Question 1

Which of the following is true of a franchise?

Accepted Answer

A)  The franchisor and franchisee are established as separate legal entities. 
B)  A franchisee does not need a license to use the franchisor's trademark. 
C)  The franchisee does not have access to the franchisor's knowledge. 
D)  A franchise is considered as a joint venture. 
A)  The franchisor and franchisee are established as separate legal entities. 
B)  A franchisee does not need a license to use the franchisor's trademark. 
C)  The franchisee does not have access to the franchisor's knowledge. 
D)  A franchise is considered as a joint venture.

Question 2

In which of the following types of franchise does a franchisor provide a secret formula or process to the franchisee?

Accepted Answer

A)  chain-style franchise 
B)  area franchise 
C)  distributorship franchise 
D)  processing plant franchise 
A)  chain-style franchise 
B)  area franchise 
C)  distributorship franchise 
D)  processing plant franchise

Question 3

Ubiquitous Enterprises is a franchisee of HotPan chain of restaurants.One afternoon,Linda,an employee of a HotPan restaurant owned by the franchisee is mopping the floor.Gary,a customer who enters the restaurant is talking on his cell phone and does not notice Linda mopping the floor.He slips on the wet floor while walking to the counter and is injured.Who among the following is liable for Gary's injuries?

Accepted Answer

A)  HotPan, for not providing a "Caution: Wet Floor!" sign. 
B)  Ubiquitous Enterprises, for not having its own "Caution" sign. 
C)  Linda, for not alerting Gary. 
D)  Gary, for not noticing that the floor was wet. 
A)  HotPan, for not providing a "Caution: Wet Floor!" sign. 
B)  Ubiquitous Enterprises, for not having its own "Caution" sign. 
C)  Linda, for not alerting Gary. 
D)  Gary, for not noticing that the floor was wet.

Question 4

A ________ refers to an arrangement between two or more companies whereby they agree to ally themselves and work together to accomplish a designated objective.

Accepted Answer

A)  limited partnership 
B)  strategic alliance 
C)  sole proprietorship 
D)  franchise 
A)  limited partnership 
B)  strategic alliance 
C)  sole proprietorship 
D)  franchise

Question 5

A joint venture corporation is a partnership owned by two or more joint venturers that is formed to operate a joint venture.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following data must a franchisor disclose if the franchisor makes sales or earnings projections for a potential franchise location that are based on the actual sales,income,or profit figures of an existing franchise?

Accepted Answer

A)  Contract details of the franchisor and the existing franchises. 
B)  Management methods that have been adopted by the existing franchises. 
C)  The number and percentage of its actual franchises that have obtained such results. 
D)  Any sales or marketing strategy employed by the franchisor in acquiring such results. 
A)  Contract details of the franchisor and the existing franchises. 
B)  Management methods that have been adopted by the existing franchises. 
C)  The number and percentage of its actual franchises that have obtained such results. 
D)  Any sales or marketing strategy employed by the franchisor in acquiring such results.

Question 7

If a franchisor violates FTC disclosure rules,the wrongdoer is subject to an injunction against further franchise sales,to civil fines,and an FTC civil action on behalf of injured franchisees.

Accepted Answer

A) True 
 B)False

Question 8

The Uniform Franchise Offering Circular (UFOC)is used in conjunction with state laws regarding franchises.

Accepted Answer

A) True 
 B)False

Question 9

A ________ is an arrangement in which two or more business entities combine their resources to pursue a single project or transaction.

Accepted Answer

A)  limited partnership 
B)  license agreement 
C)  joint venture 
D)  franchise 
A)  limited partnership 
B)  license agreement 
C)  joint venture 
D)  franchise

Question 10

Hybrid Motor Company manufactures automobiles and franchises independently owned automobile dealers (franchisees)to sell them to the public.This is a form of ________ franchise.

Accepted Answer

A)  processing plant 
B)  chain-style 
C)  area 
D)  distributorship 
A)  processing plant 
B)  chain-style 
C)  area 
D)  distributorship

Question 11

Which of the following federal agencies is empowered to enforce federal franchising rules?

