Question 1

Franchising is a form of business organization in which a firm that already has a successful product or service licenses its trademark and method of doing business to other businesses in exchange for an initial franchise fee and an ongoing royalty.

Accepted Answer

A) True 
 B)False

Question 2

To avoid making a hasty judgment, a franchisee may not purchase a franchise for ________ days from the time the Franchise Disclosure Document is received.

Accepted Answer

A)   3
B)   5
C)   10
D)   14
E)   30F) D) and E)
G) None of the above

Question 3

In the majority of cases, a franchisee pays the franchisor a royalty based on ________.

Accepted Answer

A)   a predetermined fixed weekly or monthly amount
B)   weekly or monthly net income
C)   the size of the franchise outlet
D)   weekly or monthly gross income
E)   the age of the franchise outletF) None of the above
G) A) and E)

Question 4

General Motors operates a ________ franchise system.

Accepted Answer

A)   product format and trademark
B)   product extension
C)   product and trademark
D)   business format
E)   business format and trademarkF) A) and D)
G) A) and E)

Question 5

There are two primary advantages to buying a franchise over other forms of business ownership. First, the franchisor typically provides training, technical expertise, and other forms of support, and second, ________.

Accepted Answer

A)   franchising is almost a sure way of making a profit
B)   a franchise agreement is typically easy to exit if expectations aren't met
C)   franchisors typically encourage creativity on the part of franchisees
D)   the franchisor provides an entrepreneur the ability to own a business using a tested and refined business method
E)   franchise organizations are consistently more profitable than non-franchise organizations in the same industryF) A) and E)
G) B) and C)

Question 6

Business format franchises typically allow franchisees substantial flexibility in how they run their individual franchise units.

Accepted Answer

A) True 
 B)False

Question 7

A Pepsi Cola bottling dealership is an example of a business format franchise.

Accepted Answer

A) True 
 B)False

Question 8

The royalty fees a franchisee pays are usually around four to five percent of gross income.

Accepted Answer

A) True 
 B)False

Question 9

Uptown Cheapskate, the company profiled in the opening feature of Chapter 15, was started by Chelsea and Scott Sloan. According to the feature, Chelsea and Scott decided to grow Uptown Cheapskate via franchising because they wanted to ________.

Accepted Answer

A)   grow quickly without making a huge investment in real estate
B)   capture the prestige of being a franchise organization
C)   maintain maximum control of their business while at the same time maximizing profits
D)   grow quickly while at the same time maintaining maximum control of their business
E)   grow slowly while at the same time maximizing profitsF) B) and D)
G) C) and D)

Question 10

According to a recent FTC report, instances of problems between franchisors and their franchisees tend to be ________.

Accepted Answer

A)   prevalent practices
B)   isolated occurrences
C)   nonexistent
D)   prevalent practices for product and trademark franchise systems and isolated occurrences for business format franchise systems
E)   isolated occurrences for product and trademark franchise systems and prevalent practices for business format franchise systemsF) D) and E)
G) A) and B)

Question 11

Jenna Page recently entered into an agreement with Anytime Fitness to open five Anytime Fitness franchises. According to the agreement that Jenna entered into, she has the right to open up to five Anytime Fitness franchises within the city limits of Lawrence, Kansas. Jenna has entered into a(n)  ________ franchise agreement.

Accepted Answer

A)   individual
B)   district
C)   locality
D)   area
E)   cityF) B) and E)
G) B) and D)

Question 12

In the majority of cases, a franchisee pays a royalty based on a percentage of weekly or monthly net income.

Accepted Answer

A) True 
 B)False

Question 13

The two distinctly different types of franchise systems are ________ franchise and ________ franchise.

Accepted Answer

A)   product trademark; business arrangement
B)   product plus; business format
C)   business design; product improvement
D)   product extension; business design
E)   product trademark; business formatF) C) and E)
G) B) and E)

Question 14

The document that consummates the sale of a franchise is called the ________.

Accepted Answer

A)   franchise disclosure document
B)   franchise agreement
C)   license agreement
D)   uniform franchise contract
E)   franchise circularF) D) and E)
G) A) and B)

Question 15

According to the textbook, a franchisee's weekly or monthly royalty fees are typically around ________ percent of gross income.

Accepted Answer

A)   2
B)   3
C)   4
D)   5
E)   6F) B) and D)
G) C) and E)

Question 16

Which of the following statements is incorrect regarding franchising?

Accepted Answer

A)   In some industries, such as automotive and retail food, franchising is a dominant form of business ownership and growth.
B)   There are some instances in which franchising is not appropriate.
C)   Franchising is a relatively new form of business organization.
D)   Franchising, by its very nature, involves the sharing of knowledge between a franchisor and a franchisee.
E)   Franchising is a relatively poorly understood form of business ownership and growth.F) All of the above
G) A) and B)

Question 17

According to the textbook, from the franchisor's point of view, the primary disadvantage of franchising is that ________.

Accepted Answer

A)   it is a poorly understood form of business ownership
B)   an organization allows others to profit from its trademark and business method
C)   franchise organizations consistently make less money than alternative forms of business ownership
D)   it typically takes longer to grow an organization via franchising than company-owned stores
E)   it is not legal in seven states and the District of ColumbiaF) B) and E)
G) B) and C)

Question 18

James Ryan has been a Coors Beer distributor for the past 20 years. James owns a ________ franchise.

Accepted Answer

A)   business format
B)   product and trademark
C)   business design
D)   product plus
E)   product and business formatF) A) and D)
G) C) and E)

Question 19

Which of the following statements is incorrect regarding product and trademark franchises?

