Question 1

A master franchisee, in addition to having the right to open and operate a specific number of locations in a particular area, also has the right to:

Accepted Answer

A)  stop making royalty payments if its sales decline 
B)  sell products made by companies other than the franchisor 
C)  offer and sell the franchise to other people in its area 
D)  use its own operating manuals to run its franchise outlets 
E)  stop making royalty payments if it is losing money 
A)  stop making royalty payments if its sales decline 
B)  sell products made by companies other than the franchisor 
C)  offer and sell the franchise to other people in its area 
D)  use its own operating manuals to run its franchise outlets 
E)  stop making royalty payments if it is losing money C

Question 2

Franchising is a form of business ownership in which a firm that already has a successful product or service licenses its trademark and method of doing business to other business in exchange for:

Accepted Answer

A)  an initial franchise fee and an ongoing royalty 
B)  an initial franchise fee 
C)  an equity position in the new business 
D)  an ongoing royalty 
E)  an initial franchise fee and an equity position in the new business 
A)  an initial franchise fee and an ongoing royalty 
B)  an initial franchise fee 
C)  an equity position in the new business 
D)  an ongoing royalty 
E)  an initial franchise fee and an equity position in the new business A

Question 3

Despite its advantages, franchising is not a popular form of business growth.

Accepted Answer

A) True 
 B)False  False

Question 4

The people who buy franchises from master franchisees are typically called subfranchisees.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following statement is incorrect regarding the franchisor-franchisee relationship?

Accepted Answer

A)  A franchisee may be charged a fee for additional training. 
B)  Some franchisors require a new franchisee to pay a "grand opening" fee. 
C)  Franchisees are often required to pay into a national or regional advertising fund. 
D)  Weekly or monthly royalty fees are usually around 2% of net income. 
E)  Franchisees may have to pay a monthly royalty even if the business is losing money. 
A)  A franchisee may be charged a fee for additional training. 
B)  Some franchisors require a new franchisee to pay a "grand opening" fee. 
C)  Franchisees are often required to pay into a national or regional advertising fund. 
D)  Weekly or monthly royalty fees are usually around 2% of net income. 
E)  Franchisees may have to pay a monthly royalty even if the business is losing money.

Question 6

In a business format franchise, the franchisor provides a formula for doing business to the franchisee along with training, advertising, and other forms of assistance.

Accepted Answer

A) True 
 B)False

Question 7

College Nannies and Tutors, the company profiled in the opening feature for Chapter 15, was started by Joseph Keeley, a student at St. Thomas University in St. Paul, Minnesota. According to the feature, Keeley met Peter Lytle, the angel investor who funded his startup, at:

Accepted Answer

A)  an alumni event for a community college they both attended 
B)  a Small Business Development Center workshop 
C)  a Chamber of Commerce event in Minneapolis 
D)  the awards ceremony for a business plan competition that Keeley won 
E)  a social event for aspiring entrepreneurs and investors sponsored by the city of St. Paul 
A)  an alumni event for a community college they both attended 
B)  a Small Business Development Center workshop 
C)  a Chamber of Commerce event in Minneapolis 
D)  the awards ceremony for a business plan competition that Keeley won 
E)  a social event for aspiring entrepreneurs and investors sponsored by the city of St. Paul

Question 8

In the context of international franchising, under a ________ franchise arrangement, the U.S. firm grants the rights to an individual or company (the master franchisee) to develop one or more franchise businesses and to license others to develop one or more franchise businesses within the country.

Accepted Answer

A)  master 
B)  direct 
C)  subordinate 
D)  concurrent 
E)  multinational 
A)  master 
B)  direct 
C)  subordinate 
D)  concurrent 
E)  multinational

Question 9

The majority of franchisors are highly ethical individuals who are interested only in making a fair return on their investment.

Accepted Answer

A) True 
 B)False

Question 10

The Franchise Disclosure Document is accepted in (or by):

Accepted Answer

A)  11 states 
B)  all 50 states, all of Canada, and parts of Mexico 
C)  39 states and all of Canada 
D)  all 50 states and parts of Canada 
E)  all nations participating in the North America Free Trade Agreement 
A)  11 states 
B)  all 50 states, all of Canada, and parts of Mexico 
C)  39 states and all of Canada 
D)  all 50 states and parts of Canada 
E)  all nations participating in the North America Free Trade Agreement

Question 11

The business product and trademark franchise is a more popular approach to franchising than the business format franchise.

