Question 1

A franchisee subject to wrongful termination can only recover damages, and not the franchise.

Accepted Answer

A) True 
 B)False

Question 2

Unless otherwise stated, the franchisor is liable for the torts of its franchisee.

Accepted Answer

A) True 
 B)False

Question 3

Limonelle Corporation owns the secret formula for a popular beverage brand Limonelle. The corporation operates through franchises in over 50 countries. It uses a secret formula to prepare the drink concentrate which is dispatched to the franchises world over. These franchises then prepare and bottle the beverage for distribution. Which of these types of franchises has Limonelle adopted?

Accepted Answer

A)  chain-style franchise 
B)  processing plant franchise 
C)  distributorship franchise 
D)  area franchise 
A)  chain-style franchise 
B)  processing plant franchise 
C)  distributorship franchise 
D)  area franchise

Question 4

What are the steps a prospective franchisee must take in order to acquire a franchise? What properties are generally licensed by franchisors?

Accepted Answer

A prospective franchisee must apply to t

Question 5

Franchisors are not permitted to disclose trade secrets and product formulas to franchisees.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is an instance of an area franchise?

Accepted Answer

A)  McDonald's franchises an independently owned restaurant to make and sell its products in Pennsylvania. 
B)  PepsiCo Inc. ships Pepsi in the form of a drink concentrate which is prepared and bottled locally in Canada. 
C)  Nokia licenses a retail dealer to retail its products in Jacksonville. 
D)  Burger King wants to start operating in Mexico and hires a Mexican subfranchisor to sell the franchise on behalf of Burger King. 
A)  McDonald's franchises an independently owned restaurant to make and sell its products in Pennsylvania. 
B)  PepsiCo Inc. ships Pepsi in the form of a drink concentrate which is prepared and bottled locally in Canada. 
C)  Nokia licenses a retail dealer to retail its products in Jacksonville. 
D)  Burger King wants to start operating in Mexico and hires a Mexican subfranchisor to sell the franchise on behalf of Burger King.

Question 7

A franchisor is not permitted to terminate a franchise for any reason.

Accepted Answer

A) True 
 B)False

Question 8

Trade secrets do not qualify for copyright protection.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is true of a joint venture?

Accepted Answer

A)  The parties to a joint venture are considered limited partners. 
B)  Both parties to a joint venture have equal rights to manage the venture. 
C)  A joint venture is a partnership that lasts for multiple projects. 
D)  Parties to a joint venture are exempt from fiduciary duties to each other. 
A)  The parties to a joint venture are considered limited partners. 
B)  Both parties to a joint venture have equal rights to manage the venture. 
C)  A joint venture is a partnership that lasts for multiple projects. 
D)  Parties to a joint venture are exempt from fiduciary duties to each other.

Question 10

A franchisor deals with the franchisee as an independent contractor.

Accepted Answer

A) True 
 B)False

Question 11

The party who grants a license is known as the ________.

Accepted Answer

A)  licensee 
B)  licensor 
C)  grantee 
D)  grantor 
A)  licensee 
B)  licensor 
C)  grantee 
D)  grantor

Question 12

Partners to a strategic alliance can be potential competitors to each other.

Accepted Answer

A) True 
 B)False

Question 13

A joint venture is generally an implied contract that lasts until a party disassociates at will.

Accepted Answer

A) True 
 B)False

Question 14

The franchisor is liable for the contracts entered into and torts committed by the franchisee while the franchisee is acting within the scope of the apparent agency.

Accepted Answer

A) True 
 B)False

Question 15

A single failure by a franchisee to meet a quality-control standard is sufficient cause for termination.

Accepted Answer

A) True 
 B)False

Question 16

A franchisor discloses a cautionary statement that reads, "Caution: These figures are only estimates of what we think you may earn. There is no assurance you'll do as well. If you rely upon our figures, you must accept the risk of not doing so well." This is an instance of ________.

Accepted Answer

A)  disclosure of earning projections based on actual data 
B)  disclosure of earning projections based on hypothetical data 
C)  nondisclosure of sales or earnings projections 
D)  fraudulent disclosure by the franchisor 
A)  disclosure of earning projections based on actual data 
B)  disclosure of earning projections based on hypothetical data 
C)  nondisclosure of sales or earnings projections 
D)  fraudulent disclosure by the franchisor

Question 17

In a processing plant franchise, the franchisor licenses the franchisee to make and sell its products or services to the public from a retail outlet serving an exclusive geographical territory.

