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ENTREPRENEURSHIP 2017 - Quiz Answer : Entrepreneurship and Effective Small Business Management, 11e (Scarborough) - Chapter 6

Entrepreneurship and Start Up

ENTREPRENEURSHIP 2017 - Quiz Answer and Case Study Guides

Entrepreneurship and Effective Small Business Management, 11e (Scarborough)

 

Entrepreneurship and Effective Small Business Management, 11e (Scarborough)

Chapter 6   Franchising and the Entrepreneur

 

1) In franchising, a ________ pays fees and royalties to a ________ in return for the right to sell its products or services under the franchiser's trade name and often to use its business format and system.

  1. A) franchiser; franchisee
  2. B) franchisee; franchiser
  3. C) franchise; business owner
  4. D) business owner; parent company

Answer:  B

Page Ref: 167

Topic:  What is a Franchise?

AACSB:  Analytic Skills

 

2) Franchising is currently dominated by:

  1. A) auto dealers.
  2. B) service-oriented franchises.
  3. C) retail outlets.
  4. D) fast food restaurants.

Answer:  C

Page Ref: 167

Topic:  What is a Franchise?

AACSB:  Analytic Skills

 

3) ________ franchising exists when a franchisee is licensed to sell specific products under the franchiser's brand name through a selective distribution system.

  1. A) Trade name
  2. B) Pure
  3. C) Conversion
  4. D) Product distribution

Answer:  D

Page Ref: 168

Topic:  Types of Franchising

AACSB:  Analytic Skills

 

4) In ________ franchising, a franchisee purchases only the right to become identified with the franchiser's trade name.

  1. A) trade name
  2. B) pure
  3. C) conversion
  4. D) product distribution

Answer:  A

Page Ref: 168

Topic:  Types of Franchising

AACSB:  Analytic Skills

5) ________ franchising involves providing the franchisee with a complete business system—the established name, the building layout and design, accounting systems, etc.

  1. A) Product distribution
  2. B) Trade name
  3. C) Pure
  4. D) Conversion

Answer:  C

Page Ref: 168

Topic:  Types of Franchising

AACSB:  Analytic Skills

 

6) Most gasoline products are sold through the ________ system of franchising.

  1. A) product distribution
  2. B) trade name
  3. C) pure
  4. D) conversion

Answer:  A

Page Ref: 168

Topic:  Types of Franchising

AACSB:  Reflective Thinking

 

7) McDonald's is an example of a ________ franchise.

  1. A) conversion
  2. B) trade name
  3. C) product distribution
  4. D) pure

Answer:  D

Page Ref: 168

Topic:  Types of Franchising

AACSB:  Reflective Thinking

 

8) The success of franchising is largely due to:

  1. A) the economic growth of the United States and other developed nations, economies.
  2. B) more college students choosing to go to work for themselves rather than for corporations.
  3. C) the mutual benefits it provides to the franchiser and franchisee.
  4. D) All of these factors

Answer:  C

Page Ref: 168

Topic:  Benefits of Buying a Franchise

AACSB:  Analytic Skills

 

 

9) The ideal franchising relationship is a ________ based on trust.

  1. A) corporation
  2. B) partnership
  3. C) sole proprietorship
  4. D) social enterprise

Answer:  B

Page Ref: 168

Topic:  Benefits of Buying a Franchise

AACSB:  Reflective Thinking

10) A significant advantage a franchisee has over the independent small business owner is participation in the franchiser's ________.

  1. A) centralized and large-volume buying power
  2. B) social gatherings
  3. C) profits
  4. D) policies

Answer:  A

Page Ref: 169

Topic:  Benefits of Buying a Franchise

AACSB:  Analytic Skills

 

11) In view of the cause of most new business failures, probably the most valuable service provided franchisees by the franchiser is:

  1. A) management training and experience.
  2. B) national advertising.
  3. C) financial assistance.
  4. D) territorial protection.

Answer:  A

Page Ref: 169

Topic:  Benefits of Buying a Franchise

AACSB:  Analytic Skills

 

12) Pure franchising is also referred to as:

  1. A) trade name franchising.
  2. B) business format franchising.
  3. C) product distribution franchising.
  4. D) all of the above.

Answer:  B

Page Ref: 168

Topic:  Types of Franchising

AACSB:  Analytic Skills

 

 

13) In franchising, the reputation of the franchiser is dependent on:

  1. A) their locations and popularity with the local customer.
  2. B) the brand name recognition and appeal.
  3. C) the rate of growth and the number of national outlets.
  4. D) the quality of the goods and services provided.

Answer:  D

Page Ref: 169

Topic:  Benefits of Buying a Franchise

AACSB:  Analytic Skills

 

14) Franchise advertising programs:

  1. A) are organized by the franchiser but controlled locally by the franchisee.
  2. B) are an expense borne by the franchiser.
  3. C) require franchisees to spend a minimum amount on local advertising.
  4. D) allow voluntary participation.

Answer:  C

Page Ref: 171

Topic:  Benefits of Buying a Franchise

AACSB:  Analytic Skills

15) When it comes to financial assistance for franchisees, the franchiser often:

  1. A) provides direct financing.
  2. B) assists in finding financing and occasionally provides direct assistance in a specific area.
  3. C) waives royalty fees for franchisees not making an adequate profit.
  4. D) generally does nothing, as finding financing is a requirement for qualifying for a franchise.

Answer:  B

Page Ref: 172

Topic:  Benefits of Buying a Franchise

AACSB:  Analytic Skills

 

16) The primary advantage of buying a franchise over starting your own company is:

  1. A) in the purchase of the franchiser's experience, expertise, and products.
  2. B) the fact it is much less expensive than doing your own business start-up.
  3. C) the extensive assistance offered in finding start-up capital.
  4. D) the absolute territory protection offered by all franchisers.