Accepted Answer

A)   Rather than obtaining a royalty or franchise fee, the product and trademark franchisor obtains the majority of its income from selling its products to its dealers or distributors at a markup.
B)   Ford Motors establishes product trademark rather than business format franchises.
C)   Product trademark franchises are more popular than business format franchises.
D)   Product and trademark franchisees are typically permitted to operate in a fairly autonomous manner.
E)   A product trademark franchise typically connects a single manufacturer with a network of dealers or distributors.F) B) and E)
G) B) and D)

Question 20

An advantage of franchising, from the franchisors point of view, is that franchising helps a venture grow because the franchisees provide the majority of the capital.

Accepted Answer

A) True 
 B)False

Exam 15: Franchising

An advantage of franchising, from the franchisors point of view, is that franchising helps a venture grow because the franchisees provide the majority of the capital.

Correct Answer
verified

General Motors operates a ________ franchise system.

Correct Answer
verified

Uptown Cheapskate, the company profiled in the opening feature of Chapter 15, was started by Chelsea and Scott Sloan. According to the feature, Chelsea and Scott decided to grow Uptown Cheapskate via franchising because they wanted to ________.

Correct Answer
verified

There are two primary advantages to buying a franchise over other forms of business ownership. First, the franchisor typically provides training, technical expertise, and other forms of support, and second, ________.

Correct Answer
verified

According to the textbook, a franchisee's weekly or monthly royalty fees are typically around ________ percent of gross income.

Correct Answer
verified

The document that consummates the sale of a franchise is called the ________.

Correct Answer
verified

Franchising is a form of business organization in which a firm that already has a successful product or service licenses its trademark and method of doing business to other businesses in exchange for an initial franchise fee and an ongoing royalty.

Correct Answer
verified

According to the textbook, from the franchisor's point of view, the primary disadvantage of franchising is that ________.

Correct Answer
verified

A Pepsi Cola bottling dealership is an example of a business format franchise.

Correct Answer
verified

To avoid making a hasty judgment, a franchisee may not purchase a franchise for ________ days from the time the Franchise Disclosure Document is received.

Correct Answer
verified

In the majority of cases, a franchisee pays the franchisor a royalty based on ________.

Correct Answer
verified

Business format franchises typically allow franchisees substantial flexibility in how they run their individual franchise units.

Correct Answer
verified

James Ryan has been a Coors Beer distributor for the past 20 years. James owns a ________ franchise.

Correct Answer
verified

The royalty fees a franchisee pays are usually around four to five percent of gross income.

Correct Answer
verified

In the majority of cases, a franchisee pays a royalty based on a percentage of weekly or monthly net income.

Correct Answer
verified

Correct Answer
verified

Which of the following statements is incorrect regarding product and trademark franchises?

Correct Answer
verified

The two distinctly different types of franchise systems are franchise and franchise.

Correct Answer
verified

Which of the following statements is incorrect regarding franchising?

Correct Answer
verified

According to a recent FTC report, instances of problems between franchisors and their franchisees tend to be ________.

Correct Answer
verified

Exam 15: Franchising

An advantage of franchising, from the franchisors point of view, is that franchising helps a venture grow because the franchisees provide the majority of the capital.

Correct AnswerverifiedShow Answer

General Motors operates a ________ franchise system.

Correct AnswerverifiedShow Answer

Uptown Cheapskate, the company profiled in the opening feature of Chapter 15, was started by Chelsea and Scott Sloan. According to the feature, Chelsea and Scott decided to grow Uptown Cheapskate via franchising because they wanted to ________.

Correct AnswerverifiedShow Answer

There are two primary advantages to buying a franchise over other forms of business ownership. First, the franchisor typically provides training, technical expertise, and other forms of support, and second, ________.

Correct AnswerverifiedShow Answer

According to the textbook, a franchisee's weekly or monthly royalty fees are typically around ________ percent of gross income.

Correct AnswerverifiedShow Answer

The document that consummates the sale of a franchise is called the ________.

Correct AnswerverifiedShow Answer

Franchising is a form of business organization in which a firm that already has a successful product or service licenses its trademark and method of doing business to other businesses in exchange for an initial franchise fee and an ongoing royalty.

Correct AnswerverifiedShow Answer

According to the textbook, from the franchisor's point of view, the primary disadvantage of franchising is that ________.

Correct AnswerverifiedShow Answer

A Pepsi Cola bottling dealership is an example of a business format franchise.

Correct AnswerverifiedShow Answer

To avoid making a hasty judgment, a franchisee may not purchase a franchise for ________ days from the time the Franchise Disclosure Document is received.

Correct AnswerverifiedShow Answer

In the majority of cases, a franchisee pays the franchisor a royalty based on ________.

Correct AnswerverifiedShow Answer

Business format franchises typically allow franchisees substantial flexibility in how they run their individual franchise units.

Correct AnswerverifiedShow Answer

James Ryan has been a Coors Beer distributor for the past 20 years. James owns a ________ franchise.

Correct AnswerverifiedShow Answer

The royalty fees a franchisee pays are usually around four to five percent of gross income.

Correct AnswerverifiedShow Answer

In the majority of cases, a franchisee pays a royalty based on a percentage of weekly or monthly net income.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following statements is incorrect regarding product and trademark franchises?

Correct AnswerverifiedShow Answer

The two distinctly different types of franchise systems are ________ franchise and ________ franchise.

Correct AnswerverifiedShow Answer

Which of the following statements is incorrect regarding franchising?

Correct AnswerverifiedShow Answer

According to a recent FTC report, instances of problems between franchisors and their franchisees tend to be ________.

Correct AnswerverifiedShow Answer

Correct Answer
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The two distinctly different types of franchise systems are franchise and franchise.

Correct Answer
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Correct Answer
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Correct Answer
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