Exam 4: Franchises and Buyouts

Existing franchisees are a valuable source of information about franchises.

A franchising strategy whereby a single franchisee owns more than one unit in a given area is typically referred to as an area developer strategy.

You Make the Call-Situation 2 Scott Prewitt, 23, his brother Steven Prewitt, 29, and his brother-in-law Tony Mansoor, 21, have no experience in the restaurant business. But one of their goals is to start their own business and move their families from Jackson, Mississippi, to the mountains of western North Carolina. They are considering buying a Back Yard Burgers franchise. As of July 2007, the Back Yard Burgers, Inc. restaurant system comprised 183 units operating in 20 states. The franchise, with headquarters in Memphis, Tennessee, specializes in charbroiled, freshly prepared food. The company began franchising in 1988 and currently has only U.S. franchises. The company uses a double drive-through concept for most of its restaurants, including the franchise that Prewitt and his family are considering. The Prewitt family is concerned about their inexperience and the harsh weather in the snowy mountains of North Carolina. (Sources: http://www.backyardburger.com; and Tracy Stapp, "Never Say Die," Entrepreneur, December 2002, p. 130.)

All of the following are considered advantages of franchising except

Of the following who is not an informed party that could be questioned about the business when evaluating it?

List the advantages of franchising to a potential franchisee.

A comprehensive listing of franchisers can be found in Franchise Opportunities Guide, which is published by the International Franchise Association.

Business publications such as The Wall Street Journal and Entrepreneur are excellent sources of advertising from franchisers.

All of the following are benefits of becoming a franchisee except

The buyer of an existing business typically acquires its personnel, inventories, physical facilities, established banking connections, and ongoing relationships with trade suppliers.

In many cases, a franchiser will receive payments in the form of royalties that are based on a percentage of the franchisee's gross income.

The disclosure statement provided to a prospective franchisee must contain all of the following information Except:

The following are considered disadvantages of franchising except

Aside from consulting an attorney, a potential franchisee should avoid using other sources of assistance.

One of the benefits of becoming a franchisee is sharing profits with the franchiser.

A legal agreement between two parties in a franchise arrangement is referred to as a

One drawback of becoming a franchiser relates to the increase in required operating support.

The Federal Trade Commission's "franchise rule" of 2008 prescribes that franchisers must disclose to prospective franchisees information such as bankruptcies, business experience of the principals, and litigation in which the firm is involved.

Union contracts are among the many _____ factors in valuing a business.

The franchising strategy whereby an individual or firm is granted the legal right to own more than one unit of a franchised business is known as