Question 1

The day-t-day operation of franchise business normally is left up to the franchisee.

Accepted Answer

A) True 
 B)False

Question 2

Normally, a franchisee receives a windfall on the termination of a franchise.

Accepted Answer

A) True 
 B)False

Question 3

Leo buys an exclusive territory in which he is authorized to set up a plant to make Midwest Dairy, Inc., products. After receiving the formula, Leo begins making Nice Ice-brand ice cream and other Midwest products. This is

Accepted Answer

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

Question 4

A franchise relationship may be governed by the law covering sales contracts as expressed in Article 2 of the Uniform Commercial Code.

Accepted Answer

A) True 
 B)False

Question 5

Some states require franchisors to provide presale disclosures to prospective franchisees.

Accepted Answer

A) True 
 B)False

Question 6

A franchisee ordinarily pays an initial fee or lump sum price for a franchise license.

Accepted Answer

A) True 
 B)False

Question 7

Flip Gymnastics & Karate, Inc., grants a franchise to Gibby to operate a Flip gym. Flip may require Gibby to pay the franchisor a percentage of his

Accepted Answer

A)  annual sales or volume of business. 
B)  weekly payroll expense. 
C)  monthly overhead savings. 
D)  none of the choices.

Question 8

Mika buys a Nuance Cabinets, 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 Nuance to its business operation. 
C)  focus on the right of Mika to be dealt with fairly. 
D)  underscore the interest of consumers in affordability.

Question 9

Effervescent Soda Bottling Company is

Accepted Answer

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

Question 10

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

Accepted Answer

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

Question 11

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 12

Jody owns KuppaJava Kiosks, a sole proprietorship. Jody's liability is

Accepted Answer

A)  limited by state statute and varies from state to state. 
B)  limited to the extent of capital expenditures. 
C)  limited to the extent of his or her original investment. 
D)  unlimited.

Question 13

Dominique buys a franchise from Cheyenne Artisans, Inc. This provides Cheyenne with an outlet for the firm's goods, some of which Dominique is required to buy at an established price. In their agreement, Cheyenne may also specify

Accepted Answer

A)  the franchisor's non-culpability for any breach of the agreement. 
B)  the franchise's business organizational form. 
C)  the retail prices at which Dominique must resell the goods she buys. 
D)  none of the choices.

Question 14

A manufacturer's license to a dealer to sell a product is a chain-style business operation.

Accepted Answer

A) True 
 B)False

Question 15

Sweet Styles, Inc., a franchisor of clothing stores, wishes to standardize the pricing practices of its franchisees that have engaged in price-cutting to increase their respective shares of the market. The most prudent action might be for Sweet to

Accepted Answer

A)  mandate the prices at which its franchisees sell their products. 
B)  suggest the prices at which its franchisees sell their products. 
C)  require its franchisees to buy inventory exclusively from Sweet. 
D)  threaten its franchisees with a material breach of contract.

Question 16

Pilar is interested in buying a franchise from Quixotic Bike Corporation. Quixotic must disclose material facts that Pilar needs to make an informed decision concerning this purchase, according to

Accepted Answer

A)  no law. 
B)  the Petroleum Marketing Practices Act of 1979. 
C)  the Federal Trade Commission's Franchise Rule. 
D)  the Uniform Commercial Code.

Question 17

Bret buys a franchise from Comida Mexicano Ltd. If their agreement is like most franchise agreements, it will specify that Comida can terminate the franchise

Accepted Answer

A)  at will. 
B)  for any reason. 
C)  for cause only. 
D)  for no reason.

Question 18

Laws governing franchising are designed in part to prevent franchisors from terminating franchises without good cause.

Accepted Answer

A) True 
 B)False

Question 19

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 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

Accepted Answer

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

Question 20

A franchise is a contractual arrangement.

Accepted Answer

A) True 
 B)False

Exam 36: Sole Proprietorships and Franchises

The day-t-day operation of franchise business normally is left up to the franchisee.

Normally, a franchisee receives a windfall on the termination of a franchise.

Leo buys an exclusive territory in which he is authorized to set up a plant to make Midwest Dairy, Inc., products. After receiving the formula, Leo begins making Nice Ice-brand ice cream and other Midwest products. This is

A franchise relationship may be governed by the law covering sales contracts as expressed in Article 2 of the Uniform Commercial Code.

Some states require franchisors to provide presale disclosures to prospective franchisees.

A franchisee ordinarily pays an initial fee or lump sum price for a franchise license.

Flip Gymnastics & Karate, Inc., grants a franchise to Gibby to operate a Flip gym. Flip may require Gibby to pay the franchisor a percentage of his

Mika buys a Nuance Cabinets, Inc., franchise, which the franchisor later terminates. In determining whether the termination was proper, a court will generally

Effervescent Soda Bottling Company is

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

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

Jody owns KuppaJava Kiosks, a sole proprietorship. Jody's liability is

Dominique buys a franchise from Cheyenne Artisans, Inc. This provides Cheyenne with an outlet for the firm's goods, some of which Dominique is required to buy at an established price. In their agreement, Cheyenne may also specify

A manufacturer's license to a dealer to sell a product is a chain-style business operation.

Sweet Styles, Inc., a franchisor of clothing stores, wishes to standardize the pricing practices of its franchisees that have engaged in price-cutting to increase their respective shares of the market. The most prudent action might be for Sweet to

Pilar is interested in buying a franchise from Quixotic Bike Corporation. Quixotic must disclose material facts that Pilar needs to make an informed decision concerning this purchase, according to

Bret buys a franchise from Comida Mexicano Ltd. If their agreement is like most franchise agreements, it will specify that Comida can terminate the franchise

Laws governing franchising are designed in part to prevent franchisors from terminating franchises without good cause.

A franchise is a contractual arrangement.