buiz test 4

In which type of franchise must the customer experience be consistent from one location to the next?

business format franchise

How long is a typical franchise agreement?

10-20 years

The franchisor will set the price to charge customers for the products. True or false?

False

____________ are the fees paid to the franchisor as a percentage of gross sales.

Royalties

Why are most franchised organizations successful?

The organization has an established marketing and distribution system.

What is a problem in choosing managers only from within the family? (Choose all that apply.)

There may not be a good selection of employees. There may be issues with nepotism. Other people may not be motivated to work hard if they can't have a stake in the business.

One common way to transfer ownership is to create shares that can be bought and sold per the terms of the succession agreement. True or false?

True

Which of the following is a disadvantage of franchising for the franchisor?

more control • investment X strict guidelines X product restrictions

• How long is a typical franchise agreement?

2 years X 3 years • 7 years • ? 10 years

Royalties are usually __________ of the monthly sales.

4-8 percent

What percentage of gross sales is usual for royalty fees?

4-8 percent

Which of the following is true about an LLC?

An LLC can have investors.

A complication with filling roles within the business is that it's hard to get working mothers involved. True or false?

False

A family business is one owned entirely by family members. True or false?

False

A franchised company is typically less profitable than a company that uses a traditional business model. True or false?

False

Culture is usually established by the second and third generations of a family business. True or false?

False

Having a will that bequeaths a share of the business to a surviving spouse or children is as good as a succession plan. True or false?

False

It's often more difficult to start up a family business. True or false?

False

Management is primarily responsible for establishing the vision of the company regarding who can own or buy shares. True or false?

False

Since businesses become easier to run as time goes on, there's no need to hire a professional CEO. True or false?

False

Statistics show that franchises have a higher percentage of failure than other business models. True or False?

False

The business format franchise is the most profitable type of franchise. True or false?

False

The franchisor will not have any investment costs at the start-up of a new franchise location. True or False?

False

The training and support provided by the franchisor does not require an additional fee. True or false?

False

The type of franchise that is offered is dependent on the main organization's industry. True or false?

False

You should be wary of any franchise contract that is nonnegotiable. True or false?

False

If you are a business owner, simply leaving assets to a surviving spouse or children in a will is enough to keep the future of a business safe. True or false?

False A will doesn't specify things such as voting rights and management privileges. A succession plan is different from a will.

Succession planning can be left until the current owners are ready to retire. True or false?

False Succession planning should start early to avoid making decisions in the event of the unexpected death or incapacity of the owners.

Family assets need to always be distributed equally to the children. True or false?

False The asset distribution should be fair but not necessarily equal, depending on who has contributed and in what ways to the family business.

In family-first culture models, the highest value is placed on making sure the business is profitable. True or false?

False, The highest value is on membership within the family, keeping people living and working close together.

A CEO needs to understand the concept of outsourcing services or goods needed by the business to outside sources such as foreign or non-union suppliers in order to save a company money. True or false?

True

A family member can have ownership in a business without necessarily having voting rights. True or false?

True

A franchisor supplies the building setup and decor for the franchised location. True or false?

True

A leader determines the vision and inspires people to follow that path. True or false?

True

A manufacturing franchise is the least common type of franchise. True or false?

True

Always get legal help when reviewing a contract. True or false?

True

An advantage of a family business is the variety of skills family members can bring to the business. True or false?

True

Family members can help with cash flow problems facing a new business. True or false?

True

Management explains the challenges facing a business and offers suggestions so that owners and the board can make wise decisions. True or false?

True

Managers are responsible for day-to-day operations of the family business. True or false?

True

Many franchise owners may feel disappointed that they really are not their own boss when owning a franchise.True or false?

True

Minimizing start-up costs for a franchisor can help them grow faster. True or false?

True

Most franchisees must pay an up-front fee or a percentage of gross sales to the franchisor. True or false?

True

Primogeniture means that the firstborn child inherits the family business. True or false?

True

Primogeniture means that the oldest child automatically inherits the business. True or false?

True

Statistics show that franchises have a lower percentage of failure than other business models. True or false?

True

Stewardship, the careful and responsible management of something entrusted to one's care, is a responsibility of the family owners. True or false?

True

Succession plans need to deal with transfer of both the business and family wealth. True or false?

True

The chief executive officer, or CEO, is the person with decision-making authority. True or false?

True

The franchisor will set the price a franchisee pays for the goods they purchase. True or false?

True

The more functional a family is, the more likely it is that its business will remain successful. True or false?

True

When a company has a professional and effective management structure, it's more likely to be able to secure financing for expansion and capital improvements. True or false?

