ENT 3172 Chapter 13-22

The "initial franchise fee" is

a one-time cost or fee born by the new franchisee

Which of the following best describes the franchisor-franchisee relationship?

A or C but not B

Which of the following allows a developer to build a num¬ber of franchised businesses in a particular market area?

Area Development Agreement

There are three central finance questions a prospective franchise must answer. Identify the question below is not a central finance question for a prospective franchisee.

Can I qualify for state, federal or local grants to assist in the acquisition of the franchise?

One of the very few companies that has been successful in using the exact same product world-wide is:

Coca-Cola

What is the key to the Maturity stage in the franchisor-franchisee relationship?

Communication

Rule 436 is a rule issued by ( ) provides franchisors and franchisees with certain legal rights under federal law.

Federal Trade Commission

What sort of disclosure document is required by the FTC Rule?

one of the above formats - the format prescribed by the FTC - the UFOC, or uniform franchise offering circular

Which of the following is a protectable property right granted by the government that protects an invention, new device, or innovation?

patent

Which of the following is NOT a typical social responsibility issue for U.S. franchise systems?

payment of the minimum wage in accordance with the Fair Labor Standards Act

What period of franchisee training is generally the most intensive?

pre-opening training

A product strategy which involves changing the product to meet local conditions and consumer demands is called:

product adaptation

The decline of industries such as the US automotive industry and the consumer electronics industry is evidence that:

products or services of merely average quality lose customer confidence and sales.

Which of the following is the most compelling reason for someone to seek a franchise opportunity?

profitability

What element of the Sherman Act does the Rule of Reason help the courts enforce?

prohibition of contracts and conspiracies that unreasonably restrain trade

The four "P's" of franchise include all of the following except:

promise

Examples of ethical issues in marketing include all the following except:

reducing the size of a product package, the contents of the package and adjusting the price of the product to reflect the new (smaller) size.

Which of the following is not typically a franchisee "right" granted in the written franchising agreement?

right to develop and sell new products or services

A market can be defined by four of the following means. Which one below is not considered as a primary means to define a market?

robot-analyzed menu choices based upon on-site traffic

Which of the following is NOT an argument for businesses to be socially responsible:

social responsibility is a core business purpose

Over time, most franchisors have developed a system for providing marketing services to franchisees. These services usually include three of the following. Which service is generally not included?

stock-option purchase into the franchise system itself

Which of the following illustrates the highest level of social responsibility?

support for social and cultural activities

Which of the following illustrates the highest level of social responsibility?

support of social and cultural activities

The most common restrictions levied by a government in international trade are?

tarrifs

Which of the following documents outlines how the intellectual property of the franchise is to be used by the franchisee?

the Franchise Agreement

Popular franchise directories, which may be the primary first step in information collection for prospective franchisees include all but one of the following. Which should not be included?

the New York Times

Why is the final stage of the franchisor-franchisee relationship cycle called Decline or Development?

the business may decline or continue to grow and prosper, and the relationship will mirror that decline or growth.

The franchisee's major financial obligation is to:

the franchisor

Which of the following does not shape the management philosophy of top management in a franchise system according to the text?

the level of profits of the franchise system

Preparing a financial package by a franchisee is meant to assist in the generation of equity investment or debt backing for the startup and operation of the business venture. When preparing the financial package for presentation, the first parties to consider when writing the financial package should be:

the local bank, loan office or investor to understand the operations, functions and potential profitability of the franchise.

What is the greatest support for a franchisee?

the opportunity for success

All of the following are characteristics of franchisees without legal problems except:

they are involved in their first business undertaking

Which of the following is NOT one of the ways that field representatives deliver con¬tinuing training to franchisees?

they often work indirectly with the franchisee from the franchisor's headquarters.

In making an advertising decision, a franchisor or franchisee should have the primary objectives of advertising address each of the following issues, except:

to discourage competitors

What is the field representative's primary task?

to help maintain a good franchisor-franchisee relationship

Which of the following is a word, name, phrase, symbol, or design that is used by a manufacturer or merchant to identify and distinguish its goods from those sold by others?

trademark

Business ethics

ultimately is about decisionmaking

When do copyright laws go into effect for a written work?

when the work is written

When must the disclosure document be delivered, according to the FTC Rule?

whichever of these comes first

Which of the following questions is least important as a major critical issue for a new franchisor?

who shall I hire as my secretary?

Most franchisors

will not become involved with the financing of new franchisees, although a few may provide a limited amount of help

Potential customers can be grouped into market segments in different ways as based upon any one—up-to-four---of the following factors. Which one factor below is not a means to development market segmentation?

writing style factors

Typically the inequality of bargaining power between franchisor's and franchisees

favors the franchisor

Almost all franchising agreements are set up for a specified term, generally from

five to twenty years

When developing franchise systems in a developing foreign country the first kind of franchises to develop in that country are:

foreign hospitality Franchises

Development of an integrated marketing strategy requires four of the five following items. Which one of the following is typically not part of the marketing strategy process?

franchisee personnel policies

Probably the main hindrance with expanding into foreign markets is:

government red tape

Which of the following is NOT one of the building blocks of customer service?

improvise!

Which of the following telecommunication networks allows franchisees private access to confidential information provided by the franchisor?

intranet

The franchisor-franchisee relationship usually goes through the following cycle:

introduction, growth, maturity, decline/development

Horizontal territorial restrictions

involves competitors selling similar products grouping together and excluding a third part

Which of the following is not an appropriate question to identify ethical factors in a decision making situation?

is the action being considered illegal?