Answer:  A

Page Ref: 170

Topic:  Benefits of Buying a Franchise

AACSB:  Analytic Skills

 

 

17) Most franchise experts consider the most important factor in the success of a franchise to be:

  1. A) the simplicity of the idea.
  2. B) location.
  3. C) territorial protection.
  4. D) financing.

Answer:  B

Page Ref: 173

Topic:  Benefits of Buying a Franchise

AACSB:  Analytic Skills

 

18) Territorial protection in franchising:

  1. A) varies according to industry.
  2. B) is basically every franchisee for him/herself.
  3. C) is absolute and uniform across industries.
  4. D) is no longer an issue for most franchisees.

Answer:  A

Page Ref: 174

Topic:  Benefits of Buying a Franchise

AACSB:  Analytic Skills

 

19) The failure rate for franchises is:

  1. A) higher than the rate for all new businesses.
  2. B) no different from the rate for all new businesses.
  3. C) lower than the rate for all new businesses.
  4. D) indeterminable because of the Right to Privacy Act.

Answer:  C

Page Ref: 174

Topic:  Benefits of Buying a Franchise

AACSB:  Analytic Skills

20) There are two main risks in purchasing a franchise. First, that of the franchiser's experience and business system, and second:

  1. A) the brand name recognition of the franchise.
  2. B) the entrepreneur's managerial skills and motivation.
  3. C) the franchiser's financing.
  4. D) the economy trends in the country at the time the franchisee begins operation.

Answer:  B

Page Ref: 174

Topic:  Benefits of Buying a Franchise

AACSB:  Analytic Skills

 

 

21) The first, second and third growth wave in franchising respectively, are:

  1. A) low-cost franchises that focus on niche markets; shift to service sector; fast-food restaurant using the concept of rapid growth.
  2. B) fast-food restaurant using the concept of rapid growth; shift to service sector; low-cost franchises that focus on niche markets.
  3. C) low-cost franchises that focus on niche markets; fast-food restaurant using the concept of rapid growth; shift to service sector.
  4. D) shift to service sector; low-cost franchises that focus on niche markets; fast-food restaurant using the concept of rapid growth.

Answer:  B

Page Ref: 191

Topic:  Trends in Franchising

AACSB:  Analytic Skills

 

22) Despite all the benefits, there are a number of disadvantages to franchises, such as:

  1. A) the time consumed by the management training and support the franchiser provides.
  2. B) the cost of national advertising.
  3. C) strict adherence to standardized operations.
  4. D) territory limitations.

Answer:  C

Page Ref: 176

Topic:  Drawbacks of Buying a Franchise

AACSB:  Analytic Skills

 

23) The most expensive franchises in terms of total investment are:

  1. A) retail franchises.
  2. B) business service franchises.
  3. C) McDonald's franchises.
  4. D) hotel and motel franchises.

Answer:  D

Page Ref: 175

Topic:  Drawbacks of Buying a Franchise

AACSB:  Analytic Skills

24) The payment the franchisee makes to the franchiser based on gross sales is:

  1. A) a royalty.
  2. B) the start-up fee.
  3. C) a technical assistance fee.
  4. D) a national advertising fee.

Answer:  A

Page Ref: 175

Topic:  Drawbacks of Buying a Franchise

AACSB:  Analytic Skills

 

 

25) When it comes to purchasing products, equipment, etc., the franchiser:

  1. A) cannot require the franchisees buy from the franchise company.
  2. B) can set prices paid for the products, etc., but cannot set the retail price the franchisee charges.
  3. C) is permitted to set the retail price for the franchisee.
  4. D) cannot require franchisees to buy from an "approved" supplier.

Answer:  B

Page Ref: 176

Topic:  Drawbacks of Buying a Franchise

AACSB:  Analytic Skills

 

26) Typically, the franchiser controls are very tight on what the franchisee:

  1. A) does in terms of who they hire as employees.
  2. B) sets in terms of retail pricing and hours of operation.
  3. C) does with his/her net profits after fees and taxes are paid.
  4. D) sells in terms of the product or service they offer.

Answer:  D

Page Ref: 177

Topic:  Drawbacks of Buying a Franchise

AACSB:  Analytic Skills

 

27) The biggest challenge facing the growth of new franchises is:

  1. A) the lack of capital.
  2. B) competition from independent entrepreneurs.
  3. C) market saturation.
  4. D) the recent downturn in the economy.

Answer:  C

Page Ref: 177

Topic:  Drawbacks of Buying a Franchise

AACSB:  Analytic Skills

 

28) The primary market for U.S. franchisers is:

  1. A) Europe.
  2. B) Pacific Rim.
  3. C) Canada.
  4. D) Asia.

Answer:  A

Page Ref: 193

Topic:  Trends in Franchising

AACSB:  Analytic Skills

 

29) Based on the principle of ________, the idea is to put a franchise's products or services directly in the paths of potential customers, wherever that may be.

  1. A) guerilla marketing
  2. B) intercept marketing
  3. C) franchise marketing
  4. D) path marketing

Answer:  B

Page Ref: 195

Topic:  Trends in Franchising

AACSB:  Reflective Thinking

 

30) Another term for cobranding franchising is:

  1. A) master franchising.
  2. B) conversion franchising.
  3. C) multiple-unit franchising.
  4. D) piggybacking.

Answer:  D

Page Ref: 196

Topic:  Trends in Franchising

AACSB:  Analytic Skills

 

31) To protect investors from unscrupulous franchisers, the regulatory body is the:

  1. A) FCC.
  2. B) Justice Department.
  3. C) FDA.
  4. D) FTC.

Answer:  D

Page Ref: 179

Topic:  Franchising and the Law

AACSB:  Analytic Skills

 

32) The document that governs the relationship between a franchisor and the franchise is the:

  1. A) FTC.
  2. B) FDD.
  3. C) UFOC.
  4. D) FOC.

Answer:  B

Page Ref: 179

Topic:  Franchising and the Law

AACSB:  Analytic Skills

 

 

33) The FTC's philosophy focuses on:

  1. A) catching and prosecuting abusers of franchise laws.
  2. B) verifying the accuracy of FDD information.
  3. C) providing information to prospective franchisees and helping them make good decisions.
  4. D) licensing prospective franchisers.

