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ENTREPRENEURSHIP 2017 - Quiz Answer : Entrepreneurship: Successfully Launching New Ventures, 5e (Barringer/Ireland) - Chapter 15

Entrepreneurship and Start Up

ENTREPRENEURSHIP 2017 - Quiz Answer and Case Study Guides

Entrepreneurship: Successfully Launching New Ventures, 5e (Barringer/Ireland)

Quiz Answers and Case Guides

 

Entrepreneurship: Successfully Launching New Ventures, 5e (Barringer/Ireland)

Chapter 15   Franchising

 

1) Uptown Cheapskate, the company profiled in the opening feature of Chapter 15, was started by Chelsea and Scott Sloan. According to the feature, Chelsea and Scott decided to grow Uptown Cheapskate via franchising because they wanted to ________.

  1. A) grow quickly without making a huge investments in real estate
  2. B) capture the prestige of being a franchise organization
  3. C) maintain maximum control of their business while at the same time maximizing profits
  4. D) grow quickly while at the same time maintaining maximum control of their business
  5. E) grow slowly while at the same time maximizing profits

Answer:  A

Diff: 2      Page Ref: 507

LO:  15.1: Explain franchising and how this form of business ownership works.

AACSB:  Reflective Thinking

 

2) Which of the following statements is incorrect regarding franchising?

  1. A) In some industries, such as automotive and retail food, franchising is a dominant form of business ownership and growth.
  2. B) There are some instances in which franchising is not appropriate.
  3. C) Franchising is a relatively new form of business organization.
  4. D) Franchising, by its very nature, involves the sharing of knowledge between a franchisor and a franchisee.
  5. E) Franchising is a relatively poorly understood form of business ownership and growth.

Answer:  C

Diff: 2      Page Ref: 509

LO:  15.1: Explain franchising and how this form of business ownership works.

AACSB:  Application of Knowledge

 

3) ________ is a form of business ownership in which a firm that already has a successful product or service licenses its trademark and method of doing business to other business in exchange for an initial franchise fee and an ongoing royalty.

  1. A) Licensing
  2. B) Joint Venturing
  3. C) Contracting
  4. D) Franchising
  5. E) Sub-Contracting

Answer:  D

Diff: 1      Page Ref: 510

LO:  15.1: Explain franchising and how this form of business ownership works.

AACSB:  Analytical Thinking

 

4) Franchising is a form of business ownership in which a firm that already has a successful product or service licenses its trademark and method of doing business to another business in exchange for ________.

  1. A) an initial franchise fee and an ongoing royalty
  2. B) a one-time franchise fee
  3. C) an equity position in the new business
  4. D) an ongoing royalty
  5. E) an initial franchise fee and an equity position in the new business

Answer:  A

Diff: 2      Page Ref: 510

LO:  15.1: Explain franchising and how this form of business ownership works.

AACSB:  Analytical Thinking

 

5) According to the textbook, the Comfort Keepers business idea lends itself to franchising because the  ________.

  1. A) company has the ability to grow profitably and has a good trademark
  2. B) company's business concept is easy to teach and individual Comfort Keeper outlets are inexpensive to open and operate
  3. C) company has new technology to introduce to the marketplace
  4. D) company has intellectual property and the ability to grow quickly
  5. E) company has a good trademark and a good business method

Answer:  E

Diff: 3      Page Ref: 510

LO:  15.1: Explain franchising and how this form of business ownership works.

AACSB:  Reflective Thinking

 

 

 

 

6) The two distinctly different types of franchise systems are ________ franchise and ________ franchise.

  1. A) product trademark; business arrangement
  2. B) product plus; business format
  3. C) business design; product improvement
  4. D) product extension; business design
  5. E) product trademark; business format

Answer:  E

Diff: 2      Page Ref: 511

LO:  15.1: Explain franchising and how this form of business ownership works.

AACSB:  Application of Knowledge

 

 

7) A ________ franchise is an arrangement under which the franchisor grants to the franchisee the right to buy its products and use its trade name.

  1. A) product and trademark
  2. B) product extension
  3. C) business format
  4. D) production plus
  5. E) business design

Answer:  A

Diff: 2      Page Ref: 511

LO:  15.1: Explain franchising and how this form of business ownership works.

AACSB:  Analytical Thinking

8) General Motors operates a ________ franchise system.

