Question 1

A franchisor's decision to terminate a franchise may be made in the normal course of business operations.

Accepted Answer

A) True 
 B)False

Question 2

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 3

Pilar is interested in buying a franchise from Quixotic Bike Corporation.Quixotic must disclose material facts that Pilar needs to make an in?formed 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 4

Echo enters into an agreement with Deep Pan Pies,Inc. ,to operate a franchise in Centre City.Later,Deep grants franchises to others within the city.Echo files a suit to close them.If the court rules in Echo's favor it will most likely be on the ground that

Accepted Answer

A) Deep violated the an?titrust laws. 
B) Deep violated the implied covenant of good faith and fair dealing. 
C) Echo paid a franchise fee. 
D) Echo was the first Deep franchisee in Centre City.

Question 5

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 6

Some states require franchisors to provide presale disclosures to pro?spective franchisees.

Accepted Answer

A) True 
 B)False

Question 7

Real Events Promotion Corporation licenses trademarks to Stadium 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 8

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,a...

Question 9

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 10

A sole proprietorship lacks continuity on the death of the proprietor.

Accepted Answer

A) True 
 B)False

Question 11

Good faith and fair dealing are not important in terminating a franchise relationship.

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

A franchise is a contractual arrangement.

Accepted Answer

A) True 
 B)False

Question 14

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 pru?dent 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 15

A franchisor can require a franchisee to purchase certain supplies from the franchisor at an established price.

Accepted Answer

A) True 
 B)False

Question 16

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 17

Mika buys a Nuance Cabinets,Inc. ,franchise,which the franchisor later termi?nates.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 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

Effervescent Soda Bottling Company is

Accepted Answer

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

Question 20

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 prod?ucts.This is

Accepted Answer

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

Exam 36: B: Sole Proprietorships and Franchises

A franchisor's decision to terminate a franchise may be made in the normal course of business operations.

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

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

Echo enters into an agreement with Deep Pan Pies,Inc. ,to operate a franchise in Centre City.Later,Deep grants franchises to others within the city.Echo files a suit to close them.If the court rules in Echo's favor it will most likely be on the ground that

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

Some states require franchisors to provide presale disclosures to pro?spective franchisees.

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

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

A sole proprietorship lacks continuity on the death of the proprietor.

Good faith and fair dealing are not important in terminating a franchise relationship.

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

A franchise is a contractual arrangement.

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 pru?dent action might be for Sweet to

A franchisor can require a franchisee to purchase certain supplies from the franchisor at an established price.

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

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

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

Effervescent Soda Bottling Company is

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 prod?ucts.This is