Deck 15: Investigating Franchise Opportunities

Question 1

It is crucial for a potential franchise to answer the following question prior to signing a franchise agreement.

A)by buying and running this franchise is likely to make me happy
B)buying this franchise will some all my future financial problems
C)buying this franchise will make my parents and in-laws respect me
D)none of the above

Answer 1

A
The right franchise fits a person's interests,capabilities,needs and financial capacity which,in turn,can provide the conditions for the person to be happy

Question 2

For a new franchisee joining a solid franchise system

A)much of the guesswork of running a business is removed.
B)most of the mistakes made by an independent entrepreneur will be experienced
C)the new franchisee is yet to learn and resolve all the "kinks" of running a business
D)all of the above are true

Answer 2

A
Much of the guesswork for running the specific kind of business and to do so efficiently and effectively has been resolved by the franchise system and the franchisee is trained to operate in that way

Question 3

There are three central finance questions a prospective franchise must answer.Identify the question below is not a central finance question for a prospective franchisee.

A)Do I have enough cash to pay the fees and cover somewhere between 20-to-100 percent of the total amount required by the franchise system prior to opening?
B)Can I find some one (or more)who will finance the amount that I can't cover?
C)Additional sources of capital are likely to be needed.Can I get agreed upon sources of additional funds as needed to assure that sufficient working capital is available to me?
D)Can I qualify for state,federal or local grants to assist in the acquisition of the franchise?

Answer 3

D
Most franchise systems look to the prospective franchisee's equity position and debt capacity to cover the costs of start-up and running the franchise operation

Question 4

Almost all franchising agreements are set up for a specified term,generally from

A)five to twenty years
B)one to six years
C)twenty to forty years
D)ten to thirty years

Question 5

Popular franchise directories,which may be the primary first step in information collection for prospective franchisees include all but one of the following.Which should not be included?

A)the Franchise Handbook
B)the New York Times
C)the Executive Guide to Franchise Opportunities
D)the Franchise Opportunities Guide

Question 6

The Disclosure Document in franchising means the same as:

A)Uniform Franchise Offering Circular
B)"Rule 245" of the Sherman Anti-Trust Act
C)the Walsh-Healy Act of 1970
D)the commitment to no "tying" agreements between franchise systems.

Question 7

About ( )percent of franchise systems provide some form of earnings claims for franchisees?

A)5 percent
B)about 25 percent
C)about 40 percent
D)about 70 percent

Question 8

Rule 436 is a rule issued by ( )provides franchisors and franchisees with certain legal rights under federal law.

A)Interstate Commerce Commission
B)Department of Commerce
C)Federal Trade Commission
D)U.S.Small Business Administration

Question 9

The four "P's" of franchise include all of the following except:

A)product
B)profitability
C)promise
D)people
E)process
EASY

Question 10

Over the counter business-oriented publications often include franchise-related information.Each of the following publications regularly provide such useful franchise information except for

A)Wall street Journal
B)U.S.A.Today
C)Women's Home Journal
D)Entrepreneur Magazine