Exam 34: Small Businesses and Franchapterises

Owen plans to open Owen's Pets, a pet sales and supplies outlet, and to hire Quimby and Ruth. Owen will invest only his own money. He does not expect to make any profit for at least two years and to make almost no profit for the first three years, but he hopes to expand eventually. Which form of business organization would be most appropriate? What are the chief characteristics, advantages, and disadvantages of this form of business organization? If Owen wants to obtain additional capital to expand the business, but does not want to lose control of the firm, what is his best option?

To maintain the quality of a product or service, a franchisor can exercise any degree of control over a franchisee's operation without risking potential liability.

Mucho Tacos Inc. sells franchises. Mucho Tacos imposes on its franchisees standards of operation and personnel training methods. What is the potential pitfall to Mucho Tacos if it exercises too much control over its franchisees?

Chase, the owner of Data Master, a sole proprietorship, wants to obtain additional business capital. This opportunity is most likely limited to

Haute Dogs Inc. sells a franchise to Ilene's Cuisine, a lunch truck. Ilene's Cuisine is

Made in the USA Clothing Inc. gives notice to Neely that it is terminating their franchise arrangement. Winding up the business requires

The Franchise Rule does not require a franchisor to make any disclosures to prospective franchisees but what is disclosed must be material and informative.

Ling owns and operates Metro Delivery Service as a sole proprietorship. When she dies, the business will automatically

State regulation of franchising is often aimed at protecting franchisees from unfair practices.

A franchisor can mandate retail prices for the goods that a franchisee sells.

Because each type of franchise relationship is similar, franchise contracts tend to be similar.

After notice of termination, a franchisee must be given a reasonable time to wind up the business.