Accepted Answer

A)  Federal Trade Commission (FT
C)  
B)  Securities and Exchange Commission (SE
C)  
C)  Federal Communications Commission (FC
C)  
D)  Commodity Futures Trading Commission (CFT
C)  
A)  Federal Trade Commission (FT
C)  
B)  Securities and Exchange Commission (SE
C)  
C)  Federal Communications Commission (FC
C)  
D)  Commodity Futures Trading Commission (CFT
C)

Question 12

A franchise agreement is an agreement that a franchisor and franchisee enter into that sets forth the terms and conditions of a franchise.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is true of intellectual property of a franchisor?

Accepted Answer

A)  Trademarks do not qualify for patents. 
B)  A word or motto that identifies a franchisor does not qualify for trademark protection. 
C)  A service mark is exclusive to the franchisor and cannot be licensed to franchisees. 
D)  Trade secrets of a franchisor do not qualify for patent protection. 
A)  Trademarks do not qualify for patents. 
B)  A word or motto that identifies a franchisor does not qualify for trademark protection. 
C)  A service mark is exclusive to the franchisor and cannot be licensed to franchisees. 
D)  Trade secrets of a franchisor do not qualify for patent protection.

Question 14

________ involves payment for items purchased from the franchisor.

Accepted Answer

A)  Leasing 
B)  Cost of supplies 
C)  Royalty fees 
D)  Initial license fee 
A)  Leasing 
B)  Cost of supplies 
C)  Royalty fees 
D)  Initial license fee

Question 15

Limonelle Corporation owns the secret formula for a popular beverage brand called Limonelle.The corporation operates through franchises in over 50 countries.It uses a secret formula to prepare the drink concentrate which is dispatched to the franchises world over.These franchises then prepare and bottle the beverage for distribution.Which of these types of franchises has Limonelle adopted?

Accepted Answer

A)  chain-style franchise 
B)  processing plant franchise 
C)  distributorship franchise 
D)  area franchise 
A)  chain-style franchise 
B)  processing plant franchise 
C)  distributorship franchise 
D)  area franchise

Question 16

In a(n)________ franchise,the franchisor authorizes the franchisee to negotiate and sell franchises on behalf of the franchisor.

Accepted Answer

A)  processing plant 
B)  chain-style 
C)  area 
D)  distributorship 
A)  processing plant 
B)  chain-style 
C)  area 
D)  distributorship

Question 17

Which of the following is true of a joint venture?

Accepted Answer

A)  The parties to a joint venture are considered as limited partners. 
B)  Both parties to a joint venture have equal rights to manage the venture. 
C)  A joint venture is a partnership that lasts for multiple projects. 
D)  Parties to a joint venture are exempt from fiduciary duties to each other. 
A)  The parties to a joint venture are considered as limited partners. 
B)  Both parties to a joint venture have equal rights to manage the venture. 
C)  A joint venture is a partnership that lasts for multiple projects. 
D)  Parties to a joint venture are exempt from fiduciary duties to each other.

Question 18

Which of the following is true of a joint venture corporation?

Accepted Answer

A)  The joint venturers are personally liable for debts of the joint venture corporation. 
B)  Joint venturers do not owe each other fiduciary duties as a venture is a single business transaction. 
C)  The management rights of joint venturers in a joint venture are divided by the ratio of their capital investment. 
D)  Each joint venture is liable for the debts and obligations of the joint venture. 
A)  The joint venturers are personally liable for debts of the joint venture corporation. 
B)  Joint venturers do not owe each other fiduciary duties as a venture is a single business transaction. 
C)  The management rights of joint venturers in a joint venture are divided by the ratio of their capital investment. 
D)  Each joint venture is liable for the debts and obligations of the joint venture.

Question 19

Which of the following is an instance of an area franchise?

