Deck 4: Franchising for Small Business

Question 1

McDonalds and Dairy Queen are examples of family-controlled firms

Answer 1

False

Question 2

The largest franchisor globally in revenue is McDonalds

Answer 2

True

Question 3

In U.S., it is always very costly to buy a franchise business

Answer 3

False

Question 4

Franchisors usually pay a fee or royalty to obtain the franchise rights

Question 5

One of the advantages of online franchising is that it involves high overhead costs

Question 6

McDonalds was the first franchisor in the United States

Question 7

Previous business experience is required to start a franchise business

Question 8

Under Trade Name Franchising, the franchisee has only the rights to use the franchisor's trade name and/or trademarks

Question 9

Conversion Franchising is the most popular form of franchising in United States

Question 10

Coldstone Creamery is an example of a business-format franchising

Question 11

Conversion franchising gives the right to franchisee to adopt the way the franchisor does business

Question 12

Conversion franchising includes only the rights to use the franchisor's trademarks

Question 13

Franchising is an uncommon mode of entrepreneurship in the United States

Question 14

In franchising, franchisees share the financial burden of the franchisor's growth

Question 15

Franchisor is responsible for day-to-day management of the franchisee

Question 16

One of the ways to reduce misrepresentation by franchisors is to talk to existing established franchisees

Question 17

Franchising is not regulated at state level

Question 18

All states have registration laws that franchisors should carefully consider

Question 19

Registration States are U.S. states that have laws governing the interaction between franchisors and franchisees

Question 20

The Uniform Franchise Disclosure Document was previously known as the Uniform Franchise Offering Circular

Question 21

The International Franchise Association (IFA) is the world's largest membership organization for franchisors, franchisees and franchise suppliers

Question 22

A good franchise agreement must have an exit clause

Question 23

The World Franchise Council (NFC) is a source for franchising information

Question 24

The franchise agreement is not a legal document

Question 25

Every franchisor is required to provide potential franchisee the business contact information of its current franchisees located in the same state

Question 26

According to the text, which of the following is the world's largest window cleaning franchise?

A) WHALES
B) ELEPHANT
C) FISH
D) SHARK

Question 27

Franchising involves:

A) Takeover of an already active firm
B) A legal agreement that allows one business to be operated using the name and business procedures of another business that already exists
C) Running a family business
D) Starting a small business from scratch

Question 28

In franchising, the parent company of the product, service, or method is known as :

A) Franchisee
B) Merging firm
C) Global firm
D) Franchisor

Question 29

A company that pays fees and royalties for exclusive rights to local distribution of the product or service is called:

A) Franchisee
B) Merging firm
C) Global firm
D) Franchisor

Question 30

Which of the following is NOT true about franchising?

A) Franchisee uses a brand name, trademark, and logo legally owned by the franchisor
B) Franchisee gets the legal right to engage sell or distribute goods or services
C) Franchisee uses a marketing plan or system offered by the franchisor
D) Franchisor has no control over franchisee

Question 31

Which of the following is a leading market research firm that provides information on franchising?

A) Small business administration
B) Chamber of commerce
C) Franchise business review
D) Marketing business review

Question 32

Which of the following is a drawback of running an online franchise system?

A) Low overhead costs
B) Flexible working hours
C) Tax benefits
D) Limited social interaction

Question 33

Which of the following is an advantage of running an online franchise system?

A) Crowded market
B) Low overhead costs
C) Lacks social interaction
D) High dependence on online marketing

Question 34

Which of the following is known as the birthplace of franchising?

A) China
B) United Kingdom
C) Canada
D) United States

Question 35

Which of the following is NOT the form of franchising?

A) Trade name franchising
B) Business format franchising
C) Conversion franchising
D) Diversion franchising

Question 36

Which of the following is an advantage of franchising for the franchisor?

A) Unresolved management disputes
B) Multiple sources of revenue
C) Limited point-of-scale control
D) Reduced influence

Question 37

Which of the following is an advantage of franchising for the franchisee?

A) Freedom to reinvent the wheel
B) Risk of fraud
C) High point-of-scale control
D) Proven business model

Question 38

In franchising, ________is responsible for managing growth at the corporate level

A) Franchisor
B) Franchisee
C) Human resource manager
D) Marketing manager

Question 39

Which of the following fees are associated with a franchising business?

A) Royalty
B) Advertising fee
C) Franchising fee
D) All of the above

Question 40

Which of the following type of franchises is able to charge a very high upfront payment from new franchisees?

A) Beginners
B) Developers
C) Grower
D) Maturers

Question 41

Which of the following has low entry requirements for new franchisees and few established outlets?

A) Beginners
B) Developers
C) Growers
D) Maturers

Question 42

The BDGM typology of franchising stands for:

A) Basic, design, growth, measure
B) Basic, design, growth, modify
C) Beginners, developers, growers, maturers
D) Beginners, developers, growers, modifiers

Question 43

Under the FTC rule, franchisors are required to provide prospective franchisees with information about the company franchising and its principals in a document at least ______days before signing of a franchise agreement

A) 5
B) 2
C) 10
D) 30

Question 44

Which of the following franchisors are considered risky?

A) Undercapitalized companies
B) Companies featured in trade magazines
C) Companies certified by reputable authorities and institutions
D) Members in trade associations

Question 45

Which clause allows the termination of a franchise agreement?

A) Good cause clause
B) Bad cause clause
C) Non-compete clause
D) Exculpatory clause

Question 46

The 'good cause' clause means that the contract can be terminated if a franchisee:

A) Asks for training and business advice
B) Engages in some type of breach of contract
C) Is good in handling operations
D) Pays royalty

Question 47

Which is correct of the Uniform Franchise Disclosure Document?

A) Is required by the Federal Trade Commission (FTC)
B) Is the same as the Uniform Franchise Offering Circular
C) Identifies the information all franchisors must to potential franchisees
D) All of the above choices are correct

Question 48

Which of the following is NOT part of the information in the Uniform Franchise Disclosure Document?

A) Litigation history
B) Initial investment
C) Renewal and termination
D) Personal lifestyle

Question 49

Which of the following aspects a franchisee must consider before signing the franchise agreement?

A) Whether a new business aligns with his/her interest and skills
B) Willing to invest the time in the day-to-day management of the new business
C) Willing to invest capital to buy and run the franchise
D) All of the above