Which of the following is NOT true about the Franchise Agreement?

it is generally a static, unchanging document.

The primary goal of any franchise company is to:

make a Profit

The most common and best way of starting a franchise in a foreign country is through?

master franchisee

Typically, franchise fees

may differ within the same franchise system, depending on the number of franchised units to be opened

It is expected that by the year 2010, how many of all U.S. franchisors will have foreign outlets?

more than 55%

For a new franchisee joining a solid franchise system

much of the guesswork of running a business is removed.

How should meetings between the franchisor and franchisee evolve?

NOT: - meetings as well as follow-up meetings should all cover both general and specific information about the franchise operation. TRY: - initial meetings concentrate on specifics and eventually focus on the broader aspects of the franchise.

Among the actions a franchisor may not engage in the following except:

NOT: - requiring a franchisee to buy a product(s) in order to acquire the product the franchisee wants to purchase TRY: - promote a nation-wide sales promotion for products/services sold by franchisees

As stated in the text, all of these items are among the ten most common legal problems of franchisees except:

NOT: - sharing advertising costs TRY: - correct information being provided to the IRS

In 1953 Congress passed the Small Business Act to help small firms (including franchisees) obtain loans for startups and other business needs. The SBA helps franchisees obtain capital through several ways indicated below. Which one option below is not offered by the SBA to small businesses?

NOT: - the SBA loan guarantee program - the Federal Registry, which has as a part called the Franchise Registry specific for assisting in creating loan possibilities into the franchise industry TRY: - direct SBA (direct federal tax monies) provided to the business for startup funding

Why do most franchisors use the UFOC format for disclosure?

NOT: - the UFOC covers more ground than the FTC rule format. - the FTC rule format covers more ground and is more complicated to use. TRY: not all states accept the FTC rule format.

Which of the following does the trademark most often represent?

NOT: - the name of the product - a protectable property right

Family-owned and/or controlled businesses

NOT: - usually continue to exist over two and sometimes three generations TRY: - account for a clear majority of all incorporated firms in the United States

When does a trade secret become enforceable?

NOT: - when it is filed with a federal agency TRY: when a Confidentiality Agreement is signed

About ( ) percent of franchise systems provide some form of earnings claims for franchisees?

NOT: - 5 percent - about 25 percent TRY: - about 40 percent

Most franchise agreements require that the franchisee pay a percentage of gross revenues to the franchisor's advertising budget. What range is most likely to exist within franchise system agreements?

NOT: - 6-8 percent TRY: - 1-5 percent

When its time to sell or retire, most franchisors will cooperate with the franchisee intent to exit

NOT: - none of the above is an accurate statement - and will stand aside to allow the franchisee to sell to whomever is found as a buyer of the business TRY: - but are not usually interested in helping the franchisee find a buyer for the business

The largest U.S. franchise restaurant system in China is

NOT: KFC NOT:: McDonalds

The Disclosure Document in franchising means the same as:

Uniform Franchise Offering Circular

Over the counter business-oriented publications often include franchise-related information. Each of the following publications regularly provide such useful franchise information except for

Women's Home Journal

Casual dining places have, generally, targeted which group as their primary customer group?

adults of all ages

The most common group within a Franchise Advisory Council is:

advertising

What can a franchisor do to enhance awareness in the franchisor-franchisee relationship?

all of the above

Which of the following is not usually a component of the Franchise Defense Manual?

all of the above should be a part of the Franchise Defense Manual

Why is the training manual important to a franchise?

all of the above.

Which of the following are factors in identifying and transmitting values to future generations?

all of the above: - education - family - laws

Why is an effective communication system so important for a franchise?

an effective communication system will affect the franchise's success, foster continued growth and development of the franchise, and ensure effective superior-subordinate relationships.

Debt financing by a franchisee is typically found in two forms

borrowing money for working capital and for financing capital expenditures.

What is required of the person in charge of a franchisee training program?

both b and c

Utilitarianism:

both b and c above - is concerned with providing the greatest good for the greatest number of people - attempts to remove emotion and self interests from decision making

Marketing research in franchising is done primarily by

both franchisor and franchisee collaboratively

The future for international franchising is:

bright and promising

It is crucial for a potential franchise to answer the following question prior to signing a franchise agreement.

by buying and running this franchise is likely to make me happy

How should a FAC be developed?

by the franchisor in cooperation with all the franchisees and corporate headquarters

C.A.R.E. stands for:

communication, awareness, rapport, expertise

Business social responsibility

consists of the obligations a business has to society

Franchise Advisory Councils:

constitute a crucial step along the patch toward growth and development of a franchise system

Which of the following is one of the four principles of coordination that promote effective work groups?

coordination must address all factors within any phase of any endeavor

Which of the following is a property right provided by the government in an original work of author¬ship that is fixed in a tangible form?

copyright

The least favorite method of entering foreign markets is by investing in company-owned stores in foreign countries and this is called?

direct investment

Which of the following qualities is NOT one of the requirements for an invention to be eligible for a Utility Patent?

distinctive

Which of these qualities makes for the strongest kind of trademark or service mark?

distinctiveness

The executive summary part of the financial package

explains the business, and sparks the interest of the reader in how the funds will be used