Question 1

Bob operated a pet grooming shop under a franchise agreement with Clean Pets Corp (CPC). The agreement allowed CPC to terminate the franchise if Bob was fined for cruelty to animals. After an investigation initiated by a customer complaint, Bob was fined for cruelty. CPC termi?nated the franchise. Bob filed a suit against CPC for wrongful termina?tion. Based on the decision in Case 35.3, Chic Miller's Chevrolet, Inc. v. General Motors Corp., the court will most likely rule in favor of

Accepted Answer

A)  Bob, because CPC had no good cause to terminate the franchise. 
B)  Bob, because the fine for cruelty was based on a customer complaint. 
C)  CPC, because a franchisor can terminate a franchise at any time. 
D)  CPC, because the franchise was ter?minated for good cause.

Question 2

A franchise is an association, which may or may not be incorporated, that is organized to provide an economic service to its members.

Accepted Answer

A) True 
 B)False

Question 3

Nina wants the exclusive right to sell Oven-Rite Corporation appliances in a certain area. If Oven-Rite agrees, it will likely require Nina to pay

Accepted Answer

A)  a license fee and a percentage of the sales. 
B)  a license fee only. 
C)  a percent?age of the sales only. 
D)  neither a license fee nor a percentage of the sales.

Question 4

Contract law governs franchise relationships.

Accepted Answer

A) True 
 B)False

Question 5

In determining whether a franchisor acted in good faith in terminating a franchise relationship, a court would balance the rights of both parties.

Accepted Answer

A) True 
 B)False

Question 6

Pricey Auto Corporation gives notice to Quint that Pricey is terminating their franchise arrangement. Winding up the business requires

Accepted Answer

A)  a new franchise agreement. 
B)  nothing more than closing immediately. 
C)  Quint's death, disability, or insolvency. 
D)  returning Pricey's property.

Question 7

In choosing a form of business organization for a new enterprise, important factors include the ambiance of the home office.

Accepted Answer

A) True 
 B)False

Question 8

Contracts between a franchi?see and its customers define the franchise relationship.

Accepted Answer

A) True 
 B)False

Question 9

Eve is a franchisee of Fresh Food, Inc. Their contract gives Fresh a right to control Eve's operations, including supervising the employees. Eve's employee Glen commits a crime against Eve's customer Harry. Harry files a suit against Fresh. With respect to Glen's crime, under the reason?ing of the court in Case 35.2, Kerl v. Dennis Rasmussen, Inc., Fresh is most likely

Accepted Answer

A)  liable because Fresh supervises Eve's employees. 
B)  liable because Harry was Fresh's customer. 
C)  not liable because Eve is responsible for her employees. 
D)  not liable because Harry was Eve's customer.

Question 10

A manufacturer's license to an outside dealer to sell a product is a distributorship.

Accepted Answer

A) True 
 B)False

Question 11

Fred starts up, and assumes the financial risk of, Graphic Ads, a new enterprise. Fred is

Accepted Answer

A)  a franchisee. 
B)  a franchisor. 
C)  an agent. 
D)  a sole proprietor.

Question 12

Kelly, the owner of Llama Farms, a sole proprietorship, wants to obtain additional busi?ness capital but to maintain control. This can best be accomplished by

Accepted Answer

A)  borrowing funds. 
B)  bringing in partners. 
C)  issuing stock. 
D)  selling the business.

Question 13

Burger Heaven, Inc., conducts a chain-style franchise. This involves the transfer to Clive, one of its franchisees, of

Accepted Answer

A)  a license. 
B)  a trade name. 
C)  the formula to make a product. 
D)  the ownership of the business.

Question 14

Under Connecticut law, as explained in Case 35.3, Chic Miller's Chevrolet, Inc. v. General Motors Corp., a franchise agreement can be terminated

Accepted Answer

A)  at will, by the franchisor. 
B)  only as set forth in the franchise agreement. 
C)  only for poor economic performance on the part of the franchisee. 
D)  only with good cause.

Question 15

Events Promotion Corporation licenses trademarks to Filthy Souvenirs, Inc., to use in selling caps, sweatshirts, and similar goods. This is

Accepted Answer

A)  a franchise. 
B)  an entrepreneur. 
C)  a principal-agent relationship. 
D)  a sole proprietorship.

Question 16

Chicago Coca-Cola Bottling Company is

Accepted Answer

A)  a chain-style franchise. 
B)  a distributorship franchise. 
C)  a manufacturing franchise. 
D)  no franchise.

Question 17

One of the advantages of a sole proprietorship is that the owner is not liable for the actions of the business.

Accepted Answer

A) True 
 B)False

Question 18

Star Resorts Corporation wants to terminate its franchise arrangement with Tony. Their contract does not provide for notice of termination or set a time for winding up the business. This means that to wind up, Tony

Accepted Answer

A)  has a reasonable time, with notice. 
B)  has whatever time A determines, with or without notice. 
C)  is entitled to notice, but nothing more. 
D)  must close immediately.

Question 19

In some circumstances, a franchisor may be liable for the act of a fran?chisee's employee.

Accepted Answer

A) True 
 B)False

Question 20

Owen plans to open Owen's Pets Store, a pet supplies outlet, and to hire Quinn and Ruth. Owen will invest only his own money. He does not ex?pect 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?

Accepted Answer

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

Exam 35: Sole Proprietorships and Franchises

A franchise is an association, which may or may not be incorporated, that is organized to provide an economic service to its members.

Nina wants the exclusive right to sell Oven-Rite Corporation appliances in a certain area. If Oven-Rite agrees, it will likely require Nina to pay

Contract law governs franchise relationships.

In determining whether a franchisor acted in good faith in terminating a franchise relationship, a court would balance the rights of both parties.

Pricey Auto Corporation gives notice to Quint that Pricey is terminating their franchise arrangement. Winding up the business requires

In choosing a form of business organization for a new enterprise, important factors include the ambiance of the home office.

Contracts between a franchi?see and its customers define the franchise relationship.

A manufacturer's license to an outside dealer to sell a product is a distributorship.

Fred starts up, and assumes the financial risk of, Graphic Ads, a new enterprise. Fred is

Kelly, the owner of Llama Farms, a sole proprietorship, wants to obtain additional busi?ness capital but to maintain control. This can best be accomplished by

Burger Heaven, Inc., conducts a chain-style franchise. This involves the transfer to Clive, one of its franchisees, of

Under Connecticut law, as explained in Case 35.3, Chic Miller's Chevrolet, Inc. v. General Motors Corp., a franchise agreement can be terminated

Events Promotion Corporation licenses trademarks to Filthy Souvenirs, Inc., to use in selling caps, sweatshirts, and similar goods. This is

Chicago Coca-Cola Bottling Company is

One of the advantages of a sole proprietorship is that the owner is not liable for the actions of the business.

Star Resorts Corporation wants to terminate its franchise arrangement with Tony. Their contract does not provide for notice of termination or set a time for winding up the business. This means that to wind up, Tony

In some circumstances, a franchisor may be liable for the act of a fran?chisee's employee.