ENT 396 CH.7

The prospective investor should get as much information as possible on the franchisor

True

The terms upside gain and downside loss refer to the profits the business can make and the losses it can suffer

True

Franchisees have the option of using the logo and symbols of the franchisor.

False

Who must negotiate a final deal to purchase a business? a. A lawyer b. A CPA c. The potential buyer d. All of these

The potential buyer

In negotiating a deal to purchase an existing business, it is possible to request that the seller retain a minority interest in the firm

True

Perhaps the greatest advantage of buying a franchise, as compared to starting a new business or buying an existing one, is that the franchisor will usually provide both training and guidance to the franchisee.

True

The Federal Trade Commission does not provide information on franchise success

False

The Franchise Disclosure Document (FDD) is a legally required disclosure document that must be presented to potential franchisees during presale discussions

True

Uniqueness in a product or service can be demonstrated through a new-new approach or a new-old approach

True

When one designs a unique good or service, the individual is said to have used a(n) ____approach to starting the business. a. new-old b. old-new c. new-new d. old-old

new-new

The person who sells the franchise is usually required to do all of the following except: a. provide professional management training to the unit's staff. b. help out with financial assistance. c. pay a fee. d. provide continuing aid and a guidance to the person buying the franchise.

pay a fee

An additional consideration to keep in mind when negotiating to purchase an existing business includes requesting that the seller retain __________ in the firm. a. a minority interest b. a majority interest c. either a minority or majority interest d. none of these

a minority interest

An advantage to buying an ongoing business is a. reduced concern over future operations. b. time and effort are reduced c. it may be purchased at a bargain price. d. all of these.

all of these

The advantages of franchising include: a. training and guidance. b. brand-name appeal. c. proven track record. d. all of these.

all of these

The elimination of time and effort associated with starting a company is an advantage of acquiring an ongoing venture

True

When purchasing an existing business, the prospective owner should conduct an assessment of the business's current group of employees

True

A key question to ask when buying an on-going small business is which of the following? a. Where should you retire someday? b. Can you become a millionaire by buying this business? c. How old is the business? d. How many personnel are going to remain?

How many personnel are going to remain?

Which is not a key question to ask when buying a business? a. What is the condition of the inventory? b. Is the building heated with gas or electricity? c. Why is the business being sold? d. How many of the employees will remain?

Is the building heated with gas or electricity?

A ____ is a system of distribution that enables a supplier to arrange for a dealer to handle a specific product or service under certain mutually agreed upon conditions. a. franchisor b. franchisee c. franchise d. franchiser

franchise

The individual who buys the franchise is the a. franchisor. b. franchatter. c. franchisee. d. franchisette.

franchisee

Which of the following is an intangible asset? a. plant b. machinery c. inventory d. goodwill

goodwill

Which of the following is not a key question a prospective buyer needs to ask in buying a business? a. What is the owner's personal net worth? b. What type of competition exists? c. Why is the owner selling? d. How many of the personnel will remain with the firm?

What is the owner's personal net worth?

An agreement not to compete is also known as a. a trade restriction clause. b. a deferential sale of business clause. c. a waiver of competition clause. d. a legal restraint of trade.

a legal restraint of trade

The inventory should be examined for which of the following? a. salability b. correspondence between the physical count and the book count c. up-to-datedness d. all of these.

all of these

When should a potential franchisee receive the FDD (Franchise Disclosure Document)? a. at least ten days before signing a contract or paying any money b. at least ten days before paying any money c. two days before signing a contract or paying any money d. two days before signing a contract

at least ten days before signing a contract or paying any money