Question 1

Which of the following is (are) valid techniques for valuing a company?

Accepted Answer

A)  Asset-based valuation 
B)  Market-comparable valuation 
C)  Cash flow-based valuation 
D)  All of the Above 
A)  Asset-based valuation 
B)  Market-comparable valuation 
C)  Cash flow-based valuation 
D)  All of the Above

Question 2

What options are available to the aspiring franchisee to assist in the evaluation of a franchising opportunity?

Accepted Answer

Basically, three sources of in

Question 3

The several components of franchise costs include all of the following except

Accepted Answer

A)  advertising costs. 
B)  investment costs. 
C)  royalty payments. 
D)  churning costs. 
A)  advertising costs. 
B)  investment costs. 
C)  royalty payments. 
D)  churning costs.

Question 4

You Make the Call-Situation 1
Ethan Moore is a college student in Phoenix, Arizona, currently enrolled as an entrepreneurship major. Moore's home is in Chandler, Arizona, a nearby city where he is considering purchasing a franchise. The franchise caught his interest while he was on a shopping trip to the Tucson Mall, and is operated by an Idaho-based gumball company named Gumball Gourmet.
Moore talked to the owner of the franchise at the Mall while he was stocking the kiosk, which is set up in three tiers with 47 gumball machines and a money changer. The owner mentioned in their brief conversation that this particular kiosk had sold 12,000 gumballs in the last 30-day period.
From information he found at the Gumball Gourmet Web site, Moore determined that franchises are available with as little as a $25,000 investment.
(Source: http://www.gumballgourmet.com, September 2003.)

Accepted Answer

@#IMG-DLM& _{HYPERLINK "http://www.ftc.gov"}http://www.ftc.gov _{HYPERLINK "http://www.franchise.org"}http://www.franchise

Question 5

Which of the following typically is not found in a disclosure document?

Accepted Answer

A)  The franchiser's involvement in litigation 
B)  Key features of the franchiser's experience 
C)  Details of the franchiser's proprietary technology 
D)  The franchiser's size 
A)  The franchiser's involvement in litigation 
B)  Key features of the franchiser's experience 
C)  Details of the franchiser's proprietary technology 
D)  The franchiser's size

Question 6

A firm's financial statements should not be adjusted because they conform with generally accepted accounting principles.

Accepted Answer

A) True 
 B)False

Question 7

Consider this quote: "If you can't follow somebody else, don't buy a franchise." Which characteristic of a franchise does this describe?

Accepted Answer

A)  High success rate 
B)  Restrictions on growth 
C)  Loss of entrepreneurial independence 
D)  Location problems 
A)  High success rate 
B)  Restrictions on growth 
C)  Loss of entrepreneurial independence 
D)  Location problems

Question 8

Franchising is typically defined as a marketing system revolving around a two-party legal agreement whereby a franchiser is granted the privilege to conduct business as an individual owner according to the methods and terms specified by the franchisee.

Accepted Answer

A) True 
 B)False

Question 9

The unscrupulous actions by franchisers to void contracts of franchisees in order to sell the franchise to someone else and collect an additional fee is called chewing.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

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

Question 11

Conducting thorough due diligence should always be accomplished if purchasing an existing corporation or franchise, but is unnecessary if acquiring a sole proprietorship.

Accepted Answer

A) True 
 B)False

Question 12

Why is the sharing of profits a drawback to becoming a franchiser?

Accepted Answer

A)  The franchisee will not share profits. 
B)  Only part of the profits from the franchise operation belongs to the franchiser. 
C)  There are usually no profits to share. 
D)  The sharing of profits reduces the franchiser's control. 
A)  The franchisee will not share profits. 
B)  Only part of the profits from the franchise operation belongs to the franchiser. 
C)  There are usually no profits to share. 
D)  The sharing of profits reduces the franchiser's control.

Question 13

As part of the valuation process, a buyer should scrutinize the seller's balance sheet to see whether asset book values are realistic.

Accepted Answer

A) True 
 B)False

Question 14

Legal commitments of an existing business are not a factor that needs to be evaluated by a prospective buyer.

Accepted Answer

A) True 
 B)False

Question 15

Tom Jones is a college student with no business experience. Jones is most likely to worry about his decision to become a franchisee primarily because of the

Accepted Answer

A)  restrictions on business operations. 
B)  restrictions on company growth. 
C)  requirement to work at least 40 hours per week. 
D)  increase in entrepreneurial independence. 
A)  restrictions on business operations. 
B)  restrictions on company growth. 
C)  requirement to work at least 40 hours per week. 
D)  increase in entrepreneurial independence.

Question 16

All of the following are considered attractive characteristics of franchising except

Accepted Answer

A)  higher success rates than for alternative methods. 
B)  entrepreneurial independence. 
C)  financial and training assistance. 
D)  operating benefits. 
A)  higher success rates than for alternative methods. 
B)  entrepreneurial independence. 
C)  financial and training assistance. 
D)  operating benefits.

Question 17

Business format franchising is best illustrated by the system offered by

Accepted Answer

A)  Goodyear Tires. 
B)  Coca-Cola. 
C)  Subway. 
D)  Dr. Pepper. 
A)  Goodyear Tires. 
B)  Coca-Cola. 
C)  Subway. 
D)  Dr. Pepper.

Question 18

Subway is the franchisee and the local owner is the franchiser?

Accepted Answer

A) True 
 B)False

Question 19

Why would a businessperson wish to become a franchiser?

Accepted Answer

A)  Reduction of capital requirements 
B)  Reduction in control 
C)  Sharing of profits 
D)  Increase in operating support 
A)  Reduction of capital requirements 
B)  Reduction in control 
C)  Sharing of profits 
D)  Increase in operating support

Question 20

A _____ is an independent firm or individual acting as a sales agent with the responsibility for finding new franchisees within a specified territory.

Accepted Answer

A)  multiple-unit franchiser 
B)  area developer 
C)  franchiser representative 
D)  master licensee 
A)  multiple-unit franchiser 
B)  area developer 
C)  franchiser representative 
D)  master licensee

Exam 4: Franchises and Buyouts

Which of the following is (are) valid techniques for valuing a company?

What options are available to the aspiring franchisee to assist in the evaluation of a franchising opportunity?

The several components of franchise costs include all of the following except

Which of the following typically is not found in a disclosure document?

A firm's financial statements should not be adjusted because they conform with generally accepted accounting principles.

Consider this quote: "If you can't follow somebody else, don't buy a franchise." Which characteristic of a franchise does this describe?

Franchising is typically defined as a marketing system revolving around a two-party legal agreement whereby a franchiser is granted the privilege to conduct business as an individual owner according to the methods and terms specified by the franchisee.

The unscrupulous actions by franchisers to void contracts of franchisees in order to sell the franchise to someone else and collect an additional fee is called chewing.

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

Conducting thorough due diligence should always be accomplished if purchasing an existing corporation or franchise, but is unnecessary if acquiring a sole proprietorship.

Why is the sharing of profits a drawback to becoming a franchiser?

As part of the valuation process, a buyer should scrutinize the seller's balance sheet to see whether asset book values are realistic.

Legal commitments of an existing business are not a factor that needs to be evaluated by a prospective buyer.

Tom Jones is a college student with no business experience. Jones is most likely to worry about his decision to become a franchisee primarily because of the

All of the following are considered attractive characteristics of franchising except

Business format franchising is best illustrated by the system offered by

Subway is the franchisee and the local owner is the franchiser?

Why would a businessperson wish to become a franchiser?

A _____ is an independent firm or individual acting as a sales agent with the responsibility for finding new franchisees within a specified territory.

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

Filters