Question 1

Which of the following statements is correct regarding business format franchises?

Accepted Answer

A)  Business format franchises are less popular than product and trademark franchises. 
B)  A business format franchise can be very rigid and demanding. 
C)  Agricultural machinery dealerships and soft-drink bottlers are well-known examples of business format franchises. 
D)  Business format franchises are illegal in some states. 
E)  The business format franchisor obtains the majority of its income from selling its products to its dealers at a markup. 
A)  Business format franchises are less popular than product and trademark franchises. 
B)  A business format franchise can be very rigid and demanding. 
C)  Agricultural machinery dealerships and soft-drink bottlers are well-known examples of business format franchises. 
D)  Business format franchises are illegal in some states. 
E)  The business format franchisor obtains the majority of its income from selling its products to its dealers at a markup.

Question 2

The Savvy Entrepreneurial Firm feature in Chapter 15 focuses on Wahoo's Fish Taco, a franchise organization that offers Mexican food mixed with Brazilian and Asian flavors. According to the feature, one of the things the founders of Wahoo did that has contributed to its success is elect to make Wahoo's ________.

Accepted Answer

A)  a relatively slow growth system, focusing on branding and service quality rather than rapid growth 
B)  a nationwide system, operating in all 50 states 
C)  an extremely affordable system to buy into, with a $9,000 original franchise fee and an ongoing royalty of only 2-1/2 percent 
D)  a niche franchise that is only available in theme parks and food courts of malls 
E)  a fast growth system to establish a clear first-mover advantage in its niche 
A)  a relatively slow growth system, focusing on branding and service quality rather than rapid growth 
B)  a nationwide system, operating in all 50 states 
C)  an extremely affordable system to buy into, with a $9,000 original franchise fee and an ongoing royalty of only 2-1/2 percent 
D)  a niche franchise that is only available in theme parks and food courts of malls 
E)  a fast growth system to establish a clear first-mover advantage in its niche

Question 3

The Franchise Disclosure Document contains ________ categories of information.

Accepted Answer

A)  8 
B)  14 
C)  23 
D)  35 
E)  44 
A)  8 
B)  14 
C)  23 
D)  35 
E)  44

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

All of the following are advantages to buying a franchise except ________.

Accepted Answer

A)  restrictions on creativity 
B)  potential for business growth 
C)  availability of financing 
D)  a proven product or service within an established market 
E)  franchisor's ongoing support 
A)  restrictions on creativity 
B)  potential for business growth 
C)  availability of financing 
D)  a proven product or service within an established market 
E)  franchisor's ongoing support

Question 6

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 7

The document that consummates the sale of a franchise is called the ________.

Accepted Answer

A)  franchise disclosure document 
B)  franchise agreement 
C)  license agreement 
D)  uniform franchise contract 
E)  franchise circular 
A)  franchise disclosure document 
B)  franchise agreement 
C)  license agreement 
D)  uniform franchise contract 
E)  franchise circular

Question 8

There are two primary advantages to buying a franchise over other forms of business ownership. First, the franchisor typically provides training, technical expertise, and other forms of support, and second, ________.

Accepted Answer

A)  franchising is almost a sure way of making a profit 
B)  a franchise agreement is typically easy to exit if expectations aren't met 
C)  franchisors typically encourage creativity on the part of franchisees 
D)  the franchisor provides an entrepreneur the ability to own a business using a tested and refined business method 
E)  franchise organizations are consistently more profitable than non- franchise organizations in the same industry 
A)  franchising is almost a sure way of making a profit 
B)  a franchise agreement is typically easy to exit if expectations aren't met 
C)  franchisors typically encourage creativity on the part of franchisees 
D)  the franchisor provides an entrepreneur the ability to own a business using a tested and refined business method 
E)  franchise organizations are consistently more profitable than non- franchise organizations in the same industry

Question 9

An area franchise agreement allows a franchisee to own and operate a specific number of outlets in a particular geographic area.

Accepted Answer

A) True 
 B)False

Question 10

Franchising is appropriate when a ________.

Accepted Answer

A)  firm's business methods are not polished, it has a desire to grow, and it is trying to commercialize a technology product 
B)  firm has a strong trademark, a desire to grow, and a well-designed business method 
C)  firm is trying to commercialize a technology product, it is well-funded, and it has a desire to grow 
D)  firm has a weak trademark, it is well-funded, and it has a desire to grow 
E)  firm has a desire to grow, it has a well-designed business method, and it is well funded 
A)  firm's business methods are not polished, it has a desire to grow, and it is trying to commercialize a technology product 
B)  firm has a strong trademark, a desire to grow, and a well-designed business method 
C)  firm is trying to commercialize a technology product, it is well-funded, and it has a desire to grow 
D)  firm has a weak trademark, it is well-funded, and it has a desire to grow 
E)  firm has a desire to grow, it has a well-designed business method, and it is well funded

Question 11

From the franchisor's point of view, which of the following is incorrect regarding franchising?

Accepted Answer

A)  Establishing a franchise system should be approached carefully and deliberately. 
B)  Franchising is a relatively simple business endeavor. 
C)  Franchising involves managerially demanding tasks. 
D)  Over the years a number of fraudulent franchise organizations have come and gone. 
E)  Franchising is a fairly heavily regulated form of business ownership. 
A)  Establishing a franchise system should be approached carefully and deliberately. 
B)  Franchising is a relatively simple business endeavor. 
C)  Franchising involves managerially demanding tasks. 
D)  Over the years a number of fraudulent franchise organizations have come and gone. 
E)  Franchising is a fairly heavily regulated form of business ownership.