Answer:  C

Page Ref: 179

Topic:  Franchising and the Law

AACSB:  Analytic Skills

34) Which of the following should make a potential franchisee suspicious about a franchiser's honesty?

  1. A) Claims that the franchise contract is a standard one and that there's no need to read it
  2. B) An offer of direct financing of a specific element of the franchise package
  3. C) Not providing detailed operational information until 10 days before signing the contract
  4. D) Requiring franchisees to spend a certain percentage of profits on advertising

Answer:  A

Page Ref: 182

Topic:  The Right Way to Buy a Franchise

AACSB:  Ethical Reasoning

 

35) Which of the following is an indication of a dishonest franchiser?

  1. A) Very thorough and complete operations and training manuals
  2. B) Recommending retail prices and providing a list of "approved" suppliers of products and materials needed for running the franchise
  3. C) Attempts to discourage you from allowing an attorney to evaluate the franchise contract
  4. D) Not providing a set of detailed earnings projections for each potential franchisee

Answer:  C

Page Ref: 183

Topic:  The Right Way to Buy a Franchise

AACSB:  Ethical Reasoning

 

36) When buying a franchise, the potential franchisee should first:

  1. A) search for start-up capital for local banks.
  2. B) evaluate him/herself as to the fit with the franchise.
  3. C) work in a similar business or industry for a year.
  4. D) contact the local chamber of commerce for information on the local economy.

Answer:  B

Page Ref: 183

Topic:  The Right Way to Buy a Franchise

AACSB:  Analytic Skills

 

 

37) When evaluating a franchise, the potential franchisee should:

  1. A) interview both current and former franchisees.
  2. B) only interview franchise employees as franchisees vary greatly in their opinions.
  3. C) ask about what oral promises the franchiser will give regarding future earnings.
  4. D) look at the local labor market to see if there is a pool of appropriate candidates for employment.

Answer:  A

Page Ref: 185

Topic:  The Right Way to Buy a Franchise

AACSB:  Analytic Skills

 

38) Typically, franchise contracts:

  1. A) are short-term, for 10 years or less.
  2. B) are heavily weighted in favor of the franchisee due to federal regulation.
  3. C) do not cover transfer and buyback provisions.
  4. D) are not negotiated by established franchisers.

Answer:  D

Page Ref: 189

Topic:  Franchise Contracts

AACSB:  Analytic Skills

39) The most litigated subject of the franchisee agreement is:

  1. A) franchisee fees.
  2. B) advertising expenditures.
  3. C) termination of contract.
  4. D) resale price maintenance clauses.

Answer:  C

Page Ref: 189

Topic:  Franchise Contracts

AACSB:  Analytic Skills

 

40) Under what circumstances would a typical franchiser have the right to cancel a franchise contract?

  1. A) The franchisee declares bankruptcy.
  2. B) The franchise fails to follow retail pricing guidelines set by the franchiser.
  3. C) Within five days of the initial signing of the contract
  4. D) If the franchiser decides he/she wants to buy back the franchise

Answer:  A

Page Ref: 190

Topic:  Franchise Contracts

AACSB:  Analytic Skills

 

 

41) When franchise contracts are renewed:

  1. A) the existing contract is merely annotated and signed by both parties.
  2. B) a new UFOC must be issued.
  3. C) all terms of the previous contract may be renegotiated.
  4. D) a new contract must be drawn up by the two parties.

Answer:  D

Page Ref: 190

Topic:  Franchise Contracts

AACSB:  Analytic Skills

 

42) The franchiser has the right to cancel a contract if a franchisee:

  1. A) declares a bankruptcy.
  2. B) fails to make required payments on time.
  3. C) fails to maintain quality standards.
  4. D) All of the above

Answer:  D

Page Ref: 190

Topic:  Franchise Contracts

AACSB:  Analytic Skills

 

43) The fastest growth rate in franchises is among:

  1. A) traditional areas of franchising, where costs are from $2,500 to $250,000.
  2. B) innovative, nontraditional franchisers with fresh approaches.
  3. C) gas stations and fast foods.
  4. D) hotel/motels and retail outlets.

Answer:  B

Page Ref: 191

Topic:  Trends in Franchising

AACSB:  Analytic Skills

44) ________ franchising involves the owner of an existing business becoming a franchisee to gain the advantage of name recognition.

  1. A) Product distribution
  2. B) Master franchise
  3. C) Conversion
  4. D) Pure

Answer:  C

Page Ref: 195

Topic:  Trends in Franchising

AACSB:  Analytic Skills

 

 

45) The most efficient method of franchising, from the franchiser's point-of-view, which has become popular in the 1990s and permits one franchisee to hold several franchises from the same franchise company, is called:

  1. A) multiple-unit franchising.
  2. B) master franchising.
  3. C) conversion franchising.
  4. D) piggybacking.

Answer:  A

Page Ref: 192

Topic:  Trends in Franchising

AACSB:  Analytic Skills

 

46) Establishing a Mrs. Fields Cookies franchise inside a Hardees fast-food franchise is an example of ________ franchising.

  1. A) multi-unit
  2. B) master
  3. C) cobranding
  4. D) conversion

Answer:  C

Page Ref: 196

Topic:  Trends in Franchising

AACSB:  Analytic Skills

 

47) When the franchisee has the right to establish a semi-independent organization in a particular territory to recruit, sell, and support other franchises, it is called a ________ franchise.

