Question 1

Rooster Red LLC grants a franchise to Qiana to open and operate a Rooster Red restaurant. Rooster Red will likely charge Qiana

Accepted Answer

A)  an initial fee or lump sum price for the franchise license. 
B)  a percentage of Qiana's weekly payroll expense. 
C)  an amount of Qiana's monthly overhead savings, if any. 
D)  none of the choices. 
A)  an initial fee or lump sum price for the franchise license. 
B)  a percentage of Qiana's weekly payroll expense. 
C)  an amount of Qiana's monthly overhead savings, if any. 
D)  none of the choices. A

Question 2

A sole proprietor does not own the entire business.

Accepted Answer

A) True 
 B)False  False

Question 3

The laws governing franchising are primarily designed to protect fran?chisors from dishonest franchisees.

Accepted Answer

A) True 
 B)False  False

Question 4

Any lawsuit against the business or its employees does not lead to unlimited personal liability for the owner of a sole proprietorship.

Accepted Answer

A) True 
 B)False

Question 5

Haute Dogs, Inc., sells a franchise to Ilene's Cuisine, a lunch truck. Ilene's Cuisine is

Accepted Answer

A)  a franchisee. 
B)  a franchisor. 
C)  an agent. 
D)  a principal. 
A)  a franchisee. 
B)  a franchisor. 
C)  an agent. 
D)  a principal.

Question 6

A franchisee is generally legally independent of the franchisor.

Accepted Answer

A) True 
 B)False

Question 7

Mucho Tacos, Inc., sells franchises. Mucho Tacos imposes on its fran?chi?sees standards of operation and personnel training methods. What is the potential pitfall to Mucho Tacos if it exercises too much control over its fran?chisees?

Accepted Answer

A provision in a franchise agreement per

Question 8

Mix n' Match Clothing Corporation gives notice to Neely that Mix n' Match is terminating their franchise arrangement. Winding up the business requires

Accepted Answer

A)  a new franchise agreement. 
B)  nothing more than closing immediately. 
C)  Neely's death, disability, or insolvency. 
D)  the return of Mix n' Match's property. 
A)  a new franchise agreement. 
B)  nothing more than closing immediately. 
C)  Neely's death, disability, or insolvency. 
D)  the return of Mix n' Match's property.

Question 9

Silvano owns Textbooks Plus, a sole proprietorship that sells textbooks and other school supplies. When Silvano dies, Textbooks Plus will automatically

Accepted Answer

A)  dissolve. 
B)  pass to Silvano's heirs. 
C)  pass to the state. 
D)  be offered for sale to its creditors and competitors. 
A)  dissolve. 
B)  pass to Silvano's heirs. 
C)  pass to the state. 
D)  be offered for sale to its creditors and competitors.

Question 10

Fletcher buys a Great Big Burgers, Inc., franchise. Great Big Burgers requires that its fran?chi?sees buy its products exclusively for every phase of their op?erations. Be?cause Fletcher wishes to buy less expensive products, he challenges the re?quirement. His best argument is probably that the re?quirement violates

Accepted Answer

A)  the implied covenant of good faith and fair dealing. 
B)  the Federal Trade Commission's Franchise Rule. 
C)  federal antitrust laws. 
D)  Great Big Burgers's marketing image. 
A)  the implied covenant of good faith and fair dealing. 
B)  the Federal Trade Commission's Franchise Rule. 
C)  federal antitrust laws. 
D)  Great Big Burgers's marketing image.

Question 11

A franchisee ordinarily does not pay a fee for a franchise license (the privilege of being granted a franchise).

Accepted Answer

A) True 
 B)False

Question 12

A franchise agreement between Grid Tools Company and Hometown Hardware, Inc., is silent on a time for termination of the franchise. Grid Tools may

Accepted Answer

A)  never terminate. 
B)  terminate at any time. 
C)  terminate on reasonable notice. 
D)  terminate on three days notice. 
A)  never terminate. 
B)  terminate at any time. 
C)  terminate on reasonable notice. 
D)  terminate on three days notice.

Question 13

A franchisee is generally economically independent of the franchisor's integrated business system.

Accepted Answer

A) True 
 B)False

Question 14

The franchise is not strictly speaking a business organizational form.