Question 12

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

Question 13

Franchising is a popular form of business growth.

Accepted Answer

A) True 
 B)False

Question 14

The Franchise Disclosure Document is the document that consummates the sale of a franchise.

Accepted Answer

A) True 
 B)False

Question 15

A product and trademark franchise typically connects a single manufacturer with a network of dealers or distributors.

Accepted Answer

A) True 
 B)False

Question 16

The What Went Wrong feature in Chapter 15 focuses on Curves International, the fitness center for women. Since 2006 Curves has closed more than 4,000 locations. Which of the following reasons was not identified in the feature as one of the possible explanations for why so many Curves centers have closed?

Accepted Answer

A)  An inability to find enough potential franchisees 
B)  The poor economy 
C)  Cheaper competition 
D)  The company failed to keep up with changing trends, including more flexible hours for busy working women. 
E)  The company sold too many franchises that are located too close together. 
A)  An inability to find enough potential franchisees 
B)  The poor economy 
C)  Cheaper competition 
D)  The company failed to keep up with changing trends, including more flexible hours for busy working women. 
E)  The company sold too many franchises that are located too close together.

Question 17

The ________ contains 23 categories of information that give a prospective franchisee a broad base of information about the background and financial health of the franchisor.

Accepted Answer

A)  Franchise Due Diligence Certificate 
B)  Franchise Offering Contract 
C)  Standardized Franchise Contract 
D)  Franchise Disclosure Document 
E)  Franchise Code of Conduct 
A)  Franchise Due Diligence Certificate 
B)  Franchise Offering Contract 
C)  Standardized Franchise Contract 
D)  Franchise Disclosure Document 
E)  Franchise Code of Conduct

Question 18

The Franchise Disclosure Document contains a total of 23 categories of information that give a prospective franchisee a broad base of information about the background and financial health of the franchisor.

Accepted Answer

A) True 
 B)False

Question 19

James Ryan has been a Coors Beer distributor for the past 20 years. James owns a ________ franchise.

Accepted Answer

A)  business format 
B)  product and trademark 
C)  business design 
D)  product plus 
E)  product and business format 
A)  business format 
B)  product and trademark 
C)  business design 
D)  product plus 
E)  product and business format

Question 20

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 another business in exchange for ________.

Accepted Answer

A)  an initial franchise fee and an ongoing royalty 
B)  a one-time 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)  a one-time 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

Which of the following statements is correct regarding business format franchises?

The Franchise Disclosure Document contains ________ categories of information.

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

All of the following are advantages to buying a franchise except ________.

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 document that consummates the sale of a franchise is called the ________.

There are two primary advantages to buying a franchise over other forms of business ownership. First, the franchisor typically provides training, technical expertise, and other forms of support, and second, ________.

An area franchise agreement allows a franchisee to own and operate a specific number of outlets in a particular geographic area.

Franchising is appropriate when a ________.

From the franchisor's point of view, which of the following is incorrect regarding 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 popular form of business growth.

The Franchise Disclosure Document is the document that consummates the sale of a franchise.

A product and trademark franchise typically connects a single manufacturer with a network of dealers or distributors.

The ________ contains 23 categories of information that give a prospective franchisee a broad base of information about the background and financial health of the franchisor.

The Franchise Disclosure Document contains a total of 23 categories of information that give a prospective franchisee a broad base of information about the background and financial health of the franchisor.

James Ryan has been a Coors Beer distributor for the past 20 years. James owns a ________ franchise.

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 another business in exchange for ________.

Introduction to Entrepreneurship

Recognizing Opportunities and Generating Ideas

Feasibility Analysis

Developing an Effective Business Model

Industry and Competitor Analysis

Writing a Business Plan

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

Which of the following statements is correct regarding business format franchises?

The Franchise Disclosure Document contains ________ categories of information.

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

All of the following are advantages to buying a franchise except ________.

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 document that consummates the sale of a franchise is called the ________.

There are two primary advantages to buying a franchise over other forms of business ownership. First, the franchisor typically provides training, technical expertise, and other forms of support, and second, ________.

An area franchise agreement allows a franchisee to own and operate a specific number of outlets in a particular geographic area.

Franchising is appropriate when a ________.

From the franchisor's point of view, which of the following is incorrect regarding 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 popular form of business growth.

The Franchise Disclosure Document is the document that consummates the sale of a franchise.

A product and trademark franchise typically connects a single manufacturer with a network of dealers or distributors.

The ________ contains 23 categories of information that give a prospective franchisee a broad base of information about the background and financial health of the franchisor.

The Franchise Disclosure Document contains a total of 23 categories of information that give a prospective franchisee a broad base of information about the background and financial health of the franchisor.

James Ryan has been a Coors Beer distributor for the past 20 years. James owns a ________ franchise.

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 another business in exchange for ________.

Introduction to Entrepreneurship

Recognizing Opportunities and Generating Ideas

Feasibility Analysis

Developing an Effective Business Model

Industry and Competitor Analysis

Writing a Business Plan

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