Small Business Management Ch.8

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Alonzo is considering purchasing a fitness franchise and wants to compare the advantages and disadvantages of several franchisors. Which document should he request from the franchisors that he is​ considering?

Franchise Disclosure Document

The average initial investment for a franchise​ is:

$520,000

How long does the average franchise contract​ run?

10.5 years

The​ charge-off rate for​ SBA-guaranteed loans to franchisees is​ _____percent, compared to a​ charge-off rate of​ ____ percent for all​ SBA-guaranteed loans.

13; 18

What percentage of franchisees do not read the franchise contract before they sign​ it?

18 percent

In addition to requiring franchisees to contribute to a national advertising​ fund, many franchisors require franchisees to spend a minimum amount on local advertising. The average amount​ is:

2 percent of sales

The average amount that franchisees are required to contribute to fund the​ franchisor's national advertising campaign​ is:

2 percent of sales

Alicia is looking for a career change and is evaluating several sandwich shop franchises. She has received copies of each​ franchisor's FDD, and one of the statistics she analyzes is each​ franchisor's franchise turnover rate. A percentage approaching what value should alert her that there could be​ serious, underlying problems in a​ franchise?

20

According to a recent​ survey, ___ percent of existing franchisees rely on SBA loan guarantees to secure financing.

23

What percentage of franchises do minority entrepreneurs​ own?

31.2

Franchisors are finding many opportunities to generate sales through mobile commerce. What percentage of​ e-commerce Web traffic originates from mobile devices such as smart phones and​ tablets?

55 percent

What is the average royalty fee that franchisors collect from their​ franchisees?

6.7 percent of weekly gross sales.

​_______ percent of food and beverage franchisees say​ that, if given the​ chance, they would choose to purchase the same franchise again.

74

A recent survey by the International Franchise Association reports that​ ____ percent of its members believe that taking their franchises into international markets is important to the future success of their businesses.

82

in the United States alone, franchises -------------A.employ more than 7.8 million workers. B.account for 2.3 percent of the U.S. GDP. C.generate more than​ $710 billion in annual sales. D.operate in more than 300 industries. E.All of these are correct.

All of These are correct

Which type of franchising arrangement combines two or more distinct​ franchises, such as Jamba Juice and​ Breugger's Bagels, under one roof for synergistic​ reasons?

Cobranding

Where does the greatest opportunity for growth for​ U.S.-based franchisors​ lie?

International markets

Which form of franchising involves a franchisor licensing a franchisee to sell specific​ products, such as​ automobiles, under the​ franchisor's brand name and trademark through a​ selective, limited distribution​ network?

Product distribution

Which form of franchising provides franchisees with a complete business​ system, including a license for a brand​ name, the products or services​ sold, the store​ layout, the methods of​ operation, a marketing​ plan, and other​ resources?

Pure​ (business format)

Which of the following statements about the​ franchisor-franchisee relationship is false​?

The franchisor dictates all of the prices that its franchisees​ charge, and franchisees must comply with that pricing policy or risk losing their franchises.

When considering purchasing a​ franchise, the most important question an entrepreneur can ask​ is:

What can a franchise do for me that I cannot do for​ myself?

When entering international​ markets, many franchisors create​ a(n) ____________​ agreement, which gives a franchisee in the target country the right to develop subfranchises by​ recruiting, developing, and supporting other franchisees.

master franchise

What is the average​ up-front franchise fee that franchisors​ charge?

​$25,000


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