  1. A) product format and trademark
  2. B) product extension
  3. C) product and trademark
  4. D) business format
  5. E) business format and trademark

Answer:  C

Diff: 2      Page Ref: 511

LO:  15.1: Explain franchising and how this form of business ownership works.

AACSB:  Reflective Thinking

 

9) James Ryan has been a Coors Beer distributor for the past 20 years. James owns a ________ franchise.

  1. A) business format
  2. B) product and trademark
  3. C) business design
  4. D) product plus
  5. E) product and business format

Answer:  B

Diff: 2      Page Ref: 511

LO:  15.1: Explain franchising and how this form of business ownership works.

AACSB:  Reflective Thinking

 

 

10) Which of the following statements is incorrect regarding product and trademark franchises?

  1. A) Rather than obtaining a royalty or franchise fee, the product and trademark franchisor obtains the majority of its income from selling its products to its dealers or distributors at a markup.
  2. B) Ford Motors establishes product trademark rather than business format franchises.
  3. C) Product trademark franchises are more popular than business format franchises.
  4. D) Product and trademark franchisees are typically permitted to operate in a fairly autonomous manner.
  5. E) A product trademark franchise typically connects a single manufacturer with a network of dealers or distributors.

Answer:  C

Diff: 3      Page Ref: 511

LO:  15.1: Explain franchising and how this form of business ownership works.

AACSB:  Application of Knowledge

 

11) Melanie Jacobs recently opened a Papa John's franchise. So far, she is very satisfied with Papa John's because in exchange for an initial franchise fee and an ongoing royalty payment, Papa John's has provided Melanie a formula for doing business along with training, advertising, and other forms of assistance. Melanie purchased a ________ franchise.

  1. A) business extension
  2. B) formula driven
  3. C) sales extension
  4. D) product and trademark
  5. E) business format

Answer:  E

Diff: 2      Page Ref: 511

LO:  15.1: Explain franchising and how this form of business ownership works.

AACSB:  Reflective Thinking

12) Which of the following statements is correct regarding business format franchises?

  1. A) Business format franchises are less popular than product and trademark franchises.
  2. B) A business format franchise can be very rigid and demanding.
  3. C) Agricultural machinery dealerships and soft-drink bottlers are well-known examples of business format franchises.
  4. D) Business format franchises are illegal in some states.
  5. E) The business format franchisor obtains the majority of its income from selling its products to its dealers at a markup.

Answer:  B

Diff: 3      Page Ref: 511

LO:  15.1: Explain franchising and how this form of business ownership works.

AACSB:  Analytical Thinking

 

 

13) Which of the following is not an industry in which business format franchises predominate?

  1. A) Soft drink bottlers
  2. B) Business services
  3. C) Hotels and motels
  4. D) Quick service restaurants
  5. E) Automotive service and repair

Answer:  A

Diff: 1      Page Ref: 512

LO:  15.1: Explain franchising and how this form of business ownership works.

AACSB:  Application of Knowledge

 

14) A(n) ________ franchise agreement involves the sale of a single franchise for a specific location.

  1. A) individual
  2. B) one-of-a-kind
  3. C) sole
  4. D) defined
  5. E) general

Answer:  A

Diff: 1      Page Ref: 512

LO:  15.1: Explain franchising and how this form of business ownership works.

AACSB:  Analytical Thinking

 

15) Jenna Page recently entered into an agreement with Anytime Fitness to open five Anytime Fitness franchises. According to the agreement that Jenna entered into, she has the right to open up to five Anytime Fitness franchises within the city limits of Lawrence, Kansas. Jenna has entered into a(n) ________ franchise agreement,

  1. A) individual
  2. B) district
  3. C) locality
  4. D) area
  5. E) city

Answer:  D

Diff: 2      Page Ref: 512

LO:  15.1: Explain franchising and how this form of business ownership works.

AACSB:  Reflective Thinking

 

16) A master franchisee, in addition to having the right to open and operate a specific number of locations in a particular area, also has the right to ________.

  1. A) stop making royalty payments if its sales decline
  2. B) sell products made by companies other than the franchisor
  3. C) offer and sell the franchise to other people in its area
  4. D) use its own operating manuals to run its franchise outlets
  5. E) stop making royalty payments if it is losing money

Answer:  C

Diff: 3      Page Ref: 512

LO:  15.1: Explain franchising and how this form of business ownership works.