Accepted Answer

A) True 
 B)False

Question 15

Some states require the termination of a franchise when there is no "good cause" for it to continue.

Accepted Answer

A) True 
 B)False

Question 16

If a franchisee is induced to enter into a franchise contract by the franchisor's fraudulent misrepresentation, the franchisor may be liable for damages.

Accepted Answer

A) True 
 B)False

Question 17

Eudora is interested in buying a franchise from First Home Realty Company. In this transaction, the Federal Trade Commission's Franchise Rule

Accepted Answer

A)  does not apply. 
B)  enables Eudora to weigh the deal's risks and benefits. 
C)  enables First Home to weigh the deal's risks and benefits. 
D)  prohibits certain types of anticompetitive agreements. 
A)  does not apply. 
B)  enables Eudora to weigh the deal's risks and benefits. 
C)  enables First Home to weigh the deal's risks and benefits. 
D)  prohibits certain types of anticompetitive agreements.

Question 18

In a manufacturing arrangement, a franchisor transmits to a franchisee the essential ingredients or formula to make a particular product.

Accepted Answer

A) True 
 B)False

Question 19

A franchisor can suggest retail prices for the goods that a franchisee sells but cannot mandate them.

Accepted Answer

A) True 
 B)False

Question 20

Sasha contracts to buy a franchise from TrustMe Financial Consultants Inc. The contract is silent on the issue of territorial rights. When TrustMe allows a competing franchise to be established near Sasha's office, she suffers a significant loss in profits. This is most likely a violation of

Accepted Answer

A)  no law. 
B)  the ban on certain types of anticompetitive agreements. 
C)  the Federal Trade Commission's Franchise Rule. 
D)  the implied covenant of good faith and fair dealing. 
A)  no law. 
B)  the ban on certain types of anticompetitive agreements. 
C)  the Federal Trade Commission's Franchise Rule. 
D)  the implied covenant of good faith and fair dealing.

Exam 36: Sole Proprietorships and Franchises

Rooster Red LLC grants a franchise to Qiana to open and operate a Rooster Red restaurant. Rooster Red will likely charge Qiana

A sole proprietor does not own the entire business.

The laws governing franchising are primarily designed to protect fran?chisors from dishonest franchisees.

Any lawsuit against the business or its employees does not lead to unlimited personal liability for the owner of a sole proprietorship.

Haute Dogs, Inc., sells a franchise to Ilene's Cuisine, a lunch truck. Ilene's Cuisine is

A franchisee is generally legally independent of the franchisor.

Mucho Tacos, Inc., sells franchises. Mucho Tacos imposes on its fran?chi?sees standards of operation and personnel training methods. What is the potential pitfall to Mucho Tacos if it exercises too much control over its fran?chisees?

Mix n' Match Clothing Corporation gives notice to Neely that Mix n' Match is terminating their franchise arrangement. Winding up the business requires

Silvano owns Textbooks Plus, a sole proprietorship that sells textbooks and other school supplies. When Silvano dies, Textbooks Plus will automatically

A franchisee ordinarily does not pay a fee for a franchise license (the privilege of being granted a franchise).

A franchise agreement between Grid Tools Company and Hometown Hardware, Inc., is silent on a time for termination of the franchise. Grid Tools may

A franchisee is generally economically independent of the franchisor's integrated business system.

The franchise is not strictly speaking a business organizational form.

Some states require the termination of a franchise when there is no "good cause" for it to continue.

If a franchisee is induced to enter into a franchise contract by the franchisor's fraudulent misrepresentation, the franchisor may be liable for damages.

Eudora is interested in buying a franchise from First Home Realty Company. In this transaction, the Federal Trade Commission's Franchise Rule

In a manufacturing arrangement, a franchisor transmits to a franchisee the essential ingredients or formula to make a particular product.

A franchisor can suggest retail prices for the goods that a franchisee sells but cannot mandate them.

Sasha contracts to buy a franchise from TrustMe Financial Consultants Inc. The contract is silent on the issue of territorial rights. When TrustMe allows a competing franchise to be established near Sasha's office, she suffers a significant loss in profits. This is most likely a violation of

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