BLAW Chpt. 1 – Flashcards
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Entrepreneur
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One who initiates and assumes the financial risk of a new enterprise and who undertakes to provide control its management
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Franchise
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Arrangement where the owner of a trademark, trade name, or copy right licenses the use if that thing to another under specific conditions or limitations in selling of goods or services
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Franchisee
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One receiving a license to use another's (franchisor's) trademark, trade name, or copyright license in the sale of goods or services
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Franchisor
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One licensing another (the franchisee) to use his or her trademark, trade name, or copyright in the sale of goods or services
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Types of Franchises
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Distributers (car dealerships) Chain Style Businesses (Chick-fil-a) Manufacturing or Processing Agreement (Dublin Dr. Pepper)
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Sole Proprietorship
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Simplest form of business; Owner is the business; Income is reported on Owner's personal income taxes and is legally responsible for all debts and obligation's of the business
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Winding up the business
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Process of collecting, liquidating, and distributing assets
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Cathy buys an exclusive territory in which she is authorized to set up a plant to make Delite Dairy, Inc., products. After receiving the recipes, Cathy begins making yogurt and other Delite products. This is a. a distributorship franchise. b. a chain-style franchise. c. not a franchise. d. a manufacturing franchise.
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d. a manufacturing franchise
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Faye is interested in buying a franchise from Gas n' Snax Go Stores, Inc. This transaction, like other franchise deals, is regulated to protect a. certain types of anticompetitive agreements. b. franchisors from dishonest prospective franchisees. c. prospective franchisees from dishonest franchisors. d. the government's power to restrict freedom of contract.
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C. Prospective franchisees from dishonest franchisors
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Neyda buys a franchise from Oaxaca Artes, Inc. This provides Oaxaca with an outlet for the firm's goods, some of which Neyda is required to buy at an established price. In their agreement, Oaxaca may also specify a. the retail prices at which Neyda must resell the goods she buys. b. the franchisor's non-culpability for any breach of the agreement. c. none of the choices. d. the franchise's business organizational form.
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d. the franchise's business organizational form
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A sole proprietorship lacks continuity on the death of the proprietor. a. true b. false
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a. true
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Foster enters into an agreement with Grab n' Eat Burgers, Inc., to operate a franchise in Home Town. Later, Grab n' Eat grants franchises to others within the same territory, causing Foster to suffer a significant loss in profits. In Foster's suit against Grab n' Eat, Foster's best argument is that the franchisor a. violated the implied covenant of good faith and fair dealing. b. charged Foster a franchise fee. c. violated the antitrust laws. d. granted Foster the first Grab n' Eat franchise in Home Town
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a. violated the implied covenant of good faith and fair dealing.
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Home & Hospice Health Care Corporation wants to terminate its franchise arrangement with Ida. Their contract does not provide for notice of termination or set a time for winding up the business. This means that to wind up, Ida a. is entitled to notice, but nothing more. b. has a reasonable time, with notice. c. has whatever time Home & Hospice determines, with or without notice. d. must close immediately.
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b. has a reasonable time, with notice.
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Oberon buys a Pro Club Health & Fitness, Inc., franchise, which the franchisor later terminates. In determining whether the termination was proper, a court will generally a. focus on the right of Oberon to be dealt with fairly. b. balance the rights of both parties. c. emphasize the right of Pro Club to its business operation. d. underscore the interest of consumers in affordability.
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b. balance the rights of both parties.
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The franchise agreement may specify whether the premises for the business must be leased or purchased outright. a. True b. False
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a. True
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Silvano owns Textbooks Plus, a sole proprietorship that sells textbooks and other school supplies. When Silvano dies, Textbooks Plus will automatically a. pass to Silvano's heirs. b. dissolve c. be offered for sale to its creditors and competitors. d. pass to the state.
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b. dissolve
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A franchisor's decision to terminate a franchise may be made in the normal course of business operations. a. True b. False
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a. True
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Mix n' Match Clothing Corporation gives notice to Neely that Mix n' Match is terminating their franchise arrangement. Winding up the business requires a. a new franchise agreement. b. nothing more than closing immediately. c. Neely's death, disability, or insolvency. d. the return of Mix n' Match's property.
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d. the return of Mix n' Match's property
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If a franchisee is induced to enter into a franchise contract by the franchisor's fraudulent misrepresentation, the franchisor may be liable for damages. a. true b. false
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a. true
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The laws governing franchising are primarily designed to protect franchisors from dishonest franchisees. a. true b. false
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a. true
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Eudora is interested in buying a franchise from First Home Realty Company. In this transaction, the Federal Trade Commission's Franchise Rule a. does not apply. b. enables Eudora to weigh the deal's risks and benefits. c. enables First Home to weigh the deal's risks and benefits. d. prohibits certain types of anticompetitive agreements.
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b. enables Eudora to weigh the deal's risks and benefits.
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The franchise is not strictly speaking a business organizational form. a. True b. False
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a. True
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In a manufacturing arrangement, a franchisor transmits to a franchisee the essential ingredients or formula to make a particular product. a. True b. False
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a. True
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A franchisee ordinarily does not pay a fee for a franchise license (the privilege of being granted a franchise). a. True b. False
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b. False
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The duration of a franchise is a matter determined by federal or state statutes. a. True b. False
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b. False
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Paradise Footwear buys a franchise from Quadrangle Athletic Shoes, Inc. This relationship, like all other franchise relationships, is governed by
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Contract Law
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George buys from Haul-U Corporation the exclusive right to use the Haul-U trademark and sell and lease Haul-U-brand products in a certain area. Their franchise agreement requires George to pay certain administrative expenses. Their agreement may also require George to pay a percentage of the franchisor's a.advertising costs. b.personal expenses. c.retirement income. d.none of the choices.
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a. Advertising costs
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A franchise agreement between Grid Tools Company and Hometown Hardware, Inc., is silent on a time for termination of the franchise. Grid Tools may a. never terminate. b. terminate at any time. c. terminate on reasonable notice. d. terminate on three days notice.
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c. terminate at any time
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Jumbo Juice Inc. offers entrepreneurs the opportunity to operate a franchise under the Jumbo Juice trade name as a member of a select group of dealers that engage in retail juice sales. To potential investors, Jumbo Juice must provide a.actual earnings figures. b.hypothetical earnings figures. c.projected earnings figures. d.none of the choices
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d. none of these choices
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Sasha contracts to buy a franchise from TrustMe Financial Consultants, Inc. The contract is silent on the issue of territorial rights. When TrustMe allows a competing franchise to be established near Sasha's office, she suffers a significant loss in profits. This is most likely a violation of
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The implied covenant of good faith and fair dealing
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Instead of setting up a business to market her own products, Rita considers entering into a distributorship franchise with Sports Equipment Corporation. This involves the transfer of
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license
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A sole proprietor is free to make any decision he or she wishes concerning the business. a. True b. False
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a. True