Accepted Answer

A)  Burger Palace franchises an independently owned restaurant to make and sell its products in New Wilshire. 
B)  FreshoCo. ships Fresho in the form of a drink concentrate which is prepared and bottled locally in Almia. 
C)  Victory gin licenses a retail dealer to retail its products in Ambrosia. 
D)  Ashbury King wants to start operating in Rolland and hires a Rolland subfranchisor to sell the franchise on behalf of Ashbury King. 
A)  Burger Palace franchises an independently owned restaurant to make and sell its products in New Wilshire. 
B)  FreshoCo. ships Fresho in the form of a drink concentrate which is prepared and bottled locally in Almia. 
C)  Victory gin licenses a retail dealer to retail its products in Ambrosia. 
D)  Ashbury King wants to start operating in Rolland and hires a Rolland subfranchisor to sell the franchise on behalf of Ashbury King.

Question 20

A strategic alliance allows the companies to reduce risks,share costs,combine technologies,and extend their markets.

Accepted Answer

A) True 
 B)False

Exam 31: Franchise and Special Forms of Business

Which of the following is true of a franchise?

In which of the following types of franchise does a franchisor provide a secret formula or process to the franchisee?

A ________ refers to an arrangement between two or more companies whereby they agree to ally themselves and work together to accomplish a designated objective.

A joint venture corporation is a partnership owned by two or more joint venturers that is formed to operate a joint venture.

Which of the following data must a franchisor disclose if the franchisor makes sales or earnings projections for a potential franchise location that are based on the actual sales,income,or profit figures of an existing franchise?

If a franchisor violates FTC disclosure rules,the wrongdoer is subject to an injunction against further franchise sales,to civil fines,and an FTC civil action on behalf of injured franchisees.

The Uniform Franchise Offering Circular (UFOC)is used in conjunction with state laws regarding franchises.

A ________ is an arrangement in which two or more business entities combine their resources to pursue a single project or transaction.

Hybrid Motor Company manufactures automobiles and franchises independently owned automobile dealers (franchisees)to sell them to the public.This is a form of ________ franchise.

Which of the following federal agencies is empowered to enforce federal franchising rules?

A franchise agreement is an agreement that a franchisor and franchisee enter into that sets forth the terms and conditions of a franchise.

Which of the following is true of intellectual property of a franchisor?

________ involves payment for items purchased from the franchisor.

In a(n)________ franchise,the franchisor authorizes the franchisee to negotiate and sell franchises on behalf of the franchisor.

Which of the following is true of a joint venture?

Which of the following is true of a joint venture corporation?

Which of the following is an instance of an area franchise?

A strategic alliance allows the companies to reduce risks,share costs,combine technologies,and extend their markets.

Legal Heritage and the Digital Age

Constitutional Law for Business and E-commerce

Courts and Jurisdiction

Judicial Alternative Administrative and E-Dispute Resolution

Intentional Torts and Negligence

Criminal Law and Cyber Crimes

Intellectual Property and Cyber Piracy

Ethics and Social Responsibility of Business

Nature of Traditional and E-Contracts

Agreement and Consideration

Capacity and Legality

Genuineness of Assent and Statute of Frauds

Third-Party Rights and Discharge

Breach of Contract and Remedies

Digital Law and E-Commerce

Formation of Sales and Lease Contracts

Title to Goods and Risk of Loss

Remedies for Breach of Sales and Lease Contracts

Warranties and Product Liability

Creation and Transfer of Negotiable Instruments

Holder in Due Course and Liability of Parties

Banking System and Electronic Financial Transactions

Credit, Real Property Financing, and Secured Transactions

Bankruptcy and Reorganization

Agency law

Small Business, Entrepreneurship, and Partnerships

Corporate Formation and Financing

Corporate Governance and the Sarbanes-Oxley Act

Corporate Acquisitions and Multinational Corporations

Limited Liability Companies and Limited Liability Partnerships

Investor Protection, E-Securities, and Wall Street Reform

Antitrust Law and Unfair Trade Practices

Consumer Safety and Environmental Protection

Labor, Worker Protection, and Immigration Laws

Equal Opportunity in Employment

Personal Property, Bailment, and Insurance

Real Property, Landlord-Tenant Law, and Land Use Regulation

Family Law, Wills, and Trusts

Accountants' Duties and Liability

International and World Trade Law

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