Deck 2: Franchising

Question 1

The FDD includes information such as ________.

A) Fees and costs
B) Contractual obligations
C) Territory
D) Data regarding existing units
E) All of the above

Answer 1

E

Question 2

All of the following are a new type of franchising opportunity except ________.

A) Internet franchises
B) Conversion franchises
C) Co-branding franchises
D) Piggybacking franchises
E) Leapfrogging franchises

Answer 2

E

Question 3

Which of the following is true regarding the costs of franchises?

A) They vary significantly.
B) They are always expensive.
C) They are unaffordable.
D) They are outrageous.
E) They are unreasonable.

Answer 3

A

Question 4

Any cost saving resulting from franchisee purchasing power helps to offset other costs, such as franchise ________.

A) Fees
B) Accounting
C) Gains
D) Losses
E) Overhead

Question 5

Franchise operating guidelines ________.

A) Vary considerably
B) Are constant
C) Are always well defined
D) Never change
E) All of the above

Question 6

Which of the following is not an ongoing cost of franchises?

A) Start-up fees
B) Royalties
C) Top-line revenues
D) Cooperative advertising fees
E) All of the above are ongoing costs.

Question 7

Start-up standards required of franchisees may include which of the following?

A) Specific types of experience and skills
B) Net worth requirements
C) Liquidity requirements
D) All of the above
E) None of the above

Question 8

All of the following are factors of franchise cost except ________.

A) Type of franchise
B) Brand recognition
C) Popularity
D) Capacity to secure franchisees
E) Type of product

Question 9

Which of the following is not a type of franchising according to the text?

A) Product and trade-name franchising
B) Business-format franchising
C) Inclusive franchising
D) All of the above are types of franchising.
E) None of the above is a type of franchising.

Question 10

The term "FDD" stands for which of the following?

A) Franchise Disclosure Document
B) Franchisee Disclosure Document
C) Franchisor Disclosure Document
D) Federal Disclosure Document
E) None of the above

Question 11

Franchisees may pay a fee that is separate from the royalty fee, often called a ________, to contribute to a shared advertising fund.

A) Cooperative advertising fee
B) Cooperative franchising fee
C) Cooperative marketing fee
D) Cooperative print fee
E) Cooperative media fee

Question 12

According to the text, which of the following is not a consideration when selecting a franchise?

A) Self-reflection
B) Research
C) Geography
D) Gender
E) Brand

Question 13

Products and services in a franchise may not be altered, added, or dropped without ________.

A) Franchisor agreement
B) Termination of the franchise
C) Penalty
D) Legal action
E) An act of God

Question 14

Franchises are governed by ________ laws and regulations.

A) State and federal
B) State
C) Federal
D) International
E) Federal and international

Question 15

Many fees are must be paid regardless of ________.

A) Profitability
B) Cash flow
C) Sales
D) Both A and B
E) A, B, and C

Question 16

Performing due diligence may include ________.

A) Fully understanding the FDD of the franchise company
B) Calling on existing franchisees
C) Visiting the franchise headquarters
D) Doing Internet research
E) All of the above

Question 17

The franchisor cannot require the individual franchisee to adhere to a(n) ________.

A) Pricing structure
B) Advertising agreement
C) Supplier agreement
D) Operating structure
E) Product line

Question 18

In relation to franchising advantages, you purchase the use of the company's logo, trademark, and advertising, as well as the physical design, layout, and décor that ensure ________.

A) Recognition
B) Consistency
C) Uniformity
D) Unity
E) All of the above

Question 19

The most significant advantage of a franchise is the increased probability of ________, given that franchise brands have positive track records and instant recognition in most communities.

A) Success
B) Failure
C) Popularity
D) Optimism
E) Regret

Question 20

Which of the following is true regarding inspections conducted by franchisors?

A) They may be announced or unannounced.
B) They are always surprise inspections.
C) Specific times must be scheduled.
D) It is unlawful to do such inspections.
E) Very few franchisors do inspections.

