Question 1

Cathy buys an exclusive territory in which she is authorized to set up a plant to make Delite dairy products. After receiving the recipes, Cathy begins making Evie's-brand yogurt and other Delite products. This is

Accepted Answer

A)  a chain-style franchise. 
B)  a distributorship franchise. 
C)  a manufacturing franchise. 
D)  not a franchise.

Question 2

eSports Inc. offers entrepreneurs the opportunity to operate a franchise under the eSports trade name as the owner of a game-playing venue. To possible franchisees, eSports makes earnings claims. For those claims, the franchisor

Accepted Answer

A)  can have a hypothetical basis. 
B)  must have a reasonable basis. 
C)  must have an actual basis. 
D)  can have any or no basis.

Question 3

Sam buys a franchise from Taco Mission Inc. This relationship, like all other franchise relationships, is governed by

Accepted Answer

A)  contract law. 
B)  all of the choices. 
C)  the federal Franchise Rule. 
D)  applicable state law.

Question 4

Riki contracts to buy a franchise from Sushi Company. In this contract, as in most franchise contracts, the determination of the territory to be served is made by

Accepted Answer

A)  other Sushi franchisees within the same state. 
B)  Flo. 
C)  Sushi. 
D)  Sushi customers.

Question 5

State regulation of franchising is often aimed at protecting franchisees from unfair practices.

Accepted Answer

A) True 
 B)False

Question 6

Owen plans to open Owen's Pets, a pet sales and supplies outlet, and to hire Quimby and Ruth. Owen will invest only his own money. He does not expect to make any profit for at least two years and to make almost no profit for the first three years, but he hopes to expand eventually. Which form of business organization would be most appropriate? What are the chief characteristics, advantages, and disadvantages of this form of business organization? If Owen wants to obtain additional capital to expand the business, but does not want to lose control of the firm, what is his best option?

Accepted Answer

The answer of Owen plans to open Owen's Pets, a...

Question 7

Raceway LLC licenses the trademarks to its products to Stadium Markets Inc. to reproduce on clothing and other goods for sale. This is

Accepted Answer

A)  a franchise. 
B)  none of the choices. 
C)  a partnership. 
D)  a sole proprietorship.

Question 8

A court may decide that a franchisor has wrongfully terminated a franchise if the franchisor's decision was arbitrary.

Accepted Answer

A) True 
 B)False

Question 9

Espresso Brew Inc. uses a Web site to provide downloadable information to prospective franchisees. This electronic information is the equivalent of an offer that must comply with

Accepted Answer

A)  no law. 
B)  federal antitrust laws. 
C)  the Federal Trade Commission's Franchise Rule. 
D)  the Dealers Day in Court Act.

Question 10

In a sole proprietorship, the proprietor bears the burden of any liabilities incurred by the business enterprise.

Accepted Answer

A) True 
 B)False

Question 11

A franchisor does not have good cause to terminate a franchise for a franchisee's failure to meet specified sales quotas.

Accepted Answer

A) True 
 B)False

Question 12

After notice of termination, a franchisee must be given a reasonable time to wind up the business.

Accepted Answer

A) True 
 B)False

Question 13

Maeve sells New Energy, a sole proprietorship that makes and sells solar panels, to Omar. This is

Accepted Answer

A)  the establishment of a franchise. 
B)  the creation of a partnership. 
C)  none of the choices-a sole proprietorship cannot be sold. 
D)  a transfer of the ownership of the business.

Question 14

To prevent deception, all representations by a franchisor to a prospective franchisee must have a reasonable basis at the time they are made.

Accepted Answer

A) True 
 B)False

Question 15

Ford is the sole proprietor of Go, a game subscription service. As a sole proprietor, on the business's profits, Ford pays

Accepted Answer

A)  no income taxes. 
B)  only personal income taxes. 
C)  only business income taxes. 
D)  both personal and business income taxes.

Question 16

Because each type of franchise relationship is similar, franchise contracts tend to be similar.

Accepted Answer

A) True 
 B)False

Question 17

Anyone who does business without creating a separate business organization has a franchise.

Accepted Answer

A) True 
 B)False

Question 18

Bayard organized, and owns and operates, Cypress Tours in the simplest form of business organization. This is

Accepted Answer

A)  a partnership. 
B)  a franchise. 
C)  a corporation. 
D)  none of the choices.

Question 19

Bob buys a Club Fitness, Inc., franchise, which the franchisor later terminates. 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 Club to its business operation. 
C)  focus on the right of Bob to be dealt with fairly. 
D)  underscore the interest of consumers in affordability.

Question 20

The duration of a franchise is a matter set by state law, not to be otherwise determined between the parties.

Accepted Answer

A) True 
 B)False

Exam 30: Sole Proprietorships and Franchises

Cathy buys an exclusive territory in which she is authorized to set up a plant to make Delite dairy products. After receiving the recipes, Cathy begins making Evie's-brand yogurt and other Delite products. This is

eSports Inc. offers entrepreneurs the opportunity to operate a franchise under the eSports trade name as the owner of a game-playing venue. To possible franchisees, eSports makes earnings claims. For those claims, the franchisor

Sam buys a franchise from Taco Mission Inc. This relationship, like all other franchise relationships, is governed by

Riki contracts to buy a franchise from Sushi Company. In this contract, as in most franchise contracts, the determination of the territory to be served is made by

State regulation of franchising is often aimed at protecting franchisees from unfair practices.

Raceway LLC licenses the trademarks to its products to Stadium Markets Inc. to reproduce on clothing and other goods for sale. This is

A court may decide that a franchisor has wrongfully terminated a franchise if the franchisor's decision was arbitrary.

Espresso Brew Inc. uses a Web site to provide downloadable information to prospective franchisees. This electronic information is the equivalent of an offer that must comply with

In a sole proprietorship, the proprietor bears the burden of any liabilities incurred by the business enterprise.

A franchisor does not have good cause to terminate a franchise for a franchisee's failure to meet specified sales quotas.

After notice of termination, a franchisee must be given a reasonable time to wind up the business.

Maeve sells New Energy, a sole proprietorship that makes and sells solar panels, to Omar. This is

To prevent deception, all representations by a franchisor to a prospective franchisee must have a reasonable basis at the time they are made.

Ford is the sole proprietor of Go, a game subscription service. As a sole proprietor, on the business's profits, Ford pays

Because each type of franchise relationship is similar, franchise contracts tend to be similar.

Anyone who does business without creating a separate business organization has a franchise.

Bayard organized, and owns and operates, Cypress Tours in the simplest form of business organization. This is

Bob buys a Club Fitness, Inc., franchise, which the franchisor later terminates. In determining whether the termination was proper, a court will generally

The duration of a franchise is a matter set by state law, not to be otherwise determined between the parties.