Question 1

The ideal franchising relationship is a ________ based on trust.

Accepted Answer

A) corporation 
B) partnership 
C) sole proprietorship 
D) social enterprise 
A) corporation 
B) partnership 
C) sole proprietorship 
D) social enterprise

Question 2

In most cases,a franchisee does not have to get the franchisor's approval to sell the franchise to a third party.

Accepted Answer

A) True 
 B)False

Question 3

The primary market for U.S.franchisers is:

Accepted Answer

A) Europe. 
B) Pacific Rim. 
C) Canada. 
D) Asia. 
A) Europe. 
B) Pacific Rim. 
C) Canada. 
D) Asia.

Question 4

Most franchisors do not offer franchisees territorial protection,denying them the right to exclusive distribution of the brand name in a particular geographic area.

Accepted Answer

A) True 
 B)False

Question 5

When buying a franchise,the potential franchisee should first:

Accepted Answer

A) search for start-up capital for local banks. 
B) evaluate him/herself as to the fit with the franchise. 
C) work in a similar business or industry for a year. 
D) contact the local chamber of commerce for information on the local economy. 
A) search for start-up capital for local banks. 
B) evaluate him/herself as to the fit with the franchise. 
C) work in a similar business or industry for a year. 
D) contact the local chamber of commerce for information on the local economy.

Question 6

The franchise contract defines the rights and the obligations of both parties and sets the guidelines which govern the franchise relationship.

Accepted Answer

A) True 
 B)False

Question 7

The payment the franchisee makes to the franchiser based on gross sales is:

Accepted Answer

A) a royalty. 
B) the start-up fee. 
C) a technical assistance fee. 
D) a national advertising fee. 
A) a royalty. 
B) the start-up fee. 
C) a technical assistance fee. 
D) a national advertising fee.

Question 8

Territorial protection in franchising:

Accepted Answer

A) varies according to industry. 
B) is basically every franchisee for him/herself. 
C) is absolute and uniform across industries. 
D) is no longer an issue for most franchisees. 
A) varies according to industry. 
B) is basically every franchisee for him/herself. 
C) is absolute and uniform across industries. 
D) is no longer an issue for most franchisees.

Question 9

What clues should you look for that should arouse your suspicions regarding the honesty and legitimacy of a franchise? Identify at least eight.

Accepted Answer

The following clues should arouse the su

Question 10

Most often,disputes over a franchise contract arise after the agreement is in force.

Accepted Answer

A) True 
 B)False

Question 11

The Federal Trade Commission (FTC)enacted the Trade Regulation Rule,requiring all franchisors to disclose detailed information on their operations at the first personal meeting or at least ten days before a franchise contract is signed or any money is paid.

Accepted Answer

A) True 
 B)False

Question 12

________ is when owners of independent businesses become franchisees to gain the advantage of name recognition.

Accepted Answer

A) Conversion franchising 
B) Multiple-unit franchising 
C) Master franchising 
D) Combination franchising 
A) Conversion franchising 
B) Multiple-unit franchising 
C) Master franchising 
D) Combination franchising

Question 13

In addition to other fees,franchisees must also pay royalties but only on net profits-no profits,no royalties.

Accepted Answer

A) True 
 B)False

Question 14

A master franchise is called a piggyback franchise.

Accepted Answer

A) True 
 B)False

Question 15

The most litigated subject of the franchisee agreement is:

Accepted Answer

A) franchisee fees. 
B) advertising expenditures. 
C) termination of contract. 
D) resale price maintenance clauses. 
A) franchisee fees. 
B) advertising expenditures. 
C) termination of contract. 
D) resale price maintenance clauses.

Question 16

Franchising is currently dominated by:

Accepted Answer

A) auto dealers. 
B) service-oriented franchises. 
C) retail outlets. 
D) fast food restaurants. 
A) auto dealers. 
B) service-oriented franchises. 
C) retail outlets. 
D) fast food restaurants.

Question 17

There are two main risks in purchasing a franchise.First,that of the franchiser's experience and business system,and second:

Accepted Answer

A) the brand name recognition of the franchise. 
B) the entrepreneur's managerial skills and motivation. 
C) the franchiser's financing. 
D) the economy trends in the country at the time the franchisee begins operation. 
A) the brand name recognition of the franchise. 
B) the entrepreneur's managerial skills and motivation. 
C) the franchiser's financing. 
D) the economy trends in the country at the time the franchisee begins operation.

Question 18

________ franchising exists when a franchisee is licensed to sell specific products under the franchiser's brand name through a selective distribution system.

Accepted Answer

A) Trade name 
B) Pure 
C) Conversion 
D) Product distribution 
A) Trade name 
B) Pure 
C) Conversion 
D) Product distribution

Question 19

The FTC Trade Regulation Rule applies to all franchisors in all states regardless of state disclosure laws.

Accepted Answer

A) True 
 B)False

Question 20

By definition,a franchise is owned by a semi-independent franchisee who pays a fee to a franchiser in return for the right to sell the franchised goods or services.

Accepted Answer

A) True 
 B)False

Exam 6: Franchising and the Entrepreneur

The ideal franchising relationship is a ________ based on trust.

In most cases,a franchisee does not have to get the franchisor's approval to sell the franchise to a third party.

The primary market for U.S.franchisers is:

Most franchisors do not offer franchisees territorial protection,denying them the right to exclusive distribution of the brand name in a particular geographic area.

When buying a franchise,the potential franchisee should first:

The franchise contract defines the rights and the obligations of both parties and sets the guidelines which govern the franchise relationship.

The payment the franchisee makes to the franchiser based on gross sales is:

Territorial protection in franchising:

What clues should you look for that should arouse your suspicions regarding the honesty and legitimacy of a franchise? Identify at least eight.

Most often,disputes over a franchise contract arise after the agreement is in force.

The Federal Trade Commission (FTC)enacted the Trade Regulation Rule,requiring all franchisors to disclose detailed information on their operations at the first personal meeting or at least ten days before a franchise contract is signed or any money is paid.

________ is when owners of independent businesses become franchisees to gain the advantage of name recognition.

In addition to other fees,franchisees must also pay royalties but only on net profits-no profits,no royalties.

A master franchise is called a piggyback franchise.

The most litigated subject of the franchisee agreement is:

Franchising is currently dominated by:

There are two main risks in purchasing a franchise.First,that of the franchiser's experience and business system,and second:

________ franchising exists when a franchisee is licensed to sell specific products under the franchiser's brand name through a selective distribution system.

The FTC Trade Regulation Rule applies to all franchisors in all states regardless of state disclosure laws.

By definition,a franchise is owned by a semi-independent franchisee who pays a fee to a franchiser in return for the right to sell the franchised goods or services.

Entrepreneurs: the Driving Force Behind Small Business

Ethics and Social Responsibility: Doing the Right Thing

Creativity and Innovation: Keys to Entrepreneurial Success

Strategic Management and the Entrepreneur

Choosing a Form of Ownership

Buying an Existing Business

New Business Planning Process: Feasibility Analysis,business Modeling,

Building a Bootstrap Marketing Plan

Creative Use of Advertising and Promotion

Pricing and Credit Strategies

Global Marketing Strategies

E-Commerce and Entrepreneurship

Creating a Solid Financial Plan

Managing Cash Flow

Sources of Equity Financing

Sources of Debt Financing

Location,layout,and Physical Facilities

Supply Chain Management

Managing Inventory

Staffing and Leading a Growing Company

Management Succession and Risk Management Strategies in the Family Business

The Legal Environment: Business Law and Government Regulation

Filters