Question 1

Which source of information is not recommended to help a potential franchisee investigate a franchising opportunity?

Accepted Answer

A)  The franchisers themselves 
B)  The franchiser's suppliers 
C)  Existing and previous franchisees 
D)  Independent, third-party sources 
A)  The franchisers themselves 
B)  The franchiser's suppliers 
C)  Existing and previous franchisees 
D)  Independent, third-party sources B

Question 2

The Coca-Cola Company is an example of a product and trade name franchiser.

Accepted Answer

A) True 
 B)False  True

Question 3

Burger King is an example of a company that uses business format franchising.

Accepted Answer

A) True 
 B)False  True

Question 4

The purchase price of a business is determined by negotiation between

Accepted Answer

A)  lender and seller. 
B)  seller and broker. 
C)  buyer and seller. 
D)  lender and buyer. 
A)  lender and seller. 
B)  seller and broker. 
C)  buyer and seller. 
D)  lender and buyer.

Question 5

The following are considerations which must be well thought out before deciding to franchise your business except

Accepted Answer

A)  is the business model replicable? 
B)  what will be included in the operations manual? 
C)  how will the growth be financed? 
D)  what proprietary information will be included in the FDD? 
A)  is the business model replicable? 
B)  what will be included in the operations manual? 
C)  how will the growth be financed? 
D)  what proprietary information will be included in the FDD?

Question 6

When purchasing a business you should always have an attorney at the closing who represents both sides.

Accepted Answer

A) True 
 B)False

Question 7

An entity or individual granted the right to conduct business according to specified methods and terms of another party is known as a

Accepted Answer

A)  franchiser. 
B)  franchisee. 
C)  franchise. 
D)  licensee. 
A)  franchiser. 
B)  franchisee. 
C)  franchise. 
D)  licensee.

Question 8

Discuss the function of a master licensee.

Accepted Answer

A master licensee is a firm or individua

Question 9

A franchise organization that is registered with the U.S. Small Business Administration will greatly speed up loan processing for a franchisee.

Accepted Answer

A) True 
 B)False

Question 10

The cost of a franchise may include

Accepted Answer

A)  royalty payments. 
B)  high executive salaries. 
C)  a one-time federal franchise tax. 
D)  higher-than-usual labor costs. 
A)  royalty payments. 
B)  high executive salaries. 
C)  a one-time federal franchise tax. 
D)  higher-than-usual labor costs.

Question 11

Which of the following are (is a) non-quantitative factor(s) of valuing a business, as given in the book?

Accepted Answer

A)  Future community development 
B)  Size of the buildings 
C)  Number of employees who will stay with the company 
D)  Employee Salaries 
A)  Future community development 
B)  Size of the buildings 
C)  Number of employees who will stay with the company 
D)  Employee Salaries

Question 12

Most franchise experts recommend that the FDD be examined carefully by

Accepted Answer

A)  regulators that specialize in such documents. 
B)  a franchise attorney and an accountant. 
C)  everyone associated with the potential startup. 
D)  suppliers that may be used if the startup is successful. 
A)  regulators that specialize in such documents. 
B)  a franchise attorney and an accountant. 
C)  everyone associated with the potential startup. 
D)  suppliers that may be used if the startup is successful.

Question 13

The advice of lawyers and accountants, if employed, should be strictly followed.

Accepted Answer

A) True 
 B)False

Question 14

In what way is a franchisee's control over the business greatly reduced?

Accepted Answer

A)  Most franchisers are located near the franchisee. 
B)  The franchisees are technically employees of the franchiser. 
C)  The franchisee is bound by the terms the franchise contract. 
D)  The franchisee is completely dependent on the franchiser for funding. 
A)  Most franchisers are located near the franchisee. 
B)  The franchisees are technically employees of the franchiser. 
C)  The franchisee is bound by the terms the franchise contract. 
D)  The franchisee is completely dependent on the franchiser for funding.

Question 15

Items covered in the new FDD include all of the following except

Accepted Answer

A)  litigation. 
B)  bankruptcy. 
C)  investment requirements. 
D)  marketing goals. 
A)  litigation. 
B)  bankruptcy. 
C)  investment requirements. 
D)  marketing goals.

