Ch 22
____ is a process in which the tangible assets of a business are sold
Liquidation
The franchise fee is a
substantial upfront charge paid to the franchisor
A fund that may offer tax benefits to a business owner but is subject to legal regulations is a(n)
ESOP
A business owner with a struggling business should franchise it
F
A franchise fee is typically only a few hundred dollars
F
A franchise royalty is an ongoing payment, based on a percentage of sales, that the franchisor paps to the franchisee
F
A franchisor is liable for accidents own a franchise location
F
A management buyout occurs when the managers take owner ship of a competitors business
F
Having enough cash on hand to cover expenses for at least 3 months is called diversification
F
The amount to which a given sum will increase over time through investment is known as compounding
F
The company or person that is granted permission to use a brand is known as the licensor
F
The franchise agreement and franchise disclosure document are the same thing
F
The franchise fee is a percentage of sales that the franchisee pays to the the franchisor throughout the year
F
___ is a business term that encompasses the intangibility positive aspects of a business
Goodwill
A franchise agreement describes the geographic territory in which a franchisee can operate
T
A franchise agreement typically has a term limit
T
A franchise disclosure document must typically be given to a potential franchise at least ten days before the franchisee signs franchise agreement
T
A franchise is an investment in which you pay another business for the right or use its business model and products
T
A franchise operations manual must be detailed and precise
T
A franchisor owns the brand, the brands trademarks and sets the terms for licensing a franchisee to use the brands name and its trademark
T
Business owners who want to expand their business but lack the money, time, or personnel to open numerous company-owned units should consider franchising the business
T
Franchising builds brand awareness for the franchisor's product or services
T
Franchising can only be successful for businesses that are in a solid financial condition, easily duplicated, and not dependent on the personal characteristics if their owners
T
Harvesting a business is also called cashing in or cashing out
T
If a new franchisee has questions about the operation of the business, he or she can consult the franchise operations manual
T
In the rule of 72, you divide 72 by the interest rate to find the number of years needed to double your money
T
The 2 biggest advantages of licensing are increased revenue and brand enhancement
T
The company or person that owns a brand is the brand licensor
T
The fee paid by the franchisee to the franchisor that funds marketing, advertising, and promotional materials is known as the franchise advertising fee
T
The franchise operates under the franchises brand
T
The perceived monetary value of a brand is known as brand equity
T
The Franchise Rule is
a federal law that regulates what must be included in a franchise disclosure document
The fee paid by a franchisee to a franchisor, used on a percentage of sales, is the
advertising fee and royalty fee
A major advantage of franchising for a franchisor is
all of the above
An accounting term that means the total assets minus the total liabilities in a company's balance sheet is known as
all of the above
The perceived monetary value of a brand is known as
brand equity
Granting permission to a person or company to use your brand is known as
brand licensing
Cash on hand that will cover expenses for at least 3 months is called a(n)
emergency fund
A _______ is a legally binding contract between a franchisor and franchisee that lists the rights and responsibilities of each party
franchise agreement
The legal document that provides detailed information to potential franchises about the franchisor is the
franchise discloser document
A(n) ____ is a legal document that provides detailed information to potential franchisees about the franchisor
franchise disclosure document
The upfront charge that allows the franchisee to join the franchisor's system is called a(n)
franchise fee
The fee paid by the franchisee to the franchisor as a percentage of the sales that the franchisee earns is called a(n)
franchise royalty
Franchise royalties are paid on a timetable set by the
franchisor
The business valuation term that refers to reputation, relationships, and location is known as
goodwill
The process of exiting a business and gaining the value of the business in cash when you leave is referred to as
harvesting
When a licensor requires protection from any legal action, fines, to other damages resulting from the licensee's action, it is referred to as
indemnification
The company or person who owns a brand and licenses it is known as the
licensee
The ease of converting a non-cash asset into cash is known as
liquidity
The ease of converting non-cash assets into cash is known as
liquidity
An exit strategy in which business owners sells his or her ownership shares tp the business's managers is known as a(n)
management buyout
A business whose success is due primarily to it's owner's personal contacts, charisma, or skills is
not a good candidate for a franchise
The three documents that a franchisor must provide to the franchisee are 1) an agreement 2) a disclosure document 3) a(n)
operations manual
A quick way to figure how long it will take to double your money at a given rate of return is called the
rule of 72
A quick way to figure how long it will take to double your Money at a given rate of return is to
use the rule of 72
