Exam 36: Small Businesses and Franchises

A sole proprietor owns the entire business.

Franchise agreements typically limit the franchisee's ability to sell the franchise to another party.

Soup Factory, Inc., uses a Web site to provide downloadable information to prospective franchisees. This electronic information is the equivalent of an offer that must comply with

Paradise Footwear buys a franchise from Quad Shoes Inc. This relationship, like all other franchise relationships, is governed by

A franchisee is generally economically independent of the franchisor's integrated business system.

The franchise agreement is likely to set out standards for the franchise.

Some states require the termination of a franchise when there is no "good cause" for it to continue.

Carl starts up, and assumes the financial risk of, DataWorks, a new Web marketing enterprise. Carl and DataWorks must meet legal requirements relating to​

To protect franchisees against arbitrary or bad faith termination, a state law may require certain procedures be followed in terminating a franchise.

The validity of a provision permitting the franchisor to establish and enforce certain quality standards is questionable.

In a sole proprietorship, the proprietor shares the burden of any losses or liabilities incurred by the business enterprise with the government.

Digital Wizards, Inc., a franchisor of computer technicians, wishes to standardize the pricing practices of its franchisees because they have engaged in price-cutting to increase their respective shares of the market. The most prudent action might be for Digital Wizards to

Any business-except a sole proprietorship-must comply with business registration and licensing requirements.

Savory Sandwiches LLC wants to present information in "disclosure documents" via the Internet to prospective franchisees. Among other legal requirements with which the franchisor must comply, prospective franchisees must

Pay-Mor Convenience Stores, Inc., is a franchisor. Randy operates a Pay-Mor franchise. Sam is one of Randy's employees. As a franchisor, if Pay-Mor controls the day-to-day operations of the business to a significant degree, it may be liable for tortious acts by

Typically, the franchisee determines the territory to be served by the franchise.

Champions Corporation licenses the trademarks to its products to Direct Marketing, Inc., to reproduce on caps, sweatshirts, and similar goods for sale. This is

Fact Pattern 36-1​ Jumbo Juice Inc. offers entrepreneurs the opportunity to operate a franchise under the Jumbo Juice trade name as a member of a select group of dealers that engage in retail juice sales. -Refer to Fact Pattern 36-1. To potential investors, Jumbo Juice must disclose

In determining whether a franchisor acted in good faith when terminating a franchise agreement, a court will attempt to balance the rights of both parties.

In a manufacturing arrangement, a franchisor transmits to a franchisee the essential ingredients or formula to make a particular product.