Accepted Answer

A) True 
 B)False

Question 18

The termination-at-will clause allows franchisees to sue a franchisor in case of an unjust termination of franchise.

Accepted Answer

A) True 
 B)False

Question 19

A ________ is an arrangement in which two or more business entities combine their resources to pursue a single project or transaction.

Accepted Answer

A)  limited partnership 
B)  license agreement 
C)  joint venture 
D)  franchise 
A)  limited partnership 
B)  license agreement 
C)  joint venture 
D)  franchise

Question 20

Which of the following is true of a franchise?

Accepted Answer

A)  The franchisor and franchisee are established as separate legal entities. 
B)  A franchisee does not need a license to use the franchisor's trademark. 
C)  The franchisee does not have access to the franchisor's knowledge. 
D)  A franchise is considered a joint venture. 
A)  The franchisor and franchisee are established as separate legal entities. 
B)  A franchisee does not need a license to use the franchisor's trademark. 
C)  The franchisee does not have access to the franchisor's knowledge. 
D)  A franchise is considered a joint venture.

Exam 40: Franchise and Special Forms of Business

A franchisee subject to wrongful termination can only recover damages, and not the franchise.

Unless otherwise stated, the franchisor is liable for the torts of its franchisee.

What are the steps a prospective franchisee must take in order to acquire a franchise? What properties are generally licensed by franchisors?

Franchisors are not permitted to disclose trade secrets and product formulas to franchisees.

Which of the following is an instance of an area franchise?

A franchisor is not permitted to terminate a franchise for any reason.

Trade secrets do not qualify for copyright protection.

Which of the following is true of a joint venture?

A franchisor deals with the franchisee as an independent contractor.

The party who grants a license is known as the ________.

Partners to a strategic alliance can be potential competitors to each other.

A joint venture is generally an implied contract that lasts until a party disassociates at will.

The franchisor is liable for the contracts entered into and torts committed by the franchisee while the franchisee is acting within the scope of the apparent agency.

A single failure by a franchisee to meet a quality-control standard is sufficient cause for termination.

A franchisor discloses a cautionary statement that reads, "Caution: These figures are only estimates of what we think you may earn. There is no assurance you'll do as well. If you rely upon our figures, you must accept the risk of not doing so well." This is an instance of ________.

In a processing plant franchise, the franchisor licenses the franchisee to make and sell its products or services to the public from a retail outlet serving an exclusive geographical territory.

The termination-at-will clause allows franchisees to sue a franchisor in case of an unjust termination of franchise.

A ________ is an arrangement in which two or more business entities combine their resources to pursue a single project or transaction.

Which of the following is true of a franchise?

Legal Heritage and the Digital Age

Courts and Jurisdiction

Judicial, Alternative, and E-Dispute Resolution

Constitutional Law for Business and E-Commerce

Intentional Torts and Negligence

Product and Strict Liability

Intellectual Property and Cyber Piracy

Criminal Law and Cyber Crime

Nature of Traditional and E-Contracts

Agreement

Consideration and Promissory Estoppel

Capacity and Legality

Genuineness of Assent and Undue Influence

Statute of Frauds and Equitable Exceptions

Third-Party Rights and Discharge

Remedies for Breach of Traditional and E-Contracts

Digital Law and E-Commerce

Formation of Sales and Lease Contracts

Title to Goods and Risk of Loss

Remedies for Breach of Sales and Lease Contracts

Warranties

Creation of Negotiable Instruments

Holder in Due Course and Transferability

Liability, Defenses, and Discharge

Banking System and Electronic Financial Transactions

Credit, Mortgages, and Debtors Rights

Secured Transactions

Bankruptcy and Reorganization

Agency Formation and Termination

Liability of Principals, Agents, and Independent Contractors

Employment, Worker Protection, and Immigration Law

Labor Law

Equal Opportunity in Employment

Small Business, Entrepreneurship, and General Partnerships

Limited Partnerships and Special Partnerships

Corporate Formation and Financing

Corporate Governance and the Sarbanes-Oxley Act

Corporate Acquisitions and Multinational Corporations

Limited Liability Companies and Limited Liability Partnerships

Investor Protection and E-Securities Transactions

Ethics and Social Responsibility of Business

Administrative Law and Regulatory Agencies

Consumer Protection and Product Safety

Environmental Protection

Antitrust Law and Unfair Trade Practices

Personal Property, Real Property, and Insurance

Real Property

Landlord-Tenant Law and Land Use Regulation

Insurance

Accountants Duties and Liability

Wills, Trusts, and Estates

Family Law

International and World Trade Law

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