  1. A) multi-unit
  2. B) piggyback
  3. C) conversion
  4. D) master

Answer:  D

Page Ref: 196

Topic:  Trends in Franchising

AACSB:  Analytic Skills

48) A master franchise is also called:

  1. A) sub-franchise.
  2. B) cobrander.
  3. C) Both A and B
  4. D) None of the above

Answer:  A

Page Ref: 196

Topic:  Master Franchising

AACSB:  Analytic Skills

 

 

49) ________ is when owners of independent businesses become franchisees to gain the advantage of name recognition.

  1. A) Conversion franchising
  2. B) Multiple-unit franchising
  3. C) Master franchising
  4. D) Combination franchising

Answer:  A

Page Ref: 195

Topic:  Conversion Franchising

AACSB:  Analytic Skills

 

50) Perhaps the best way to evaluate the reputation of a franchiser is to ________ several franchise owners.

  1. A) meet
  2. B) interview
  3. C) write
  4. D) Both A and B

Answer:  D

Page Ref: 185

Topic:  Talk to Existing Franchisees

AACSB:  Analytic Skills

 

51) What franchisee turnover rate is probably sound?

  1. A) Less than 5 percent
  2. B) Less than 15 percent
  3. C) Less than 25 percent
  4. D) Less than 35 percent

Answer:  A

Page Ref: 185

Topic:  Franchise Turnover

AACSB:  Analytic Skills

 

52) The ________ requires all franchisers to disclose detailed information on their operations at the first personal meeting or at least fourteen days before a franchise contract is signed or any money is paid.

  1. A) FCC
  2. B) FDD
  3. C) Trade Regulations Rule
  4. D) FDA

Answer:  B

Page Ref: 179

Topic:  Franchising and the Law

AACSB:  Analytic Skills

 

53) In franchising, royalties are paid by the franchisee to the franchisor.

Answer:  TRUE

Page Ref: 167

Topic:  What is a Franchise?

AACSB:  Analytic Skills

 

54) By definition, a franchise is owned by a semi-independent franchisee who pays a fee to a franchiser in return for the right to sell the franchised goods or services.

Answer:  TRUE

Page Ref: 167

Topic:  What is a Franchise?

AACSB:  Reflective Thinking

 

55) In a franchise arrangement, the franchiser controls the distribution methods of the business venture.

Answer:  FALSE

Page Ref: 167

Topic:  What is a Franchise?

AACSB:  Analytic Skills

 

56) Trade name franchising involves licensing the rights to sell specific products under the manufacturer's brand name.

Answer:  FALSE

Page Ref: 168

Topic:  Types of Franchising

AACSB:  Analytic Skills

 

57) The type of franchising growing fastest is product distribution franchising.

Answer:  FALSE

Page Ref: 168

Topic:  Types of Franchising

AACSB:  Analytic Skills

 

58) Pure franchising occurs when the franchisee purchases only the right to become identified with the franchiser's trade name.

Answer:  FALSE

Page Ref: 168

Topic:  Types of Franchising

AACSB:  Analytic Skills

 

59) Pure franchising involves the right to use all the elements of a fully integrated business operation.

Answer:  TRUE

Page Ref: 168

Topic:  Types of Franchising

AACSB:  Analytic Skills

 

60) Franchising benefits the franchisor by providing a quick way to expand the distribution system and a way to grow without the cost and effort to develop managers internally.

Answer:  TRUE

Page Ref: 169

Topic:  Benefits of Buying a Franchise

AACSB:  Analytic Skills

61) As with most franchises, the key to H&R Block's success is the standardization of their product, processes, etc.

Answer:  TRUE

Page Ref: 171

Topic:  Benefits of Buying a Franchise

AACSB:  Analytic Skills

 

62) McDonald's relies almost exclusively on the trade name type of franchising.

Answer:  FALSE

Page Ref: 171

Topic:  Benefits of Buying a Franchise

AACSB:  Analytic Skills

 

63) When a franchisee buys a franchise, he/she is purchasing the expertise and the business experience of the franchisor.

Answer:  TRUE

Page Ref: 169

Topic:  Benefits of Buying a Franchise

AACSB:  Analytic Skills

 

64) The basic and first question an entrepreneur should ask him/herself before jumping into a franchise is, "How much is this going to cost me?"

Answer:  FALSE

Page Ref: 169

Topic:  Benefits of Buying a Franchise

AACSB:  Reflective Thinking

 

65) Quality is so important in franchising that most franchisers retain the right to terminate the franchise contract and to repurchase the outlet if a franchisee fails to maintain quality standards.

Answer:  TRUE

Page Ref: 171

Topic:  Benefits of Buying a Franchise

AACSB:  Reflective Thinking

 

66) Most franchisers provide extensive financial help like loans and low-rate financing for their franchises.

Answer:  FALSE

Page Ref: 172

Topic:  Benefits of Buying a Franchise

AACSB:  Reflective Thinking

 

67) Buying a franchise prevents an entrepreneur from making many mistakes and avoids the most inefficient type of learning—trial and error.

Answer:  TRUE

Page Ref: 173

Topic:  Benefits of Buying a Franchise

AACSB:  Analytic Skills

68) According to experts, the most important factor in franchising is location.

Answer:  TRUE

Page Ref: 173

Topic:  Benefits of Buying a Franchise

AACSB:  Analytic Skills

 

69) Most franchisors do not offer franchisees territorial protection, denying them the right to exclusive distribution of the brand name in a particular geographic area.

Answer:  FALSE

Page Ref: 174

Topic:  Benefits of Buying a Franchise

AACSB:  Analytic Skills

 

70) The failure rate for franchises is well below that for other types of new businesses.

