question

College Nannies and Tutors, the company profiled in the opening feature for Chapter 15, was started by Joseph Keeley, a student at St. Thomas University in St. Paul, Minnesota. According to the feature, Keeley met Peter Lytle, the angel investor who funded his startup, at:

answer

the awards ceremony for a business plan competition that Keeley won

question

Which of the following statements is incorrect regarding franchising?

answer

New technologies are often introduced through franchise systems.

question

According to the textbook, in 2007 over ________ individual franchise outlets were operating in the United States.

answer

765,000

question

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

answer

franchising

question

Franchising is a form of business ownership in which a firm that already has a successful product or service licenses its trademark and method of doing business to another business in exchange for:

answer

an initial franchise fee and an ongoing royalty

question

According to the textbook, one of the first companies in the United States to utilize franchising was:

answer

Singer Sewing Machine

question

There are two distinctly different types of franchise systems:

answer

product trademark franchise, business format franchise

question

A ________ franchise is an arrangement under which the franchisor grants to the franchisee the right to buy its products and use its trade name.

answer

product and trademark

question

Betty Collins has been a Ford dealer for the past 20 years. Betty owns a:

answer

product and trademark franchise

question

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

answer

Product trademark franchises are by far more popular than business format franchises.

question

Clark Jensen recently opened a Planet Smoothie franchise. So far, he is very satisfied with Planet Smoothie because in exchange for an initial franchise fee and an ongoing royalty payment, Planet Smoothie has provided Clark a formula for doing business along with training, advertising, and other forms of assistance. Clark purchased a ________ franchise.

answer

business format

question

Which of the following statements is incorrect regarding business format franchises?

answer

The business format franchisor obtains the majority of its income from selling its products to its dealers at a markup.

question

A(n) ________ involves the sale of a single franchise for a specific location.

answer

individual franchise agreement

question

Phil Atkinson recently entered into an agreement with Sonic to open seven Sonic Fast-Food Restaurant franchises. According to the agreement that Phil entered into, he has the right to open up to seven Sonic Fast-Food Restaurant franchises within the city limits of Portland, Oregon. Phil has entered into a(n):

answer

area franchise agreement

question

A master franchisee, in addition to having the right to open and operate a specific number of locations in a particular area, also has the right to:

answer

offer and sell the franchise to other people in its area

question

The people who buy franchises from master franchises are typically called:

answer

subfranchisees

question

An individual who owns and operates more than one outlet of the same franchisor, whether through an area or a master franchise agreement, is referred to as a:

answer

multiple-unit franchisee

question

Franchising is appropriate when:

answer

a firm has a strong trademark, a desire to grow, and a well-designed business method

question

Which of the following companies would not be suitable for franchising?

answer

Home Depot

question

The Savvy Entrepreneurial Firm feature in Chapter 15 focuses on Wahoo's Fish Taco, a franchise organization that offers Mexican food mixed with Brazilian and Asian flavors. According to the feature, one of things the founders of Wahoo did that has contributed to its success is:

answer

elect to make Wahoo's a relatively slow growth system, focusing on branding and service quality rather than rapid growth

question

According to our textbook, which of the following is not a quality to look for in prospective franchisees?

answer

individual, rather than team-oriented

question

According to a concept called ________ theory, it is more effective for the units of a growing chain to be run by franchisees than by managers, because managers are usually paid a salary and may not be as committed to the success of their individual units as franchisees, who are in effect the owners of the units they manage.

answer

agency

question

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

answer

an organization allows others to profit from its trademark and business method

question

Because franchisees put their personal capital at risk, they are highly motivated to make their franchise outlets successful. According to the textbook, this advantage of franchising a business is referred to as:

answer

franchisee motivation

question

Which of the following was not identified in the textbook as one of the disadvantages of franchising a business?

answer

franchisee motivation

question

The What Went Wrong feature in Chapter 15 focuses on Curves International, the fitness center for women. Over the past three years, nearly one-third of Curves' 7,700 franchises have closed. Which of the following reasons was not identified in the feature as one of the possible explanations for why so many Curves centers have closed?

answer

a turnover in the company's management

question

According to the textbook, which of the following is not a cost that is typically associated with buying a franchise?

answer

intellectual capital fees

question

Which of the following statement is not correct regarding the costs associated with purchasing a franchise?

answer

The franchisee typically pays a royalty based on a percentage of weekly or monthly net income.

question

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

answer

5%

question

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

answer

weekly or monthly gross income

question

Which of the following statements is incorrect regarding the franchisor-franchisee relationship?

answer

Weekly or monthly royalty fees are usually around 2% of net income.

question

The Partnering for Success feature in Chapter 15 focuses on how franchise organizations can boost their sales while at the same time reduce their expenses. The technique that the feature recommends to achieve these dual objectives is:

answer

cobranding

question

There are two primary advantages to buying a franchise over other forms of business ownership. First, franchising provides an entrepreneur the ability to own a business using tested and refined business methods, and second:

answer

the franchisor typically provides training, technical expertise, and other forms of support

question

According to the textbook, the main disadvantage of buying a franchise is:

answer

the cost involved

question

Which of the following is not an advantage of buying a franchise?

answer

duration and nature of the commitment

question

Which of the following is not a disadvantage of buying a franchise?

answer

availability of financing

question

The statute that regulates franchising at the federal level is:

answer

Federal Trade Commission Rule 436

question

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

answer

14 days

question

Franchisors are required by law to disclose all their costs in a document called the:

answer

Franchise Disclosure Document

question

The Franchise Disclosure Document is accepted in (or by):

answer

all 50 states and parts of Canada

question

The FDD contains ________ categories of information.

answer

23

question

The document that consummates the sale of a franchise is called the:

answer

franchise agreement

question

While franchise agreements vary, each agreement typically contains two sections:

answer

the purchase agreement and the franchise agreement

question

While franchise agreements vary, each agreement typically contains the franchise agreement and:

answer

the purchase agreement

question

In addition to FTC disclosure requirements, ________ states have laws providing additional protection to franchisees.

answer

15

question

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

answer

isolated occurrences

question

International opportunities for franchising are becoming:

answer

more prevalent

question

more prevalent In regard to international franchising, under a(n) ________, the U.S. franchisor grants the rights to an individual or company (the developer) to develop multiple franchised businesses within a country or territory.

answer

direct franchise agreement

question

Kim Baker just purchased the rights to develop multiple School of Rock franchises in England. Kim just purchased a(n):

answer

direct franchise arrangement

question

In the context of international franchising, under a ________ franchise arrangement, the U.S. firm grants the rights to an individual or company (the master franchisee) to develop one or more franchise businesses and to license others to develop one or more franchise businesses within the country.

answer

master

Entrepreneurship Test 2 – Flashcards

Unlock all answers in this set

Haven't found what you were looking for?

Search for samples, answers to your questions and flashcards