Question 21

Franchisors are focused on creating wealth for ________.

A) Themselves
B) Friends
C) Franchisees
D) The community
E) Employees

Question 22

McDonalds is the only franchise available for ownership internationally.

Question 23

Franchisors are ________ to provide operating manuals and training to their franchisees, which are a valuable resource for success.

A) Required
B) Not required
C) Encouraged
D) Unable
E) None of the above

Question 24

Sound franchisors provide a significant quantity and excellent quality of start-up assistance to new franchisees, as well as ongoing education and support for established ones.

Question 25

If you are looking to start a business that is creative and is not controlled by others, then franchising is your best option.

Question 26

The franchisor is the second party to the franchise agreement and is the owner of the unit or territory rights.

Question 27

It is uncommon for a franchisor to handle the national and regional media purchasing for a franchisee.

Question 28

Master franchises do not allow individuals and organizations to buy the right to subfranchise within a delineated geographic territory.

Question 29

There is no need for legal representation when entering into a franchise agreement.

Question 30

All of the following are advantages of franchising except ________.

A) Training
B) Financing assistance
C) Purchasing power
D) Promotional support
E) Loss of control

Question 31

Which of the following aspects would the franchisor control in a business-format franchising situation?

A) Accounting
B) Marketing
C) Operations
D) Quality assurance
E) All of the above

Question 32

In many instances, products or ingredients in a franchise must be purchased from ________.

A) The franchisor
B) Designated suppliers
C) Any suppliers
D) Both A and B
E) All of the above

Question 33

As a franchisee you will benefit from the purchasing power of the franchisor to get lower costs and improved vendor service.

Question 34

Product and trade-name franchising is the licensing of the product or the production of the product and the use of the trademark, logo, or other identity of the franchise.

Question 35

A franchisor's record of success can ________.

A) Provide a significant advantage for your business start-up
B) Be a concern for a franchisee
C) Never provide help for start-up
D) Be proven
E) Not be counted on

Question 36

All of the following are selected franchise fees and costs according to the text, except ________.

A) Training
B) Advertising and promotion
C) Fixtures
D) Initial inventory
E) Local publicity campaigns

Question 37

Strong franchisors have all of the following except ________.

A) Established multiple franchises
B) Positive relationships with their franchisees
C) Years of experience
D) Many legal disputes
E) None of the above is an exception.

Question 38

Subway restaurants can be found ________.

A) In traditional stand-alone units
B) In convenience stores
C) In shopping malls
D) In military bases
E) All of the above

Question 39

The formula provided by the franchise does which of the following?

A) Guarantees brand recognition
B) Eases the issues of start-up development
C) Ensures ongoing support
D) Removes the creativity and freedom
E) All of the above

Question 40

There are few resources for franchise research.

Question 41

The most significant advantage for a franchisee is the increased probability of success.

Question 42

What are some of the key drawbacks of buying a franchise? How could these issues hinder your business?

Question 43

The start-up and ongoing assistance provided by a franchisor guarantees your success.

Question 44

What are some of the positive aspects of franchises that could assist you with your business idea? What advantages could you utilize in start-up, operations, competitive advantage, and so on?

Question 45

The costs of franchises vary significantly.

Question 46

A franchise is a business that markets a product or service developed by a franchisor, typically in the manner specified by the franchisor.

Question 47

Apply the steps of franchise selection to your business idea. Identify the most critical steps for your situation and how these issues would help you determine the best franchise opportunity.

Question 48

Franchisees may pay a fee that is separate from the royalty fee, often called a cooperative advertising fee, to contribute to an individual advertising fund.

Question 49

What franchising issues would you need legal assistance to address? How would that affect your decision to franchise or not to franchise?

Question 50

If you were to become a franchisee, which type of franchise would you choose? Discuss possible concerns and advantages of different franchise types.