Question 16

While reading Inc. magazine, you come across an advertisement for a franchise opportunity that matches your interests; you should first look for independent, third-party sources of information to verify that the opportunity is legitimate.

Accepted Answer

A) True 
 B)False

Question 17

You are considering becoming a franchisee with the Pots-R-Us franchise. You will only be able to determine whether this is a legitimate franchise opportunity or a fraudulent operator by

Accepted Answer

A)  carefully investigating the company and its product(s). 
B)  finding out whether the company has an operational Web site. 
C)  researching the industry in which the franchiser is involved. 
D)  following your instincts-there is no substitute for intuition. 
A)  carefully investigating the company and its product(s). 
B)  finding out whether the company has an operational Web site. 
C)  researching the industry in which the franchiser is involved. 
D)  following your instincts-there is no substitute for intuition.

Question 18

The U.S. Small Business Administration has introduced the Franchise Registry which

Accepted Answer

A)  lists warnings about certain franchise systems. 
B)  verifies a franchise system's lending eligibility. 
C)  rates franchise systems according to a four star rating. 
D)  registers all franchise systems operating in the U.S. 
A)  lists warnings about certain franchise systems. 
B)  verifies a franchise system's lending eligibility. 
C)  rates franchise systems according to a four star rating. 
D)  registers all franchise systems operating in the U.S.

Question 19

One primary source of information for a potential franchisee should be

Accepted Answer

A)  the franchiser being evaluated. 
B)  the franchiser's suppliers. 
C)  other parties considering the same franchiser. 
D)  other franchisers. 
A)  the franchiser being evaluated. 
B)  the franchiser's suppliers. 
C)  other parties considering the same franchiser. 
D)  other franchisers.

Question 20

The entrepreneur who enters into a franchising agreement does not acquire the right to use the franchiser's trademark or brand name.

Accepted Answer

A) True 
 B)False

Exam 4: Franchises and Buyouts

Which source of information is not recommended to help a potential franchisee investigate a franchising opportunity?

The Coca-Cola Company is an example of a product and trade name franchiser.

Burger King is an example of a company that uses business format franchising.

The purchase price of a business is determined by negotiation between

The following are considerations which must be well thought out before deciding to franchise your business except

When purchasing a business you should always have an attorney at the closing who represents both sides.

An entity or individual granted the right to conduct business according to specified methods and terms of another party is known as a

Discuss the function of a master licensee.

A franchise organization that is registered with the U.S. Small Business Administration will greatly speed up loan processing for a franchisee.

The cost of a franchise may include

Which of the following are (is a) non-quantitative factor(s) of valuing a business, as given in the book?

Most franchise experts recommend that the FDD be examined carefully by

The advice of lawyers and accountants, if employed, should be strictly followed.

In what way is a franchisee's control over the business greatly reduced?

Items covered in the new FDD include all of the following except

While reading Inc. magazine, you come across an advertisement for a franchise opportunity that matches your interests; you should first look for independent, third-party sources of information to verify that the opportunity is legitimate.

You are considering becoming a franchisee with the Pots-R-Us franchise. You will only be able to determine whether this is a legitimate franchise opportunity or a fraudulent operator by

The U.S. Small Business Administration has introduced the Franchise Registry which

One primary source of information for a potential franchisee should be

The entrepreneur who enters into a franchising agreement does not acquire the right to use the franchiser's trademark or brand name.

The Entrepreneurial Life

Entrepreneurial Integrity and Ethics

Getting Started

The Family Business

The Business Plan: Visualizing the Dream

The Marketing Plan

The Human Resources Plan: Managers, Owners, Allies, and Directors

The Location Plan

Understanding a Firms Financial Statements

Forecasting Financial Requirements

A Firms Sources of Financing

Planning for the Harvest

Building Customer Relationships

Product and Supply Chain Management

Pricing and Credit Decisions

Promotional Planning

Global Opportunities for Small Business

Professional Management in the Entrepreneurial Firm

Managing Human Resources

Managing Operations

Managing the Firms Assets

Managing Risk in the Small Business

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