Answer:  TRUE

Page Ref: 174

Topic:  Benefits of Buying a Franchise

AACSB:  Analytic Skills

 

71) By signing the franchise contract, a franchisee typically surrenders some freedom and autonomy in operating his/her business.

Answer:  TRUE

Page Ref: 178

Topic:  Drawbacks of Buying a Franchise

AACSB:  Analytic Skills

 

72) The only fee that franchisers can collect from franchisees is a one-time franchise fee paid at the outset of the relationship.

Answer:  FALSE

Page Ref: 175

Topic:  Drawbacks of Buying a Franchise

AACSB:  Analytic Skills

 

73) In addition to other fees, franchisees must also pay royalties but only on net profits—no profits, no royalties.

Answer:  FALSE

Page Ref: 175

Topic:  Drawbacks of Buying a Franchise

AACSB:  Analytic Skills

 

74) In many franchises, strict uniformity is the rule rather than the exception.

Answer:  TRUE

Page Ref: 176

Topic:  Drawbacks of Buying a Franchise

AACSB:  Analytic Skills

 

75) Franchisors can require franchisees to purchase materials and supplies only from approved suppliers.

Answer:  TRUE

Page Ref: 176

Topic:  Drawbacks of Buying a Franchise

AACSB:  Analytic Skills

76) Franchisees generally sell only those products or services that the franchiser has approved but may sell complementary products as long as they aren't a second competing franchise.

Answer:  FALSE

Page Ref: 177

Topic:  Drawbacks of Buying a Franchise

AACSB:  Analytic Skills

 

77) Territorial encroachment is becoming a hotly contested issue as franchisers have nearly exhausted prime locations for franchises.

Answer:  TRUE

Page Ref: 177

Topic:  Drawbacks of Buying a Franchise

AACSB:  Analytic Skills

 

78) Independent entrepreneurs with a "go-my-own-way" attitude are ideally suited for becoming franchisees.

Answer:  FALSE

Page Ref: 178

Topic:  Drawbacks of Buying a Franchise

AACSB:  Analytic Skills

 

79) It is important for potential entrepreneurs to have extensive experience in the business in which they are buying a franchise.

Answer:  FALSE

Page Ref: 173

Topic:  Benefits of Buying a Franchise

AACSB:  Analytic Skills

 

 

80) The FTC Trade Regulation Rule applies to all franchisors in all states regardless of state disclosure laws.

Answer:  TRUE

Page Ref: 179

Topic:  Franchising and the Law

AACSB:  Analytic Skills

 

81) If a franchisor encourages you to sign without reading the agreement, or discourages you from "spending the money on an attorney," this is a warning sign that the franchiser might be dishonest.

Answer:  TRUE

Page Ref: 182

Topic:  The Right Way to Buy a Franchise

AACSB:  Analytic Skills

 

82) By the 1920s, franchising was rife with fraudulent practitioners. 

Answer:  FALSE

Page Ref: 178

Topic:  Franchising and the Law

AACSB:  Reflective Thinking

83) According to the Trade Regulation Rule, every franchisor must provide detailed information on their operations at the first personal contact, or at least 14 days before a franchise contract is signed.

Answer:  TRUE

Page Ref: 179

Topic:  Franchising and the Law

AACSB:  Analytic Skills

 

84) The FTC verifies the accuracy of the franchise disclosure information required by the Trade Regulation Rule.

Answer:  FALSE

Page Ref: 179

Topic:  Franchising and the Law

AACSB:  Analytic Skills

 

85) One of the best ways for an entrepreneur to evaluate a potential franchiser is to interview several franchise owners who have been in business at least one year.

Answer:  TRUE

Page Ref: 185

Topic:  The Right Way to Buy a Franchise

AACSB:  Analytic Skills

 

 

86) Do not heed any information gathered from past franchisees, because they will distort the reasons why they left the franchise.

Answer:  FALSE

Page Ref: 185

Topic:  The Right Way to Buy a Franchise

AACSB:  Analytic Skills

 

87) Most often, disputes over a franchise contract arise after the agreement is in force.

Answer:  TRUE

Page Ref: 188

Topic:  Franchise Contracts

AACSB:  Analytic Skills

 

88) The franchise contract defines the rights and the obligations of both parties and sets the guidelines which govern the franchise relationship.

Answer:  TRUE

Page Ref: 188

Topic:  Franchise Contracts

AACSB:  Analytic Skills

 

89) Having an attorney review and evaluate a franchise contract really is unnecessary since the FTC requires all franchisers to offer a "standard" franchise contract.

Answer:  FALSE

Page Ref: 189

Topic:  Franchise Contracts

AACSB:  Analytic Skills

90) One of the most litigated subjects of a franchise agreement is the termination of the contract by either party.

Answer:  TRUE

Page Ref: 189

Topic:  Franchise Contracts

AACSB:  Analytic Skills

 

91) Franchisors are obligated to renew a franchisee's contract unless there has been malfeasance on the part of the franchise.

Answer:  FALSE

Page Ref: 190

Topic:  Franchise Contracts

AACSB:  Analytic Skills

 

92) In most cases, a franchisee does not have to get the franchisor's approval to sell the franchise to a third party.

Answer:  FALSE

Page Ref: 190

Topic:  Franchise Contracts

AACSB:  Analytic Skills

 

93) Franchising, as a method of conducting business, has declined in importance in the past five years in international markets.

Answer:  FALSE

Page Ref: 193

Topic:  Trends in Franchising

AACSB:  Analytic Skills

 

94) The primary market for U.S. franchisors is Europe.

Answer:  TRUE

Page Ref: 193

Topic:  Trends in Franchising

AACSB:  Analytic Skills

 

95) Nancy has owned her own hair salon for ten years. She's recently signed an agreement with Budget Cutters to become one of their outlets. This is an example of conversion franchising.

