BA109 Quiz 6

Franchises total annual sales represent nearly ________ percent of total annual sales and employ nearly one in ________ workers in the Unities Sates in more than 300 industries.

17; 8

A study by the International Franchises Association reports that minorities own more than ________ percent of all franchises and women own ________ percent of franchises.

20;25

Benefits of involvement in a franchise experience include:

All of these

________ is an emerging international market for U.S. franchisers that is expected to realize the highest future growth rate.

China

A franchise trend in which owners of independent businesses become franchisees to gain the advantage of name recognition is called:

conversion franchising

A franchise is a system of distribution in which semi-independent business owners pay ________ and ________ to a parent company in return for the right to become identified with its trademark, to sell its product or services, and often to use its business format and system.

fees; royalties

McDonald's recently set up several small franchises in nontraditional locations such as a hospital, a college campus, an airport, a subway station, and a sports arena. These locations are based on the principle of:

intercept marketing.

The failure rate for franchises is:

lower than the average rate for new businesses.

A franchise myth is that:

once the franchise is open, the franchisee has autonomy to run the business in what ever way he or she sees fit.

McDonald's is an example of a ________ franchise.

pure

Franchises have experienced three major growth waves since its beginning that include a focus on:

rapid growth, the service sector, and specific market niches.

In addition to reading the franchiser's UFDD, it would be wise for the potential franchisee to seek a franchise that offers which of the following?

All of these

Which of the following is an indication of a dishonest franchiser?

All of these

Which of the following is not a potential disadvantage of a franchise?

All of these are potential disadvantages of a franchise.

A recent study reports that the success rate of franchisees increases when a franchise system:

All of these increase the rate of success.

Franchisers generally do which of the following regarding financial assistance to franchisees?

Assist in finding financing and occasionally provide direct assistance in a specific area.

Chris Jaffe, the owner of a small independent doughnut shop, is worried that a large doughnut franchise will open an outlet near her location and take away business. Taking a proactive approach, Jaffe contacts the franchise, and after a few months of negotiations, becomes a franchisee. Jaffe is an example of which trend in franchising?

Conversion

It is illegal for a franchiser to require franchisees to purchase products only from "approved suppliers."

False

The bigger the franchise, the more successful the franchisees will be.

False

A good method for evaluating a franchiser's reputation is to interview existing franchise owners about the operation.

True

Franchisees in fast-growing systems reap the benefits of the franchisor's expanding reach, but they also may encounter the downside of a franchisor's aggressive growth strategy; market saturation.

True

Pure franchising involves a system of franchising in which a franchisor sells a franchisee a complete business format and system.

True

Pure franchising involves the right to use all the elements of a fully integrated business operation.

True

Quality is so important in franchising that most franchisers retain the right to terminate the franchise contract and to repurchase the outlet if a franchisee fails to maintain quality standards.

True

The failure rate for franchises is below that for other types of new businesses.

True

The franchisee turnover rate is the rate at which franchisees leave a franchise system.

True

Trade name franchising is a system of franchising in which a franchisee purchases the right to use the franchisor's trade name without distributing particular products under that name.

True

When a franchisee buys a franchise, he or she is purchasing the expertise and the business of the franchiser.

True

A significant advantage a franchisee has over an independent business is the participation in the franchisor's ________ largely due to the ________ the franchise offers.

centralized buying power: economies of scale

One of the major trends in franchising is the ________ of American franchise systems.

internationalization

When the franchiser has the right to establish a semi-independent organization in a particular territory to recruit, sell, and support other franchises, it is known as a ________ franchise.

master

In a ________, a franchisee has the right to create a semi-independent organization in a particular territory to recruit, sell, and support other franchisees.

master franchise

The FTC's philosophy regarding the Uniform Franchise Disclosure Document (UFDD) focuses on:

providing information to prospective franchisees and helping them make wise decisions.