mana 3325 chapter 8

54) Franchises have experienced three major growth waves since beginning that include a focus on ________.

rapid growth, the service sector ,specific market niches

57) One of the major trends in franchising is the ________ of American franchise systems. A) replication B) conversion C) internationalization D) reduction

C) internationalization

28) The failure rate for franchises is ________. A) higher than the average rate for new businesses B) no different from the rate for new businesses C) lower than the average rate for new businesses D) indeterminable because of the Right to Privacy Act

C) lower than the average rate for new businesses

39) The FTC's philosophy regarding the Uniform Franchise Disclosure Document (UFDD) focuses on ________. A) catching and prosecuting abusers of franchise laws B) verifying the accuracy of FDD information C) providing information to prospective franchisees and helping them make wise decisions D) licensing prospective franchisors

C) providing information to prospective franchisees and helping them make wise decisions

55) A study by the International Franchises Association reports that minorities own more than ________ percent of all franchises and women own ________ percent of franchises. A) 2; 8 B) 9; 20 C) 12; 25 D) 31; 26

D) 31; 26

10) Benefits of involvement in a franchise experience include ________. A) management training and support B) brand name appeal and standardization of goods and services C) national advertising exposure and financial assistance D) All of the above

D) All of the above

38) Which of the following is an indication of a dishonest franchisor? A) A high-pressure sale. B) A "get-rich-quick" scheme. C) Attempts to discourage you from getting an attorney to review the contract. D) All of the above

D) All of the above

44) In addition to reading the franchisor's UFDD, it would be wise for the potential franchisee to seek a franchise that offers which of the following? A) A unique concept or marketing approach B) A registered trademark C) A positive relationship with franchisees D) All of the above

D) All of the above

AACSB: Analytical Thinking 29) Which of the following is not a potential disadvantage of a franchise? A) Unsatisfactory training program. B) Limited product line. C) Less freedom. D) All of the above are potential disadvantages of a franchise.

D) All of the above are potential disadvantages of a franchise.

43) Which of the following should make a potential franchisee suspicious about a franchisor's honesty? A) Claims that the franchise contract is a standard agreement and that there is no need to read it or have an attorney look it over. B) An offer of direct financing of a specific element of the franchise package. C) Not providing detailed operational information until 10 days before signing the contract. D) Requiring franchisees to spend a certain percentage of profits on advertising.

A) Claims that the franchise contract is a standard agreement and that there is no need to read it or have an attorney look it over.

30) A franchise myth is that ________. A) once the franchise is open, the franchisee has autonomy to run the business in whatever way (s)he sees fit B) the owner needs to be hands on C) the franchise will only expect to be paid when the franchisee is profitable D) franchises fail at a rate higher than independently owned businesses

A) once the franchise is open, the franchisee has autonomy to run the business in whatever way (s)he sees fit

13) Some franchisors offer ________ to give existing franchisees the right to exclusive distribution of brand name goods or services within a particular geographic area. A) territorial protection B) exclusive rights C) guaranteed protection D) exclusivity

A) territorial protection

11) Franchisors generally do which of the following regarding financial assistance to franchisees? A) Provide direct financing. B) Assist in finding financing and occasionally provide direct assistance in a specific area. C) Waive royalty fees for franchisees not making an adequate profit. D) Franchisors provide no assistance because having or finding financing is a requirement for qualifying for a franchise.

B) Assist in finding financing and occasionally provide direct assistance in a specific area.

56) ________ is the top international market for U.S. franchisors. A) Europe B) Canada C) Japan D) China

B) Canada

64) Chris Jaffe, the owner of a small independent doughnut shop, is worried that a large doughnut franchise will open an outlet near her location and take away business. Taking a proactive approach, Jaffe contacts the franchise, and after a few months of negotiations, becomes a franchisee. Jaffe is an example of which trend in franchising? A) Cobranding B) Conversion C) Master D) Subfranchising

B) Conversion

16) When it comes to purchasing products, equipment, and incurring other expenses, the franchisor ________. A) cannot require the franchisees to buy from the franchise company B) can set prices franchisees pay for the products but cannot set the retail price the franchisees charge C) is permitted to set the retail price for the franchisee D) cannot require franchisees to buy from an "approved" supplier

B) can set prices franchisees pay for the products but cannot set the retail price the franchisees charge

58) The principle of putting a franchise's products or services directly in the paths of potential customers with smaller, less expensive outlets is called ________. A) cobranding B) intercept marketing C) area development D) master franchise

B) intercept marketing

63) McDonald's recently set up several small franchises in nontraditional locations such as a hospital, a college campus, an airport, a subway station, and a sports arena. These locations are based on the principle of ________. A) conversion franchising B) intercept marketing C) multi-unit franchising D) cobranding

B) intercept marketing

60) In a ________ franchise, a franchisee has the right to create a semi-independent organization in a particular territory to recruit, sell, and support other franchisees. A) multiple-unit B) master C) conversion D) cobranding

B) master

2) Franchises total annual sales represent more than ________ and employ nearly ________ workers in the Unities Sates in more than 300 industries. A) $17 billion; 17 million B) $120 billion; 8.2 million C) $710 billion; 7.8 million D) $225 billion; 21 million

C) $710 billion; 7.8 million

15) Franchise royalty fees typically range from ________ to ________ percent with an average of 6.7 percent. A) 3; 13 B) 1; 21 C) 1; 11 D) 3; 11

C) 1; 11

3) ________ franchising involves providing the franchisee with a complete business system, with an established name, the building layout and design, accounting systems, and other elements while ________ franchising allows the franchisee to use the franchisor's trade name without distributing the products exclusively under the franchisor's name. A) Product distribution; trade name B) Trade name; pure C) Pure; trade name D) Pure; product distribution

C) Pure; trade name

12) A significant advantage a franchisee has over an independent business is the participation in the franchisor's ________ largely due to the ________ the franchise offers. A) centralized buying power; buying insight B) centralized buying power; brand protection C) centralized buying power; economies of scale D) economies of scale; territorial protection

C) centralized buying power; economies of scale

65) Establishing a Baskin-Robbins franchise inside a Blimpee's franchise is an example of ________ franchising. A) multi-unit B) master C) cobranding D) diversionary

C) cobranding

59) A franchise trend in which owners of independent businesses become franchisees to gain the advantage of name recognition is called ________. A) area development B) master franchise C) conversion franchising D) cobranding

C) conversion franchising

14) A recent study reports that the success rate of franchisees increases when a franchise system ________. A) requires franchisees to have prior industry experience B) requires franchisees to actively manage their operations C) has built a strong brand name with training programs to improve knowledge and skills D) All of the above increase the rate of success.

D) All of the above increase the rate of success.

61) A method of franchising that gives the right to create a semi-independent organization in a particular territory is a(n) ________ franchise. A) conversion B) master C) product distribution D) area development

D) area development

1) A franchise is a system of distribution in which semi-independent business owners pay ________ and ________ to a parent company in return for the right to become identified with its trademark, to sell its product or services, and often to use its business format and system. A) a percentage of sales; royalties B) upfront costs; incremental costs C) royalties; monthly consulting charges D) fees; royalties

D) fees; royalties

62) When the franchisor has the right to establish a semi-independent organization in a particular territory to recruit, sell, and support other franchises, it is known as a ________ franchise. A) multi-unit B) cobranding C) conversion D) master

D) master

4) McDonald's is an example of a ________ franchise. A) conversion forms B) trade name C) product distribution D) pure

D) pure