Exam 26: Sole Proprietorships and Private Franchises

If a party to a franchise contract fails to perform, he or she may be subject to a suit for breach of contract.

In raising capital, a sole proprietor is limited to his or her personal funds-a loan is not possible.

Laws governing franchising are designed in part to prevent franchisors from terminating franchises without good cause.

A sole proprietorship lacks continuity on the death of the proprietor.

Pepsi-Cola Bottling Company is

Kelly, the owner of Llama Farms, a sole proprietorship, wants to obtain additional business capital but to maintain control. This can best be accomplished by

Cluckee Chick'n Corporation provides its prospective franchisees with projected earnings figures based on actual data. Cluckee Chick'n must also disclose

A franchisor is the purchaser of a franchise.

Phillipa is the sole proprietor of Fun Floral Arrangements. As a sole proprietor, on Fun Floral Arrangements' profits, Phillipa

Star Resorts Corporation wants to terminate its franchise arrangement with Tony. Their contract does not provide for notice of termination or set a time for winding up the business. This means that to wind up, Tony

Cal sells "DownSize," a weight-reduction program, from a Web site, in competition with Eat-Less Inc.'s product "Fit 'n Trim." Eat-Less files a suit against Cal, alleging in part that he is a sole proprietor, but his enterprise should be deemed a different form of business. Cal's enterprise should most likely be considered

Jack buys a Kitchens, Inc., franchise, which the franchisor later terminates. In determining whether the termination was proper, a court will generally

Bret buys a franchise from Comida Mexicano Ltd. If their agreement is like most franchise agreements, it will specify that Comida can terminate the franchise

Bob operated a pet grooming shop under a franchise agreement with Clean Pets Corp (CPC). The agreement allowed CPC to terminate the franchise if Bob was fined for cruelty to animals. After an investigation initiated by a customer complaint, Bob was fined for cruelty. CPC terminated the franchise. Bob filed a suit against CPC for wrongful termination. The court will most likely rule in favor of

The validity of a provision permitting the franchisor to establish and enforce certain quality standards is questionable.

Leo buys an exclusive territory in which he is authorized to set up a plant to make Midwest Dairy, Inc., products. After receiving the formula, Leo begins making Nice-brand ice cream and other Midwest products. This is

A franchisor's decision to terminate a franchise may be made in the normal course of business operations.

A franchise is a contractual arrangement.

Most franchise agreements provide that notice of termination of a franchise is not necessary.

CheezBurger Heaven, Inc., conducts a chain-style franchise. This involves the transfer to Clive, one of its franchisees, of