Question 1

A franchisor cannot impose quality stan?dards on a franchisee.

Accepted Answer

A) True 
 B)False

Question 2

Ewa, the owner of Finest Enterprises, is a sole proprietor. What are the chief characteristics, advantages, and disadvantages of this form of busi?ness organization? Ewa wants to obtain additional capital to expand Finest, but she does not want to lose control of the firm. As a sole proprie?tor, what is her best option to attain these goals?

Accepted Answer

A sole proprietorship is the simplest fo

Question 3

Rafe is interested in buying a franchise from Sportz Rulez Company. In this transaction, the Federal Trade Commission's Franchise Rule

Accepted Answer

A)  does not apply. 
B)  enables Rafe to weigh the deal's risks and benefits. 
C)  enables Sportz Rulez to weigh the deal's risks and benefits. 
D)  prohibits certain types of anticompetitive agreements. 
A)  does not apply. 
B)  enables Rafe to weigh the deal's risks and benefits. 
C)  enables Sportz Rulez to weigh the deal's risks and benefits. 
D)  prohibits certain types of anticompetitive agreements.

Question 4

Jody owns KuppaJava Kiosks, a sole proprietorship. Jody's liability is

Accepted Answer

A)  limited by state statute and varies from state to state. 
B)  limited to the extent of capital expenditures. 
C)  limited to the extent of his or her original investment. 
D)  unlimited. 
A)  limited by state statute and varies from state to state. 
B)  limited to the extent of capital expenditures. 
C)  limited to the extent of his or her original investment. 
D)  unlimited.

Question 5

A franchisee normally pays an initial lump sum for a franchise license.

Accepted Answer

A) True 
 B)False

Question 6

In choosing a form of business organization for a new enterprise, important factors include the ease of creation.

Accepted Answer

A) True 
 B)False

Question 7

An agreement that requires a franchisee to buy materials exclusively from the franchisor may violate contract law for a lack of consideration.

Accepted Answer

A) True 
 B)False

Question 8

A state deceptive trade practice statute may limit the actions of franchisors.

Accepted Answer

A) True 
 B)False

Question 9

Normally, a franchisee determines the territory that it will serve.

Accepted Answer

A) True 
 B)False

Question 10

State law determines the duration of a franchise.

Accepted Answer

A) True 
 B)False

Question 11

Comfort Wear, Inc., a franchisor of shoe stores, wishes to standardize the pricing practices of its franchisees that have engaged in price-cutting to increase their respective shares of the market. The most prudent rem?edy might be for Comfort to

Accepted Answer

A)  reduce the quantity of the products that it sells to its franchisees. 
B)  suggest the prices at which its franchisees sell their products. 
C)  terminate the franchisees who cut prices. 
D)  undercut the business of those franchisees who cut prices by open?ing competing stores in the franchisees' territory. 
A)  reduce the quantity of the products that it sells to its franchisees. 
B)  suggest the prices at which its franchisees sell their products. 
C)  terminate the franchisees who cut prices. 
D)  undercut the business of those franchisees who cut prices by open?ing competing stores in the franchisees' territory.

Question 12

A franchisor is never liable for the act of a fran?chisee's employee.

Accepted Answer

A) True 
 B)False

Question 13

Dean buys a franchise from Excel Realty, Inc. In their agree?ment, Excel may specify

Accepted Answer

A)  neither Dean's business form nor its standards of operation. 
B)  the business form and the standards of operation. 
C)  the business form only. 
D)  the standards of operation only. 
A)  neither Dean's business form nor its standards of operation. 
B)  the business form and the standards of operation. 
C)  the business form only. 
D)  the standards of operation only.

Question 14

Rita buys a Super Grill franchise. Super Grill requires that its fran?chi?sees buy its products for every phase of their op?erations. Be?cause Rita wishes to buy less expensive products, she challenges the re?quirement. Her best argument is probably that the re?quirement violates

Accepted Answer

A)  the commerce clause. 
B)  the Equal Protection Clause. 
C)  the federal antitrust laws. 
D)  the First Amendment. 
A)  the commerce clause. 
B)  the Equal Protection Clause. 
C)  the federal antitrust laws. 
D)  the First Amendment.

Question 15

A franchisor may suggest retail prices for the goods that a franchisee sells.

Accepted Answer

A) True 
 B)False

Question 16

Leigh wants to go into the business of construction contracting. Among the reasons that would probably convince Leigh to set up his business as a sole proprietorship would be

Accepted Answer

A)  its greater organizational flexibility. 
B)  its limited liability. 
C)  its perpetual existence. 
D)  the ease of transferring the business to other family members. 
A)  its greater organizational flexibility. 
B)  its limited liability. 
C)  its perpetual existence. 
D)  the ease of transferring the business to other family members.

Question 17

Jack buys a Kitchens, Inc., franchise, which the franchisor later termi?nates. In determining whether the termination was proper, a court will generally

Accepted Answer

A)  balance the rights of both parties. 
B)  emphasize the right of Kitchens, Inc., to its business operation. 
C)  focus on the right of Jack to be dealt with fairly. 
D)  underscore the interest of consumers in affordability. 
A)  balance the rights of both parties. 
B)  emphasize the right of Kitchens, Inc., to its business operation. 
C)  focus on the right of Jack to be dealt with fairly. 
D)  underscore the interest of consumers in affordability.

