Question 1

The purchase price of a business is determined by negotiation between _____ and _____

Accepted Answer

A)  lender; seller. 
B)  seller; broker. 
C)  buyer; seller. 
D)  lender; buyer.

Question 2

Due to a decrease in the number of franchises over the past decade, the task of selecting an appropriate franchise has become more difficult.

Accepted Answer

A) True 
 B)False

Question 3

The franchise contract that Pamela signed with DEF Company specified she would have an exclusive sales territory. While the contract was still in force, DEF opened a corporate-owned store within her territory. DEF is guilty of

Accepted Answer

A)  master licensing. 
B)  encroachment. 
C)  due diligence. 
D)  churning.

Question 4

Discuss the advantages of buying a franchise.

Accepted Answer

The answer of Discuss the advantages of buying a franchise....

Question 5

Harold was given the chance to examine the tax returns and financial statements of a business he is considering for purchase. The seller asked him to sign a _____ that prohibits Harold from sharing this confidential information with anyone else.

Accepted Answer

A)  franchise contract 
B)  due diligence document 
C)  Franchise Disclosure Document (FD
D)  
D)  nondisclosure agreement

Question 6

Caron signed a contract with Devon allowing her to provide services using Devon's trademark, logo, and business model. This business is a(n)

Accepted Answer

A)  franchise. 
B)  franchisor. 
C)  franchisee. 
D)  independent business.

Question 7

Bart is meeting with a representative of GHI, a franchisor. He has received information about the franchisor's finances, experience, size, and involvement in litigation. Bart has been given a

Accepted Answer

A)  master license. 
B)  nondisclosure statement. 
C)  franchise rule. 
D)  Franchise Disclosure Document (FD
D) .

Question 8

One of the benefits of a franchise agreement for the franchisee is that the franchisor is solely responsible for advertising the franchise.

Accepted Answer

A) True 
 B)False

Question 9

Each month, Tomas must report his gross income and pay a percentage of that amount to his franchisor. This percentage is

Accepted Answer

A)  negotiable every month. 
B)  finance charges. 
C)  royalty fees. 
D)  an investment cost.

Question 10

Marvin is selling his business as a total entity. The buyer has offered a very large down payment, but Marvin would prefer a lower down payment and a longer repayment period. Which of the following is the most likely reason for this?

Accepted Answer

A)  To reduce Marvin's annual tax liability on the profit of the sale 
B)  To allow the buyer time to turn a profit before having to make large payments 
C)  To provide a steady income to Marvin during his retirement 
D)  To avoid capital gains taxes on the sale of the assets

Question 11

When conducting due diligence on whether to purchase a business, the two most valuable sources of outside assistance are _____ and _____.

Accepted Answer

A)  customers; suppliers 
B)  customers; bankers 
C)  accountants; lawyers 
D)  vendors; lawyers

Question 12

Match the term with its definition.
-Individuals or firms that obtain the legal right to open several franchised outlets in a given area

Accepted Answer

A) area developers 
B) business brokers 
C) business format franchising 
D) churning 
E) co-branding
F)due diligence
G)encroach
H)master licensee
I)multiple-unit ownership
J)product and trade name franchising

Question 13

One of the advantages of buying a franchise is that the purchaser has access to a business model with a proven track record.

Accepted Answer

A) True 
 B)False

Question 14

Jarrod is reading a detailed statement of the franchisor's finances, experience, size, and involvement in litigation. Jarrod is reading a Franchise Disclosure Document (FDD).

Accepted Answer

A) True 
 B)False

Question 15

Royalty fees typically range between _____ and _____ percent of the gross income that the franchisee receives from customers for selling the franchised products and services.

Accepted Answer

A)  5; 9 
B)  3; 5 
C)  1; 2 
D)  10; 15

Question 16

Match the term with its definition.
-Specialized brokers that bring together buyers and sellers of businesses

Accepted Answer

A) area developers 
B) business brokers 
C) business format franchising 
D) churning 
E) co-branding
F)due diligence
G)encroach
H)master licensee
I)multiple-unit ownership
J)product and trade name franchising

Question 17

When Konrad purchased his business, he purchased it as a total entity. As a result,

Accepted Answer

A)  Konrad got only the liquid assets of the business. 
B)  Konrad got both liquid assets and the real estate of the business. 
C)  the seller must pay any outstanding debt held by the business. 
D)  Konrad assumed responsibility for all outstanding debts incurred by the business.

Question 18

To control costs when purchasing a business, the buyer's attorney or the seller's attorney can be used as the closing agent.

Accepted Answer

A) True 
 B)False

Question 19

The processing of a loan application can be completed more quickly if the franchising organization is registered with the U.S. Small Business Administration.

Accepted Answer

A) True 
 B)False

Question 20

Annabelle has been granted the right to conduct business according to specified methods and terms of another party. Annabelle is a

Accepted Answer

A)  franchisor. 
B)  franchisee. 
C)  franchise. 
D)  licensee.

Exam 4: Franchises and Buyouts

The purchase price of a business is determined by negotiation between _ and _

Due to a decrease in the number of franchises over the past decade, the task of selecting an appropriate franchise has become more difficult.

The franchise contract that Pamela signed with DEF Company specified she would have an exclusive sales territory. While the contract was still in force, DEF opened a corporate-owned store within her territory. DEF is guilty of

Discuss the advantages of buying a franchise.

Harold was given the chance to examine the tax returns and financial statements of a business he is considering for purchase. The seller asked him to sign a _____ that prohibits Harold from sharing this confidential information with anyone else.

Caron signed a contract with Devon allowing her to provide services using Devon's trademark, logo, and business model. This business is a(n)

Bart is meeting with a representative of GHI, a franchisor. He has received information about the franchisor's finances, experience, size, and involvement in litigation. Bart has been given a

One of the benefits of a franchise agreement for the franchisee is that the franchisor is solely responsible for advertising the franchise.

Each month, Tomas must report his gross income and pay a percentage of that amount to his franchisor. This percentage is

Marvin is selling his business as a total entity. The buyer has offered a very large down payment, but Marvin would prefer a lower down payment and a longer repayment period. Which of the following is the most likely reason for this?

When conducting due diligence on whether to purchase a business, the two most valuable sources of outside assistance are _ and _.

Match the term with its definition. -Individuals or firms that obtain the legal right to open several franchised outlets in a given area

One of the advantages of buying a franchise is that the purchaser has access to a business model with a proven track record.

Jarrod is reading a detailed statement of the franchisor's finances, experience, size, and involvement in litigation. Jarrod is reading a Franchise Disclosure Document (FDD).

Royalty fees typically range between _ and _ percent of the gross income that the franchisee receives from customers for selling the franchised products and services.

Match the term with its definition. -Specialized brokers that bring together buyers and sellers of businesses

When Konrad purchased his business, he purchased it as a total entity. As a result,

To control costs when purchasing a business, the buyer's attorney or the seller's attorney can be used as the closing agent.

The processing of a loan application can be completed more quickly if the franchising organization is registered with the U.S. Small Business Administration.

Annabelle has been granted the right to conduct business according to specified methods and terms of another party. Annabelle is a