Bus Law Ch. 36

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A sole proprietor does not own the entire business
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False
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In choosing a form of business organization for a new enterprise, impor¬tant factors include the ability to raise capital.
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True
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The franchise is not strictly speaking a business organizational form.
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True
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A sole proprietor is free to make any decision he or she wishes concerning the business.
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True
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Any lawsuit against the business or its employees does not lead to unlimited personal liability for the owner of a sole proprietorship.
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False
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A franchisee is generally legally independent of the franchisor.
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True
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A franchisee is generally economically independent of the franchisor’s integrated business system.
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False
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In a manufacturing arrangement, a franchisor transmits to a franchisee the essential ingredients or formula to make a particular product.
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True
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The laws governing franchising are primarily designed to protect fran¬chisors from dishonest franchisees.
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False
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No state requires franchisors to provide presale disclosures to prospective franchisees.
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False
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Some states require that a franchisor submit advertising aimed at pro-spective franchisees to the state for approval.
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True
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Some states require the termination of a franchise when there is no “good cause” for it to continue.
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False
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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.
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True
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A franchisee ordinarily does not pay a fee for a franchise license (the privilege of being granted a franchise).
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False
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The franchisor may require that the business use a particular organizational form and capital structure.
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True
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The franchise agreement is not likely to set out standards such as sales quotas and record-keeping requirements.
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False
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The duration of a franchise is a matter determined by federal or state statutes.
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False
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A franchisor can suggest retail prices for the goods that a franchisee sells but cannot mandate them.
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True
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When a franchise agreement contains a notice-and-cure provision, a franchisee’s breach of the duty of honesty and fidelity is not enough to allow the franchisor to terminate the franchise.
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False
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If a franchisor’s decision to terminate a franchise is made in the normal course of business and reasonable notice is given, it is less likely that the termination will be considered wrongful.
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True
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Kari is the sole proprietor of Living Earth Garden Shop. As a sole proprietor, on the business’s profits, Kari pays
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Only personal income taxes
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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
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Dissolve
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Haute Dogs, Inc., sells a franchise to Ilene’s Cuisine, a lunch truck. Ilene’s Cuisine is
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A franchisee
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Cookie Shops, Inc., sells a franchise to Donuts & Desserts, a mall food-court vendor. Cookie Shops is
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A franchisor
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Paradise Footwear buys a franchise from Quadrangle Athletic Shoes Inc. This rela¬tionship, like all other franchise relationships, is governed by
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Contract law
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Instead of setting up a business to market her own products, Rita con¬sid¬ers entering into a distributorship franchise with Sports Equipment Corporation. This involves the transfer of
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A license
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Sauces n’ Syrups, Inc., and Thad’s Sweet & Spicy Bottling Plant have a manufacturing franchise arrange¬¨ment. This involves the transfer of
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The formula to make a certain product
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Ralph is interested in buying a franchise from Sparkle Beverages Inc. For Ralph to make an informed decision concerning this purchase, Sparkle Beverages must disclose in writ¬ing or online
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Material facts such as the basis of projected earnings figures
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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
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Enables Eudora to weigh the deals’ risks and benefits
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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. B10. Refer to Fact Pattern 36-1. To potential investors, Jumbo Juice must provide
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None of the choices
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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. Refer to Fact Pattern 36-1. Jumbo Juice makes earnings claims to potential investors. For those claims, the franchisor
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Must have reasonable basis
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Level Fencing Company wants to present information in “disclosure docu¬¨ments” via the Internet to prospective franchisees. Among other legal re¬¨quirements with which Level Fencing must comply, prospective franchisees must
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be able to download or save all electronic documents
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FreezE Yogurt Corporation provides its prospective franchisees with projected earnings figures based on actual data. FreezE Yogurt must also disclose
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The number and percentage of franchisees that achieved the figures
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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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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 agree¬¨ment requires George to pay certain administrative expenses. Their agreement may also require George to pay a percentage of the franchisor’s
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Advertising costs
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Rooster Red LLC grants a franchise to Qiana to open and operate a Rooster Red restaurant. Rooster Red will likely charge Qiana
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An initial fee or lump sum price for the franchise license
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Shop n’ Pay Convenience Stores, Inc., is a franchisor. Tonya operates a Shop n’ Pay fran¬¨chise. Ulysses is one of Tonya’s employees. As a franchisor, if Shop n’ Pay con¬¨trols the day-to-day operations of the business to a significant degree, it may be liable for tortious acts by
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Shop N Pay, Tonya or Ulysses
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Fletcher buys a Great Big Burgers, Inc., franchise. Great Big Burgers requires that its fran¬chi¬sees buy its products exclusively for every phase of their op-erations. Be¬cause Fletcher wishes to buy less expensive products, he challenges the re¬quirement. His best argument is probably that the re-quirement violates
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Federal antitrust laws
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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
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The return of Mix n Match’s property
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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
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Terminate on reasonable notice

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