Ch. 5

Which of the following is true of combination franchising?

Cultural clashes can lead to the breakup of this arrangement.

Which of the following statements is true of market research in the context of small businesses?

Formal research programs are a valuable but an expensive way to obtain guidance.

Which of the following is a drawback of buying a franchise?

Franchisees face issues in understanding their role in the responsibilities of operating the franchise.

Which of the following is a good source of information through which prospective business owners get help and advice?

State Economic Development Agencies

In a given market area, the fact that a high number of similar firms have gone out of business usually signals market weakness.

true

In the context of franchising, the success of fast food restaurants is related to the increasing number of women working outside the home.

true

Prospective entrepreneurs can access data from _____ to obtain information on subjects such as population, business, and housing.

Census Bureau

_____ are private associations of local (or regional) business and professional people who are familiar with an area's needs.

Chambers of commerce

What does a franchiser do?

Owns the company's name and licenses others to sell its products

Catherine, who loves dogs, wants to offer dog-walking services in her neighborhood. Her research leads her to a small professional pet care store operating in the area, which she decides to buy. Which of the following is a good reason for Catherine to buy the pet care store?

The facilities are already available

Which of the following is a benefit of buying a franchise?

The franchiser brings proven methods of operation to aid the franchisee.

Which of the following is a reason for starting a new business?

The owner has the freedom to select his or her own competitive environment.

While working in a fast-food outlet, Harold observed that most of the customers were working in offices in the neighborhood. Sensing a profitable opportunity, he decided to open a catering business. He offered to deliver lunch directly to the offices so that the businesspeople would not have to interrupt their meetings to go out for lunch. In the context of the above scenario, which of the following was the reason for Harold to start his own business?

To select a competitive environment

Which of the following is true of a franchise fee?

It is a one-time fee paid to the franchiser.

Product and trademark franchising is usually observed in the restaurant industry.

false

Small businesses never select one product niche because they usually have sufficient resources to cover the whole market.

false

The Service Corps of Retired Executives publishes many useful books on planning and organizing small businesses.

false

The Small Business Administration in the Untied States is a particularly effective source of local information for prospective business owners because it is familiar with an area's needs.

false

The industry group with the largest volume of sales in a business format franchising is automobile and truck dealerships.

false

John wants to start his own business. After doing some research, he has decided to specialize in cleaning kitchens since most homemakers are not satisfied with the quality of the service offered by the residential cleaning companies. This process of finding a small—but profitable—demand for something and producing a custom-made product or service known as _____.

niche marketing

Jane, who wants to start her own business, considers buying an Internet café which is up for sale in her neighborhood. However, Jane discovers that Internet connectivity tends to be erratic in the store since she lives in a remote town, and decides against it. Which of the following is most likely the reason for Jane's refusal to buy the business?

problems due to old and obsolete facilities

A disadvantage of franchising is the voluminous paperwork needed to provide disclosure documents to potential franchisees.

true

An advantage of buying a franchise is that it already has many of the requirements for success.

true

In the context of small businesses, franchises tend to fail because of unsuccessful marketing.

true

Reintroducing an old product is a good business idea since customer tastes run in cycles.

true