Chapter 5

Which of the following is a definition of "franchise"?

A franchise is a license to operate an individually owned business as if it were part of a chain of outlets or stores.

Which of the following is an accurate statement about business profitability?

According to the SBA, the most profitable companies in the United States are small firms that have been in business for more than ten years and employ fewer than 20 people.

The Small Business Administration (SBA) defines a small business as "one which is independently owned and operated for profit and is not dominant in its field." How small must a firm be to not dominate its field?

By the SBA's definition, the factors that determine the size of a business depend on the particular industry it is in.

Which of the following is not a management resource provided by the Small Business Administration?

Free assistance in closing failed small businesses

Every business must keep records of sales, profits and losses, fixed assets, contacts, tax returns, customers, and a variety of other information that affects the growth and operability of the business. Which of the following is true about small business?

Many small firms need only a simple set of records.

Studies show that the incidence of innovation among ________ -business workers is significantly higher than among workers in _______ businesses.

Small - large

The government agency that advises and assists small businesses by providing management and financial assistance including counseling on improving operations and assisting with obtaining debt financing is known as the ______

Small Business Administration (SBA)

______ are business clinics, usually located on college campuses that provide free counseling and training for owners of small businesses

Small-business development centers (SBDCs)

Which of the following is a way in which the Small Business Administration provides financial assistance to small businesses?

Small-business investment companies (SBICs)

The growth of women and minorities in franchising is attributable to which of the following activities?

Special outreach programs designed to encourage franchisee diversity

Having a business plan causes a new business owner to think through all of the aspects of business ownership, costs, capital needed for start-up, and can be used to review company goals and benchmark when they are met. Which of the following is true about the company and industry portion of the business plan?

This section of the business plan gives the background of the company, explains the legal business form it will take, provides information about the products or services to be offered, reviews potential customers, current competitors, and the business's future.

Franchises offer people starting a business the advantage of a recognized name, management assistance, and

a greater chance for success

All of the following are factors that encourage certain people to start new businesses, except:

a reclusive nature

Mike Boyle's strength and conditioning can be described as a small business in ______

a service industry

Several factors contribute to the entrepreneurial spirit in the United States, but the most important is the personal characteristics of the individuals who start businesses. Studies have shown that personal factors in small-business success include family background, willingness to accept a challenge,

and a desire to determine one's own destiny

______ franchises occur when two franchisors offer their products together; this is becoming a new small-business trend

dual-branded

A franchise arrangement includes a franchisor and a franchisee with the franchisor _______ to the franchisee.

granting a franchise

There are many reasons why entrepreneurs start businesses. Mike Boyle likely started MBSC because ______

he had a passion for the industry

John had a good idea for a candy manufacturing business. He decided that he wanted to take the risk, become an entrepreneur, and start his own business. Now, ten years later, John's candy company has 20 locations all over the US and employs nearly 1,000 people. This example illustrates:

how small business fuels job creation and innovation

A business plan is essential for starting a new business because it

is a guide for the person starting the business

Knowledgeable entrepreneurs choose areas with which they are familiar. These are most often the more established industries that require only a _______ investment and some special _______

low initial; skills or knowledge

According to the US office of management and budget, ______ of the major technological advances of the 20th century originated with individual inventors and small companies

more than half

Statistics show that most small business failures are related to

poor management

Which of the following is considered a shortcoming of owning a franchise?

possible market saturation

________ businesses are important to the U.S. economy because, among other things, they employ about half of all private sector employees, pay 42 percent of total U.S. private payroll, and hire 37 percent of high-tech workers (scientists, engineers, computer programmers, and others)

small

Sears, Roebuck & Co., and General Motors rely heavily on _______ to provide merchandise, parts, supplies, and other goods and services. Companies like these buy parts and assemblies for these businesses because it is less expensive than manufacturing them in their own factories.

small business firms

Small businesses enjoy several unique benefits that larger firms may not have such as

the ability to adapt to change and simplified record keeping

________ are independently owned and operated, not dominant in their field of operation, and meet certain standards of size in regard to number of employees or average annual sales

Small businesses

Jeffrey Inc. is a large business that produces off-road vehicle parts. In addition to this market stream, Jeffrey produces auto parts, boat parts, and parts for machinery and equipment. Inventions, LLC is a small business that focuses only on the off-road vehicle market and has created lighter weight, stronger, and more efficient parts for off-road vehicles. Its primary market is off-road racing which it believes will serve the dual purpose of showcasing its product and filling the needs of its customers. Inventions has significantly increased its market share in the off-road vehicle parts market over the years causing Jeffrey to revamp its marketing techniques and reanalyze its customer's needs. Which of the following is true about the relationship of small businesses to large businesses?

Small businesses challenge larger, established firms in many ways, causing them to become more efficient and more responsive to consumer needs

What are the three key ingredients in small business survival as well as failure?

capital, management, and planning

______ is a new alternative to traditional financing that uses online sites to invite people to contribute

crowdfunding

Which category of industries includes retailing, wholesaling, transportation, and communications- industries concerned with the movement of goods from producers to consumers?

distribution

Which of the following is NOT an advantage of smallness in business?

easy to raise capital

Which of the following is the most likely reason that a small-business owner may become frustrated as a franchisee?

excessive restrictions resulting in less freedom

According to the authors, franchises may become unsuccessful because the franchisor

expanded too rapidly

A person who buys a franchise is known as the:

franchisee

While the ______ owns the business, the ______ controls it.

franchisee - franchisor

Franchising allows a ______ the opportunity to set up a small business relatively quickly, and because of its association with an established brand, a ______ outlet often reaches the break-even point faster than an independent business would

franchisee; franchise

A franchisee acquires rights to all of the following, except:

other franchisee's employees and management

What percentage of home-based businesses have no employees?

over 90%

Basic rights and obligations are delineated in a franchise agreement. Which of the following is a franchising obligation?

requirement to purchase goods or products from the franchisor

What is meant by dual-branded franchises?

two franchisors offer their products together