Answer:  TRUE

Page Ref: 195

Topic:  Trends in Franchising

AACSB:  Analytic Skills

 

96) A multi-unit franchise gives the franchisee the right to open more than one franchise outlet in a territory within a specific time frame.

Answer:  TRUE

Page Ref: 192

Topic:  Trends in Franchising

AACSB:  Reflective Thinking

97) A master franchise gives the franchisee the right to combine two distinct franchises under one roof.

Answer:  FALSE

Page Ref: 196

Topic:  Trends in Franchising

AACSB:  Analytic Skills

 

98) When Wal-Mart began having McDonald's restaurants share their retail space they were exercising master franchising.

Answer:  FALSE

Page Ref: 196

Topic:  Trends in Franchising

AACSB:  Analytic Skills

 

99) A significant growth area in franchising is providing time-saving services to baby boomers.

Answer:  TRUE

Page Ref: 197

Topic:  Trends in Franchising

AACSB:  Reflective Thinking

 

100) To make a successful franchise operation, an entrepreneur's business model must be replicable.

Answer:  TRUE

Page Ref: 197

Topic:  Franchising as a Growth Strategy

AACSB:  Analytic Skills

 

101) A master franchise is called a piggyback franchise.

Answer:  FALSE

Page Ref: 196

Topic:  Trends in Franchising

AACSB:  Analytic Skills

 

102) Typically, because the franchisor's attorney prepares franchise contracts, the provision favors the franchisee.

Answer:  FALSE

Page Ref: 188

Topic:  Franchise Contracts

AACSB:  Analytic Skills

 

103) The Federal Trade Commission (FTC) enacted the Trade Regulation Rule, requiring all franchisors to disclose detailed information on their operations at the first personal meeting or at least ten days before a franchise contract is signed or any money is paid.

Answer:  TRUE

Page Ref: 179

Topic:  Franchising and the Law

AACSB:  Analytic Skills

 

104) The law requires franchisors to register a Franchise Disclosure Document (FDD) and deliver a copy to prospective franchisees after the sale of a franchise. 

Answer:  FALSE

Page Ref: 179

Topic:  Franchising and the Law

AACSB:  Analytic Skills

105) When franchisees purchase their franchises and sign the contract, they agree to sell the franchisor's product or service by following its prescribed formula.

Answer:  TRUE

Page Ref: 178

Topic:  Drawbacks of Buying a Franchise

AACSB:  Analytic Skills

 

 

106) A poor image for the entire franchise could result from some franchisees using inferior products to cut costs.

Answer:  TRUE

Page Ref: 176

Topic:  Drawbacks of Buying a Franchise

AACSB:  Analytic Skills

 

107) In most cases, startup costs for franchises often do not include any additional fees.

Answer:  FALSE

Page Ref: 175

Topic:  Drawbacks of Buying a Franchise

AACSB:  Analytic Skills

 

108) A significant advantage a franchisee has over the independent small business owner is participation in the franchisor's centralized and large-volume buying power.

Answer:  TRUE

Page Ref: 173

Topic:  Benefits of Buying a Franchise

AACSB:  Analytic Skills

 

109) Training programs often involve both classroom and on-site instruction to teach franchisees the basic operations of the business —from producing and selling the goods or services to purchasing raw materials and completing paperwork.

Answer:  TRUE

Page Ref: 170

Topic:  Benefits of Buying a Franchise

AACSB:  Analytic Skills

 

110) Franchising is an important part of the U.S. economy. Briefly explain its importance, define franchising, and identify the three basic types of franchises.

Answer:  Through franchised businesses, consumers can buy nearly every good or service imaginable—from singing telegrams and computer training to tax services and waste-eating microbes.  There are three types of franchising: trade name franchising, where the franchisee purchases only the right to use a brand name; product distribution franchising, which involves a license to sell specific products under a brand name; and pure franchising, which provides a franchisee with a complete business system.

Page Ref: 168

Topic:  Types of Franchising

AACSB:  Reflective Thinking

 

111) Explain the benefits of franchising to the franchisee.

Answer:  The franchisor has the benefits of expanding his or her business on limited capital and growing without developing key managers internally. The franchisee also receives many key benefits: management training and counseling; customer appeal of a brand name; standardized quality of goods and services, national advertising programs, financial assistance, proven products and business formats, centralized buying power, territorial protection, and a greater chance for success.

Page Ref: 168-175

Topic:  Benefits of Buying a Franchise

AACSB:  Analytic Skills

 

112) Although franchising is the fastest growing segment of small business, it has drawbacks. Name and explain at least five drawbacks to franchising from the franchisee's perspective.

Answer:  Potential franchisees should be aware of the disadvantages involved in buying a franchise: franchise fees and profit sharing, strict adherence to standardized operations, restrictions on purchasing, limited product lines, possible ineffective training programs, and less freedom.

Page Ref: 175-178

Topic:  Drawbacks of Buying a Franchise

AACSB:  Analytic Skills

 

113) What characteristics do franchisees look for in a "good franchise"?

Answer:  Although there's never a guarantee of success, the following characteristics make a franchise stand out:

∙     A unique concept or marketing approach

∙     Profitability

∙     A registered trademark

∙     A business system that works

∙     A solid training program

∙     Affordability

∙     A positive relationship with franchisees

Page Ref: 182-187

Topic:  The Right Way to Buy a Franchise

AACSB:  Reflective Thinking

 

114) What is the Franchise Disclosure Document? Offer several examples of what type of information is required in the FDD.

Answer:  The Federal Trade Commission required all franchisors to create a Franchise Disclosure Document (FDD), a document that provides valuable information to prospective franchisees so that they can make informed decisions before investing in a franchise. The FDD requires all franchisors to disclose detailed information on their operations at least 14 days before a franchise contract is signed or any money is paid.