Question 18

Worldwide Realtors, Inc., sells a franchise to XL Sales Company. XL is

Accepted Answer

A)  a franchisee. 
B)  a franchisor. 
C)  an agent. 
D)  a principal. 
A)  a franchisee. 
B)  a franchisor. 
C)  an agent. 
D)  a principal.

Question 19

Roller Rinks, Inc. (RRI) grants a franchise to Sven to operate an RRI rink. RRI may require Sven to pay a percentage of his

Accepted Answer

A)  annual sales only. 
B)  annual sales or annual volume of business. 
C)  annual volume of business only. 
D)  neither annual sales nor annual volume of business. 
A)  annual sales only. 
B)  annual sales or annual volume of business. 
C)  annual volume of business only. 
D)  neither annual sales nor annual volume of business.

Question 20

Bret buys a franchise from Comida Mexicano Ltd. If their agreement is like most franchise agree?ments, it will specify that Comida can ter?minate the franchise

Accepted Answer

A)  at will. 
B)  for any reason. 
C)  for cause only. 
D)  for no reason. 
A)  at will. 
B)  for any reason. 
C)  for cause only. 
D)  for no reason.

Exam 35: Sole Proprietorships and Franchises

A franchisor cannot impose quality stan?dards on a franchisee.

Rafe is interested in buying a franchise from Sportz Rulez Company. In this transaction, the Federal Trade Commission's Franchise Rule

Jody owns KuppaJava Kiosks, a sole proprietorship. Jody's liability is

A franchisee normally pays an initial lump sum for a franchise license.

In choosing a form of business organization for a new enterprise, important factors include the ease of creation.

An agreement that requires a franchisee to buy materials exclusively from the franchisor may violate contract law for a lack of consideration.

A state deceptive trade practice statute may limit the actions of franchisors.

Normally, a franchisee determines the territory that it will serve.

State law determines the duration of a franchise.

Comfort Wear, Inc., a franchisor of shoe stores, wishes to standardize the pricing practices of its franchisees that have engaged in price-cutting to increase their respective shares of the market. The most prudent rem?edy might be for Comfort to

A franchisor is never liable for the act of a fran?chisee's employee.

Dean buys a franchise from Excel Realty, Inc. In their agree?ment, Excel may specify

Rita buys a Super Grill franchise. Super Grill requires that its fran?chi?sees buy its products for every phase of their op?erations. Be?cause Rita wishes to buy less expensive products, she challenges the re?quirement. Her best argument is probably that the re?quirement violates

A franchisor may suggest retail prices for the goods that a franchisee sells.

Leigh wants to go into the business of construction contracting. Among the reasons that would probably convince Leigh to set up his business as a sole proprietorship would be

Jack buys a Kitchens, Inc., franchise, which the franchisor later termi?nates. In determining whether the termination was proper, a court will generally

Worldwide Realtors, Inc., sells a franchise to XL Sales Company. XL is

Roller Rinks, Inc. (RRI) grants a franchise to Sven to operate an RRI rink. RRI may require Sven to pay a percentage of his

Bret buys a franchise from Comida Mexicano Ltd. If their agreement is like most franchise agree?ments, it will specify that Comida can ter?minate the franchise

Introduction to Law and Legal Reasoning

Courts and Alternative Dispute Resolution

Court Procedures

Constitutional Authority to Regulate Business

The Statute of Fraudswriting Requirements

Ethics and Business Decision Making

Intentional Torts

Negligence and Strict Liability

Intellectual Property and Internet Law

Criminal Law and Cyber Crimes

Nature and Terminology

Agreement

Consideration

Capacity and Legality

Mistakes, Fraud, and Voluntary Consent

Third Party Rights

Performance and Discharge

Breach of Contract and Remedies

E-Contracts and E-Signatures

The Formation of Sales and Lease Contracts

Title, Risk, and Insurable Interest

Performance Breach of Sales Lease Contracts

Warranties and Product Liability

The Function Creation of Negotiable Instruments

Transferability and Holder in Due Course

Liability, Defenses, and Discharge

Checks, the Banking System, and E-Money

Creditors Rights and Remedies

Secured Transactions

Bankruptcy Law

Agency Formation and Duties

Liability to Third Parties and Termination

Employment and Labor Law

Employment Discrimination

Partnerships and Limited Liability Partnerships

Limited Liability Companies Special Business Forms

Corporationsformation and Financing

Corporationsdirectors, Officers, Shareholders

Corporationsmerger, Consolidation, Termination

Corporationssecurities Law Corporate Governance

Law for Small Businesses

Administrative Law

Consumer Law

Environmental Law

Antitrust Law

Personal Property and Bailments

Real Property and Landlord-Tenant Relationships

Insurance

Wills and Trusts

Professional Liaility and Accountability

International Law in a Global Economy

Legal and Ethical Issues in Business

Legal Issues

Contracts and Business Law

Contracts and Liability

Banking and Payment Systems

Loan Security and Repossession in Credit Transactions

Employment Law and Ethics

Legal Issues in Corporate Governance and Business Operations

Legal and Ethical Issues in Environmental Protection and Consumer Rights