Accepted Answer

A) True 
 B)False

Question 12

How can a person tell if franchising is right for them?

Accepted Answer

Purchasing a franchise should be weighed

Question 13

While franchise agreements vary, each agreement typically contains the franchise agreement and:

Accepted Answer

A)  the legal agreement 
B)  the procurement agreement 
C)  the purchase agreement 
D)  the sell agreement 
E)  the conversion agreement 
A)  the legal agreement 
B)  the procurement agreement 
C)  the purchase agreement 
D)  the sell agreement 
E)  the conversion agreement

Question 14

Franchisors are required by law to disclose all their costs in a document called the:

Accepted Answer

A)  Fairness in Franchising Certificate 
B)  Consistent Franchise Offering Code 
C)  Standardized Franchise Code 
D)  Franchise Disclosure Document 
E)  Franchise Code of Conduct 
A)  Fairness in Franchising Certificate 
B)  Consistent Franchise Offering Code 
C)  Standardized Franchise Code 
D)  Franchise Disclosure Document 
E)  Franchise Code of Conduct

Question 15

According to a concept called ________ theory, it is more effective for the units of a growing chain to be run by franchises than by managers, because managers are usually paid a salary, and may not be as committed to the success of their individual units as franchisees, who are in effect the owners of the units they manage.

Accepted Answer

A)  agency 
B)  stimulus 
C)  control 
D)  leadership 
E)  motivation 
A)  agency 
B)  stimulus 
C)  control 
D)  leadership 
E)  motivation

Question 16

Kim Baker just purchased the rights to develop multiple Curves International franchises in Australia. Kim just purchased a:

Accepted Answer

A)  concurrent franchise arrangement 
B)  indirect franchise arrangement 
C)  lateral franchise arrangement 
D)  direct franchise arrangement 
E)  subordinate franchise arrangement 
A)  concurrent franchise arrangement 
B)  indirect franchise arrangement 
C)  lateral franchise arrangement 
D)  direct franchise arrangement 
E)  subordinate franchise arrangement

Question 17

Which of the following statements is incorrect regarding franchising?

Accepted Answer

A)  Franchising is growing in popularity in the U.S. 
B)  There are some instances in which franchising is not appropriate. 
C)  New technologies are often introduced through franchise systems. 
D)  Franchising, by its very nature, involves the sharing of knowledge between a franchisor and a franchisee. 
E)  The failure rate for franchise systems is relatively high. 
A)  Franchising is growing in popularity in the U.S. 
B)  There are some instances in which franchising is not appropriate. 
C)  New technologies are often introduced through franchise systems. 
D)  Franchising, by its very nature, involves the sharing of knowledge between a franchisor and a franchisee. 
E)  The failure rate for franchise systems is relatively high.

Question 18

What is the difference between a product and trademark franchise and a business format franchise? Which type of franchise is most common for entrepreneurial firms?

Accepted Answer

A product and trademark franchise is an

Question 19

The people who buy franchises from master franchises are typically called:

Accepted Answer

A)  minor franchisees 
B)  secondary franchisees 
C)  mini-franchisees 
D)  subordinate franchisees 
E)  subfranchisees 
A)  minor franchisees 
B)  secondary franchisees 
C)  mini-franchisees 
D)  subordinate franchisees 
E)  subfranchisees

Question 20

Which of the following is not an advantage of buying a franchise?

Accepted Answer

A)  a proven product or service within an established system 
B)  franchisor ongoing support 
C)  availability of financing 
D)  potential for business growth 
E)  duration and nature of the commitment 
A)  a proven product or service within an established system 
B)  franchisor ongoing support 
C)  availability of financing 
D)  potential for business growth 
E)  duration and nature of the commitment

A master franchisee, in addition to having the right to open and operate a specific number of locations in a particular area, also has the right to:

Franchising is a form of business ownership in which a firm that already has a successful product or service licenses its trademark and method of doing business to other business in exchange for:

Despite its advantages, franchising is not a popular form of business growth.