Page Ref: 179

Topic:  Franchising and the Law

AACSB:  Analytic Skills

 

115) What clues should you look for that should arouse your suspicions regarding the honesty and legitimacy of a franchise? Identify at least eight.

Answer:  The following clues should arouse the suspicion of an entrepreneur about to invest in a franchise:

∙     Claims that the franchise contract is "the standard one" and that "you don't need to read it." There is no standard franchise contract.

∙     A franchisor who fails to give you a copy of the required disclosure document, the FDD, at your first face-to-face meeting.

∙     A marginally successful prototype store or no prototype at all.

∙     A poorly prepared operations manual outlining the franchise system or no manual (or system) at all.

∙     An unsolicited testimonial from "a highly successful franchisee." Scam artists will hire someone to pose as a successful franchisee, complete with a rented luxury car and expensive-looking jewelry and clothing, to "prove" how successful franchisees can be and to help close the sale.

∙     An unusual amount of litigation brought against the franchisor. In this litigious society, companies facing lawsuits is a common situation.

∙     Verbal promises of large future earnings without written documentation.

∙     A high franchisee turnover rate or a high termination rate.

∙     Attempts to discourage you from allowing an attorney to evaluate the franchise contract before you sign it.

∙     No written documentation to support claims and promises.

∙     A high pressure sale—sign the contract now or lose the opportunity.

∙     Claiming to be exempt from federal laws requiring complete disclosure of franchise details in a FDD. If a franchisor has no FDD, run—don't walk—away from the deal.

∙     "Get-rich-quick schemes"—promises of huge profits with only minimum effort.

∙     Reluctance to provide a list of present franchisees for you to interview.

∙     Evasive, vague answers to your questions about the franchise and its operation.

Page Ref: 182-183

Topic:  The Right Way to Buy a Franchise

 

116) Outline the process of buying a franchise, naming and briefly explaining each step you should go through.

Answer:  To buy a franchise the right way requires that you evaluate yourself, research your market, consider your franchise options, get a copy of the franchisor's FDD and study it, talk to existing franchisees, ask the franchisor some tough questions, and make your choice.

Page Ref: 182-187

Topic:  The Right Way to Buy a Franchise

 

117) Discuss franchise contracts covering their current state, factors in their termination, renewal, and transfer, and what the most common dispute tends to be.

Answer:  The franchise contract summarizes the details that will govern the franchisor franchisee relationship over its life. The contract outlines the rights and the obligations of each party and sets the guidelines that govern the franchise relationship. Although franchise contracts cover everything from initial fees and continuing payments to training programs and territorial protection, three issues are responsible for most franchisor-franchisee disputes: termination of the contract, contract renewal, and transfer and buyback provisions.

∙     Termination. Franchisees must know when and under what conditions they—and the franchisor—can terminate the contract. Generally, the franchisor has the right to cancel a contract if a franchisee declares bankruptcy, fails to make required payments on time, or fails to maintain quality standards.

∙     Renewal. Franchisors usually retain the right to renew or refuse to renew franchisees' contracts. If a franchisee fails to make payments on schedule or does not maintain quality standards, the franchisor has the right to refuse renewal. In some cases, the franchisor has no obligation to offer contract renewal to the franchisee when the contract expires.

∙     Transfer and Buybacks. Under most franchise contracts, franchisees cannot sell their franchises to a third party or will it to a relative without the franchisor's approval. In most instances, franchisors approve a franchisee's request to sell an outlet to another person. Most franchisors retain the right of first refusal in franchise transfers, which means the franchisee must offer to sell the franchise to the franchisor first.

Page Ref: 188-190

Topic:  Franchise Contracts

AACSB:  Analytic Skills

 

118) Describe the key trends that will affect franchising over the next decade.

Answer:  Trends influencing franchising include: international opportunities, the emergence of smaller, nontraditional locations, conversion franchising, multiple unit franchising (MUF), master franchising, piggyback franchising (or co-branding), and products and services targeting aging baby boomers.

Page Ref: 191-197

Topic:  Trends in Franchising

AACSB:  Reflective Thinking

 

 

 

 

 

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Entrepreneurship: Starting and Operating A Small Business, 4th Edition, 2016, Steve Mariotti
Entrepreneurship: Successfully Launching New Ventures, 5th Edition, 2016, Bruce R. Barringer
Essentials of Entrepreneurship and Small Business Management, 8th Edition, 2016, Norman M. Scarborough
Fundamentals for Becoming a Successful Entrepreneur: From Business Idea to Launch and Management, 2016, Malin Brannback, Alan Carsrud
Entrepreneurship and Effective Small Business Management, 11th Edition, 2015, Norman M. Scarborough

------
PART 1: Decision to Become an Entrepreneur
1. Introduction to Entrepreneurship
PART 2: Developing Successful Business Ideas
3. Feasibility Analysis
4. Developing an Effective Business Model
5. Industry and Competitor Analysis
6. Writing a Business Plan
PART 3: Moving from an Idea to an Entrepreneurial Firm
7. Preparing the Proper Ethical and Legal Foundation
8. Assessing a New Venture’s Financial Strength and Viability
9. Building a New-Venture Team
10. Getting Financing or Funding
PART 4: Managing and Growing an Entrepreneurial Firm
11. Unique Marketing Issues
12. The Importance of Intellectual Property
13. Preparing for and Evaluating the Challenges of Growth
14. Strategies for Firm Growth
15. Franchising

