 
D) the franchisor promotes the business both locally and nationally,reinforcing the brand name.

Question 16

The cost of a franchise may include

Accepted Answer

A) royalty payments. 
B) higher operational costs. 
C) a one-time federal franchise tax. 
D) higher labor costs. 
A) royalty payments. 
B) higher operational costs. 
C) a one-time federal franchise tax. 
D) higher labor costs.

Question 17

Match:
a.due diligence
b.fair market value
c.franchise
d.franchise contract
e.Franchise Disclosure Document
f.Franchise Rule
g.franchisee
h.franchisor
-Bringing two or more franchise brands together under one roof

Accepted Answer

The answer of Match:
a.due diligence
b.fair market value
c.franchise
d.franchise contract
e.Franchise Disclosure Document
f.Franchise...

Question 18

In many cases,a franchisor will receive payments in the form of royalties that are based on a percentage of the franchisee's gross income.

Accepted Answer

A) True 
 B)False

Question 19

A franchising strategy whereby a single franchisee owns more than one unit in a given area is typically referred to as an area developer strategy.

Accepted Answer

A) True 
 B)False

Question 20

When is a bargain price for an existing business not a good deal for the buyer?

Accepted Answer

A) When the seller intends to open a competing business in the same locality 
B) When the business is losing money 
C) When the neighborhood is deteriorating 
D) all of the above 
A) When the seller intends to open a competing business in the same locality 
B) When the business is losing money 
C) When the neighborhood is deteriorating 
D) all of the above

Exam 4: Franchises and Buyouts

The Pepsi-Cola Company is an example of a product and trade name franchisor.

Franchising offers both a proven line of business and reduced risk.

Marvin is selling his business as a total entity.The buyer has offered a very large down payment,but Marvin would prefer a lower down payment and a longer repayment period.What is the most likely reason for this?

Having worked professionally for 10 years,Tom and Kate have decided to start a new franchise.Considering their background,a disadvantage for them becoming franchisees is

RST,Inc. ,a franchisor,is requiring its franchisee,Raymond,to make significant changes to the equipment and interior appearance of his business as a condition of renewing the contract.Raymond suspects:

Match: a.due diligence b.fair market value c.franchise d.franchise contract e.Franchise Disclosure Document f.Franchise Rule g.franchisee h.franchisor -A franchise arrangement whereby the franchisee obtains an entire marketing and management system geared to entrepreneurs

What kind of training support might a franchisee expect from the franchisor?

Which of the following reasons for buying a business is also a reason for purchasing a franchise?

The franchise contract Pamela signed with DEF Company specified she would have an exclusive sales territory.While the contract was still in force,DEF opened a corporate-owned store within her territory.DEF is guilty of:

If a franchisor is guilty of encroachment of a franchisee,which agreement is it most likely to be in violation of?​

Annabell has been granted the right to conduct business according to specified methods and terms of another party.Annabell is a:

Which factor is a non-quantitative factor of valuing a business?

In addition to the regular monthly payment of a percentage of gross sales to her franchisor,Wilma is required to submit a smaller percentage for advertising costs.She is willing to do this because:

The cost of a franchise may include

Match: a.due diligence b.fair market value c.franchise d.franchise contract e.Franchise Disclosure Document f.Franchise Rule g.franchisee h.franchisor -Bringing two or more franchise brands together under one roof

In many cases,a franchisor will receive payments in the form of royalties that are based on a percentage of the franchisee's gross income.

A franchising strategy whereby a single franchisee owns more than one unit in a given area is typically referred to as an area developer strategy.

When is a bargain price for an existing business not a good deal for the buyer?

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If a franchisor is guilty of encroachment of a franchisee,which agreement is it most likely to be in violation of?