True

While the franchisee makes an up-front investment in the business, the franchisor still has a significant investment. True or false?

True

Culture in business can be defined as the personality and values of a company. True or false?

True A business's culture is its personality and the reflection of its core values.

In the middle-ground culture model, family is valued, but there's a recognition that not everyone in the family is well-suited to work in the business. True or false?

True, In this model, family members are supported to be successful and productive, whether or not they work within the family business.

In business-first culture models, job titles and responsibilities are formally defined. True or false?

True, The culture of a business-first model is formal and oriented toward maintaining the business as a profitable entity.

Which of the following are disadvantages based on kinship?

all of the above

Which of the following is an example of additional start-up costs that a franchisee may encounter?

all of the above

A franchise contract is designed to protect the franchisor's ________.

brand

Partially Correct Which of the following are responsibilities of a manager? (Choose all that apply.)

budgeting analyzing organizing planning

What is the most common type of franchise?

business format franchise

How can the franchisor create a common platform? (Choose all that apply.)

by controlling the employee selection at each location by controlling the management of the franchise by controlling the business operations at each location by controlling the products supplied at each location

What is the responsibility of the franchisor with regard to advertising?

campaign development X paying for the advertising • coordinating with other franchisees in the area X determining the geographical territory for the advertising campaign

Most family business start-ups have __________ issues in the first few months of business formation.

compliance cash flow X communication leadership

How can the franchisor ensure that the customer has the same experience at all locations? (Choose all that apply.)

controlling the building design and decor, controlling the business operations at each location, controlling the products supplied at each location

A good succession plan can help address which of the following issues? (Choose all that apply.)

family conflict, need for liquidity, management succession, estate taxes

Which of the following are the most common areas for franchises? (Choose all that apply.)

food retail automotive

Who is responsible for day-to-day operations in a franchised location?

franchisee

Who is responsible for hiring at a franchised location?

franchisee

Who is responsible for suppliying the business processes and systems at the franchised location?

franchisor

Who is responsible for training at the franchised location?

franchisor

What section of a franchise agreement specifies who will own the property?

geographic territory

Which issues are related to succession planning? (Choose all that apply.)

inheritance, managerial control Succession planning entails not only passing the assets of a business to heirs in a fair manner, but also deciding who will run the business when the original owners retire.

Which of the following is an advantage of franchising for the franchisor?

quick growth

Why is location assistance an advantage for franchisees?

Franchisors conduct extensive research to determine the ideal location.

__________ in a contract ensure that the franchisor will not open another location within a certain geographic area.

Geographic rights

Which of the following is an advantage of franchising for the franchisor?

low risk

In which type of franchise does the franchisee purchase the rights to manufacture the franchisor's products?

manufacturing franchise

A franchise contract is typically _________.

nonnegotiable

What section of a franchise agreement outlines the rules and obligations of the franchisor and franchisee?

operation of the business

What section of a franchise agreement outlines the training that the franchisee will receive?

operation of the business

What is the responsibility of the franchisee with regard to advertising?

paying for the advertising

In what type of franchise does a franchisor not enforce a specific business format that must be followed by the franchisee?

product franchise

In what type of franchise does a franchisor supply the products to sell?

product franchise

In which type of franchise does a franchisee have more flexibility to run the franchise independently?

product franchise

Which of the following is an advantage of franchising for the franchisee?

provided training and support

Which of the following is a disadvantage of franchising for the franchisor?

regulations

What values did Ingvar Kamprad, founder of Ikea, pass along as his business grew from a one-man operation to a worldwide business? (Choose all that apply.)

simplicity, humility

Which of the following is a disadvantage of franchising for the franchisee?

strict guidelines

Succession plans may provide for which type of management decisions? (Choose all that apply.)

succession from within the family succession by hiring an outside manager succession by allowing a current employee to buy into the firm

Which of the following is a disadvantage of franchising for the franchisee?

support X less control X regulations • ? not your "own boss"

What section of a franchise agreement outlines the training that the franchisee will receive?

support • royalties • dispute terms X operation of the business

Family businesses benefit from new vision as younger generations enter the business. A good example of this is __________.

technology New generations can breathe fresh life into a company because they update its technological resources

What happens if a franchisee does not follow the guidelines set forth by the franchisor?

termination of the agreement

Which of the following is included in a Uniform Franchise Offering Circular (UFOC)?

terms of the franchise agreement

What is the purpose of a franchise model?

to increase the customer base of a brand

What can be both an advantage and disadvantage for franchisees?

training

What can be both an advantage and disadvantage for franchisees?

training programs