------
PART I. STARTING THE PROCESS
Chapter 1. Why Plan?
PART II. WHAT TO DO BEFORE THE BUSINESS PLAN IS WRITTEN
Chapter 2. Developing and Screening Business Ideas
Chapter 3. Feasibiity Analysis
PART III. PREPARING A BUSINESS PLAN
Chapter 4. Introductory Material, Executive Summary, and Description of the Business
Chapter 5. Industry Analysis
Chapter 6. Market Analysis
Chapter 7. Marketing Plan
Chapter 8. Management Team and Company Structure
Chapter 9. Operations Plan and Product (or Service) Design and Development Plan
Chapter 10. Financial Projections
PART IV. PRESENTING THE BUSINESS PLAN
Chapter 11. Presenting the Plan with Confidence

------
BRIEF CONTENTS
UNIT 1 Entrepreneurial Pathways
Chapter 1 Entrepreneurs Recognize Opportunities
Chapter 2 Franchising
Chapter 3 Finding Opportunity in an Existing Business
Chapter 4 The Business Plan: Road Map to Success
Honest Tea Business Plan
Unit 1 Case Study: Spanx
UNIT 2 Who Are Your Customers?
Chapter 5 Creating Business from Opportunity
Chapter 6 Exploring Your Market
Unit 2 Case Study: Kitchen Arts & Letters, Inc.
UNIT 3 Integrated Marketing
Chapter 7 Developing the Right Marketing Mix and Plan
Chapter 8 Pricing and Credit Strategies
Chapter 9 Integrated Marketing Communications
Chapter 10 Marketing Globally
Chapter 11 Smart Selling and Effective Customer Service
Unit 3 Case Study: Empact
UNIT 4 Show Me the Money: Finding, Securing, and Managing It
Chapter 12 Understanding and Managing Start-Up, Fixed, and Variable Costs
Chapter 13 Using Financial Statements to Guide a Business
Chapter 14 Cash Flow and Taxes
Chapter 15 Financing Strategy: Debt, Equity, or Both?
Unit 4 Case Study: Lee’s Ice Cream
UNIT 5 Operating a Small Business Effectively
Chapter 16 Addressing Legal Issues and Managing Risk
Chapter 17 Operating for Success
Chapter 18 Location, Facilities, and Layout
Chapter 19 Human Resources and Management
Unit 5 Case Study: ONLC
UNIT 6 Leadership, Ethics, and Exits
Chapter 20 Leadership and Ethical Practices
Chapter 21 Franchising, Licensing, and Harvesting: Cashing in Your Brand
Unit 6 Case Study: Honest Tea
Appendix 1 Sample Student Business Plan: University Parent, Inc.
Appendix 2 BizBuilder Business Plan
Appendix 3 Resources for Entrepreneurs
Appendix 4 Useful Formulas and Equations
------
Section 1: The Rewards and Challenges of Entrepreneurship
1. Entrepreneurs: The Driving Force Behind Small Business
2. Ethics and Social Responsibility: Doing the Right Thing
3. Creativity and Innovation: Keys to Entrepreneurial Success
4. Strategic Management and the Entrepreneur
Section 2: Launching a Venture: Entry Strategies
5. Choosing a Form of Ownership
6. Franchising and the Entrepreneur
7. Buying an Existing Business
8. New Business Planning Process: Feasibility Analysis, Business Modeling, and Crafting a Winning Business Plan
Section 3: Building a Marketing Plan
9. Building a Bootstrap Marketing Plan
10. Creative Use of Advertising and Promotion
11. Pricing and Credit Strategies
12. Global Marketing Strategies
13. E-Commerce and Entrepreneurship
Section 4: Building a Financial Plan
14. Creating a Solid Financial Plan
15. Managing Cash Flow
16. Sources of Equity Financing
17. Sources of Debt Financing
Section 5: Building an Operating Plan
18. Location, Layout, and Physical Facilities
19. Supply Chain Management
20. Managing Inventory
21. Staffing and Leading a Growing Company
Section 6: Legal Aspects of Small Business: Succession, Ethics, and Government Regulation
22. Management Succession and Risk Management Strategies in the Family Business
23. The Legal Environment: Business Law and Government Regulation
------
Section I: The Challenge of Entrepreneurship 
1. The Foundations of Entrepreneurship
2. Ethics and Social Responsibility: Doing the Right Thing
3. Inside the Entrepreneurial Mind: From Ideas to Reality
Section II: The Entrepreneurial Journey Begins
4. Conducting a Feasibility Analysis and Designing a Business Model
5. Crafting a Business Plan and Building a Solid Strategic Plan
6. Forms of Business Ownership and Buying an Existing Business
7. Franchising and the Entrepreneur
Section III: Launching the Business
8. Building a Powerful Bootstrap Marketing Plan
9. E-commerce and the Entrepreneur
10. Pricing and Credit Strategies
11. Creating a Successful Financial Plan
12. Managing Cash Flow
Section IV: Putting the Business Plan to Work: Sources of Funds
13. Sources of Financing: Equity and Debt
14. Choosing the Right Location and Layout
15. Global Aspects of Entrepreneurship
16. Building a New Venture Team and Planning the Next Generation
------

 

ENTREPRENEURSHIP 2017 - NEW COLLECTION 2016 - 2017

1. Youtube Playlist: See the collection of videos - www.youtube.com/ecomftu2012

2. Download Power Point Slides Free

Entrepreneurship: Starting and Operating A Small Business, 4th Edition, 2016, Steve Mariotti - LINK
Entrepreneurship: Successfully Launching New Ventures, 5th Edition, 2016, Bruce R. Barringer  - LINK
Essentials of Entrepreneurship and Small Business Management, 8th Edition, 2016, Norman M. Scarborough - LINK
Fundamentals for Becoming a Successful Entrepreneur: From Business Idea to Launch and Management, 2016, Malin Brannback - LINK
Entrepreneurship and Effective Small Business Management, 11th Edition, 2015, Norman M. Scarborough - LINK

 

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