NVC Ch 15

. A product and trademark franchise typically connects a single manufacturer with a network of dealers or distributors.

TRUE

An area franchise agreement allows a franchisee to own and operate a specific number of outlets in a particular geographic area.

TRUE

. According to a concept called ________ theory, it is more effective for the units of a growing chain to be run by franchisees than by managers because managers are usually paid a salary and may not be as committed to the success of their individual units as franchisees, who are in effect the owners of the units they manage.

A. Agency

. The Franchise Disclosure Document is accepted in (or by) ________

A. All 50 states and parts of Canada

In addition to FTC disclosure requirements, ________ states have laws providing additional protection to franchisees.

A. 15

The Franchise Disclosure Document contains ________ categories of information.

A. 23

. According to the textbook, a franchisee's weekly or monthly royalty fees are typically around________ to ________ percent of gross income

A. 4; 5

Which of the following statements is correct regarding business format franchises?

A. A business format franchise can be very rigid and demanding

. While franchise agreements vary, each agreement typically contains these sections: the ________ agreement and the ________ agreement.

A. Purchase, Franchise

Which of the following companies is suitable for franchising?

A. Qdoba Mexican grill

12. Which of the following is not an industry in which business format franchises predominate?

A. Soft drink bottlers

Which of the following is a company that is suitable for franchising but has a relatively small number of franchise outlets?

A. Starbucks

The people who buy franchises from master franchises are typically called ________ franchisees

A. Sub

. An advantage of franchising, from the franchisors point of view, is that franchising helps a venture grow because the franchisees provide the majority of the capital.

A. TRUE

. Franchisees are often required to pay into a national or regional advertising fund, even if the advertisements are directed at goals other than promoting the franchisor's product or service.

A. TRUE

. One of the most important questions a prospective franchisor should consider is whether the fees and royalties charged by a franchisor are consistent with the franchise's value or worth.

A. TRUE

. The royalty fees a franchisee pays are usually around four to five percent of gross income.

A. TRUE

A prospective franchisee should fully understand all the information contained in the Franchise Disclosure Document before a franchise agreement is signed

A. TRUE

An individual who is team oriented and has experience in the industry in which the franchise competes is a good candidate to be a franchisee.

A. TRUE

Franchising is a popular form of business growth

A. TRUE

In a business format franchise, the franchisor provides a formula for doing business to the franchisee along with training, advertising, and other forms of assistance.

A. TRUE

The Franchise Disclosure Document contains a total of 23 categories of information that give a prospective franchisee a broad base of information about the background and financial health of the franchisor.

A. TRUE

The majority of franchisors are highly ethical individuals who are interested only in making a fair return on their investment.

A. TRUE

. According to the textbook, the main disadvantage of buying a franchise is ________

A. The cost involved

. According to the textbook, which of the following is not a cost that is typically associated with buying a franchise?

A. Trademark acquisition fee

. To avoid making a hasty judgment, a franchisee may not purchase a franchise for ________ days from the time the Franchise Disclosure Document is received.

A. 14

1. Franchising is a form of business ownership in which a firm that already has a successful product or service licenses its trademark and method of doing business to another business in exchange for ________.

A. An initial franchise fee and an ongoing royalty

Franchising is a form of business ownership in which a firm that already has a successful product or service licenses its trademark and method of doing business to another business in exchange for ________.

A. An initial franchise fee and an ongoing royalty

Jenna Page recently entered into an agreement with Anytime Fitness to open five Anytime Fitness franchises. According to the agreement that Jenna entered into, she has the right to open up to five Anytime Fitness franchises within the city limits of Lawrence, Kansas. Jenna has entered into a(n) ________ franchise agreement

A. Area

Melanie Jacobs recently opened a Papa John's franchise. So far, she is very satisfied with Papa John's because in exchange for an initial franchise fee and an ongoing royalty payment, Papa John's has provided Melanie a formula for doing business along with training, advertising, and other forms of assistance. Melanie purchased a ________ franchise.

A. Business format

According to the textbook, the Comfort Keepers business idea lends itself to franchising because the ________.