The people who buy franchises from master franchisees are typically called subfranchisees.

Which of the following statement is incorrect regarding the franchisor-franchisee relationship?

In a business format franchise, the franchisor provides a formula for doing business to the franchisee along with training, advertising, and other forms of assistance.

College Nannies and Tutors, the company profiled in the opening feature for Chapter 15, was started by Joseph Keeley, a student at St. Thomas University in St. Paul, Minnesota. According to the feature, Keeley met Peter Lytle, the angel investor who funded his startup, at:

In the context of international franchising, under a ________ franchise arrangement, the U.S. firm grants the rights to an individual or company (the master franchisee) to develop one or more franchise businesses and to license others to develop one or more franchise businesses within the country.

The majority of franchisors are highly ethical individuals who are interested only in making a fair return on their investment.

The Franchise Disclosure Document is accepted in (or by):

The business product and trademark franchise is a more popular approach to franchising than the business format franchise.

How can a person tell if franchising is right for them?

While franchise agreements vary, each agreement typically contains the franchise agreement and:

Franchisors are required by law to disclose all their costs in a document called the:

Kim Baker just purchased the rights to develop multiple Curves International franchises in Australia. Kim just purchased a:

Which of the following statements is incorrect regarding franchising?

What is the difference between a product and trademark franchise and a business format franchise? Which type of franchise is most common for entrepreneurial firms?

The people who buy franchises from master franchises are typically called:

Which of the following is not an advantage of buying a franchise?

Introduction to Entrepreneurship

Recognizing Opportunities and Generating Ideas

Feasibility Analysis

Writing a Business Plan

Industry and Competitor Analysis

Developing an Effective Business Model

Preparing the Proper Ethical and Legal Foundation

Assessing a New Venture's Financial Strength and Viability

Building a New Venture Team

Getting Financing or Funding

Unique Marketing Issues

The Importance of Intellectual Property

Preparing for and Evaluating the Challenges of Growth

Strategies for Firm Growth

Filters

Exam 15: Franchising

A master franchisee, in addition to having the right to open and operate a specific number of locations in a particular area, also has the right to:

Franchising is a form of business ownership in which a firm that already has a successful product or service licenses its trademark and method of doing business to other business in exchange for:

Despite its advantages, franchising is not a popular form of business growth.

The people who buy franchises from master franchisees are typically called subfranchisees.

Which of the following statement is incorrect regarding the franchisor-franchisee relationship?

In a business format franchise, the franchisor provides a formula for doing business to the franchisee along with training, advertising, and other forms of assistance.

College Nannies and Tutors, the company profiled in the opening feature for Chapter 15, was started by Joseph Keeley, a student at St. Thomas University in St. Paul, Minnesota. According to the feature, Keeley met Peter Lytle, the angel investor who funded his startup, at:

In the context of international franchising, under a ________ franchise arrangement, the U.S. firm grants the rights to an individual or company (the master franchisee) to develop one or more franchise businesses and to license others to develop one or more franchise businesses within the country.

The majority of franchisors are highly ethical individuals who are interested only in making a fair return on their investment.

The Franchise Disclosure Document is accepted in (or by):

The business product and trademark franchise is a more popular approach to franchising than the business format franchise.

How can a person tell if franchising is right for them?

While franchise agreements vary, each agreement typically contains the franchise agreement and:

Franchisors are required by law to disclose all their costs in a document called the:

Kim Baker just purchased the rights to develop multiple Curves International franchises in Australia. Kim just purchased a:

Which of the following statements is incorrect regarding franchising?

What is the difference between a product and trademark franchise and a business format franchise? Which type of franchise is most common for entrepreneurial firms?

The people who buy franchises from master franchises are typically called:

Which of the following is not an advantage of buying a franchise?

Introduction to Entrepreneurship

Recognizing Opportunities and Generating Ideas

Feasibility Analysis

Writing a Business Plan

Industry and Competitor Analysis

Developing an Effective Business Model

Preparing the Proper Ethical and Legal Foundation

Assessing a New Venture's Financial Strength and Viability

Building a New Venture Team

Getting Financing or Funding

Unique Marketing Issues

The Importance of Intellectual Property

Preparing for and Evaluating the Challenges of Growth

Strategies for Firm Growth

Filters