Chapter 5 Small Business, Entrepreneurship and Franchises

What is meant by dual-branded franchises?

. Two franchisors offer their products together

Franchising agreements fall into three general categories, which of the following is not one of those categories?

A distributor franchises the channels of distribution to franchisees.

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.

What percentage of home-based businesses have no employees?

Over 90%

________ 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

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.

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.

Business plan

a carefully constructed guide for the person starting a business

Small Business Administration (SBA)

a governmental agency that assists, counsels, and protects the interests of small business in the United States

SCORE Association

a group of business people who volunteer their services to small businesses through the SBA

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

a guide for the person starting a business

Franchise

a license to operate an individually owned business as though it were part of a chain of outlets or stores

There are three general categories of franchising agreements

a manufacturer franchising retail stores to sell its products, producers licensing a distributor to sell their products to retailers, and a franchisor who supplies brand names, techniques, or their services instead of a complete product

Franchisee

a person or organization purchasing a franchise

Franchisor

an individual or organization granting a franchise

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

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

expanded too rapidly

While the _________ owns the business, the __________ controls it.

franchisee - franchisor

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

granting a franchise

Small-business Institutes (SBIs)

groups of senior and graduate students in business administration who provide management counseling to small businesses

Venture capital

money that is invested in small (and sometimes struggling) firms that have the potential to become very successful

Small business

one that is independently owned and operated for profit and is not dominant in its field

Statistics show that most small business failures are related to _______________

poor management

Small-business Investment Companies (SBICs)

privately owned firms that provide venture capital to small enterprises that meet their investment standards

Studies show that the incidence of innovation among ______ business workers is significantly higher than among workers in _________ businesses.

small > large

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

Franchising

the actual granting of a franchise

Small Business Development Centers (SBDCs)

university-based groups that provide individual counseling and practical training to owners of small businesses