A. Company has a good trademark and good business method

In regard to international franchising, under a(n) ________ franchise agreement, the U.S. franchisor grants the rights to an individual or company (the developer) to develop multiple franchised businesses within a country or territory.

A. Direct

Jim Pierce just purchased the rights to develop multiple School of Rock franchises in Germany. Jim just purchased a(n) ________ franchise arrangement

A. Direct

. Which of the following is not an advantage of buying a franchise?

A. Duration and nature of the commitment

. A management concept called agency theory refutes the value of franchising for organizations with multiple units, like restaurant chains.

A. FALSE

. In the majority of cases, a franchisee pays a royalty based on a percentage of weekly or monthly net income.

A. FALSE

A Pepsi Cola bottling dealership is an example of a business format franchise.

A. FALSE

Business format franchises typically allow franchisees substantial flexibility in how they run their individual franchise units.

A. FALSE

Home Depot is an example of an organization that is perfectly suited for franchising

A. FALSE

The Franchise Disclosure Document is the document that consummates the sale of a franchise.

A. FALSE

The people who buy franchises from master franchisees are typically called employee-franchisees.

A. FALSE

Franchising is appropriate when a ________.

A. Firm has a strong trademark, a desire to grow, and a well-designed business method

. While franchise agreements vary, each agreement typically contains the purchase agreement and the ________ agreement

A. Franchise

. The ________ contains 23 categories of information that give a prospective franchisee a broad base of information about the background and financial health of the franchisor.

A. Franchise disclosure document

Which of the following was not identified in the textbook as one of the disadvantages of franchising a business?

A. Franchisee Motivation

________ is a form of business ownership in which a firm that already has a successful product or service licenses its trademark and method of doing business to other business in exchange for an initial franchise fee and an ongoing royalty.

A. Franchising

From the franchisor's point of view, which of the following is incorrect regarding franchising?

A. Franchising is a relatively simple business endeavor.

A(n) ________ franchise agreement involves the sale of a single franchise for a specific location.

A. Individual

According to our textbook, which of the following is not a quality to look for in prospective franchisees?

A. Individual, rather than team-oriented

According to a recent FTC report, instances of problems between franchisors and their franchisees tend to be ________

A. Isolated occurrences

In the context of international franchising, under a ________ franchise arrangement, the U.S. firm grants the rights to an individual or company (the master franchisee) to develop one or more franchise businesses and to license others to develop one or more franchise businesses within the country

A. Master

International opportunities for franchising are becoming ________

A. More prevalent

. According to the textbook, the first rule of buying a franchise is ________.

A. Not making a hasty decision

A master franchisee, in addition to having the right to open and operate a specific number of locations in a particular area, also has the right to ________

A. Offer and sell the franchise to other people in its area

A ________ franchise is an arrangement under which the franchisor grants to the franchisee the right to buy its products and use its trade name.

A. Product and trademark

General Motors operates a ________ franchise system

A. Product and trademark

James Ryan has been a Coors Beer distributor for the past 20 years. James owns a ________ franchise

A. Product and trademark

. Which of the following statements is incorrect regarding product and trademark franchises?

A. Product trademark franchises are more popular than business format franchises.

. Franchising is a form of business organization in which a firm that already has a successful product or service licenses its trademark and method of doing business to other businesses in exchange for an initial franchise fee and an ongoing royalty

A. True

. In the majority of cases, a franchisee pays the franchisor a royalty based on ________.

A. Weekly or monthly gross income

. According to the textbook, from the franchisor's point of view, the primary disadvantage of franchising is that ________.

A. an organization allows others to profit from its trademark and business method

A multiple-unit franchisee is a person who owns ________

A. and operates more than one outlet of the same franchisor

. The document that consummates the sale of a franchise is called the ________

A. franchise agreement

The two distinctly different types of franchise systems are ________ franchise and ________ franchise.

A. product trademark; business format

. All of the following are advantages to buying a franchise except ________.

A. restrictions on creativity

There are two primary advantages to buying a franchise over other forms of business ownership. First, the franchisor typically provides training, technical expertise, and other forms of support, and second, ________

A. the franchisor provides an entrepreneur the ability to own a business using a tested and refined business method

Which of the following statements is incorrect regarding franchising?

a. Franchising is a relatively new form of business organization