AACSB:  Analytical Thinking

 

17) The people who buy franchises from master franchises are typically called ________ franchisees.

  1. A) minor
  2. B) secondary
  3. C) mini-
  4. D) subordinate
  5. E) sub

Answer:  E

Diff: 2      Page Ref: 512

LO:  15.1: Explain franchising and how this form of business ownership works.

AACSB:  Application of Knowledge

 

18) A multiple-unit franchisee is a person who owns ________.

  1. A) franchise outlets from more than one franchisor
  2. B) both product and trademark franchise outlets and business format franchise outlets
  3. C) and operates more than one outlet of the same franchisor
  4. D) more than 10 franchise outlets
  5. E) franchise units from multiple franchisors

Answer:  C

Diff: 2      Page Ref: 512

LO:  15.1: Explain franchising and how this form of business ownership works.

AACSB:  Analytical Thinking

 

19) Franchising is a form of business organization in which a firm that already has a successful product or service licenses its trademark and method of doing business to other businesses in exchange for an initial franchise fee and an ongoing royalty.

Answer:  TRUE

Diff: 1      Page Ref: 510

LO:  15.1: Explain franchising and how this form of business ownership works.

AACSB:  Application of Knowledge

 

 

20) A product and trademark franchise typically connects a single manufacturer with a network of dealers or distributors.

Answer:  TRUE

Diff: 2      Page Ref: 511

LO:  15.1: Explain franchising and how this form of business ownership works.

AACSB:  Analytical Thinking

21) A Pepsi Cola bottling dealership is an example of a business format franchise.

Answer:  FALSE

Diff: 2      Page Ref: 511

LO:  15.1: Explain franchising and how this form of business ownership works.

AACSB:  Analytical Thinking

 

22) In a business format franchise, the franchisor provides a formula for doing business to the franchisee along with training, advertising, and other forms of assistance.

Answer:  TRUE

Diff: 2      Page Ref: 511

LO:  15.1: Explain franchising and how this form of business ownership works.

AACSB:  Reflective Thinking

 

23) Business format franchises typically allow franchisees substantial flexibility in how they run their individual franchise units.

Answer:  FALSE

Diff: 2      Page Ref: 511

LO:  15.1: Explain franchising and how this form of business ownership works.

AACSB:  Reflective Thinking

 

24) An area franchise agreement allows a franchisee to own and operate a specific number of outlets in a particular geographic area.

Answer:  TRUE

Diff: 2      Page Ref: 512

LO:  15.1: Explain franchising and how this form of business ownership works.

AACSB:  Reflective Thinking

 

25) The people who buy franchises from master franchisees are typically called employee-franchisees.

Answer:  FALSE

Diff: 2      Page Ref: 512

LO:  15.1: Explain franchising and how this form of business ownership works.

AACSB:  Analytical Thinking

 

 

26) What is the difference between a product and trademark franchise and a business format franchise? Which type of franchise is most common for entrepreneurial firms?

Answer:  A product and trademark franchise is an arrangement in which the franchisor grants to the franchisee the right to buy its products and use its trade name. This approach typically connects a single manufacturer with a network of dealers or distributors. For example, General Motors has established a network of dealers that sell GM cars and use the GM trademark in their advertising and promotions. Other examples of product and trademark franchise systems include agricultural machinery dealers, soft drink bottlers, and beer distributorships. In a business format franchise, which is by far the more popular approach to franchising for entrepreneurial firms, the franchisor provides a formula for doing business to the franchisee along with training, advertising, and other forms of assistance. Fast-food restaurants and convenience stores are well-known examples of business format franchises.

Diff: 2      Page Ref: 511

LO:  15.1: Explain franchising and how this form of business ownership works.

AACSB:  Analytical Thinking

27) From the franchisor's point of view, which of the following is incorrect regarding franchising?

  1. A) Establishing a franchise system should be approached carefully and deliberately.
  2. B) Franchising is a relatively simple business endeavor.
  3. C) Franchising involves managerially demanding tasks.
  4. D) Over the years a number of fraudulent franchise organizations have come and gone.
  5. E) Franchising is a fairly heavily regulated form of business ownership.

Answer:  B

Diff: 3      Page Ref: 513

LO:  15.2: Describe steps entrepreneurs can take to establish a franchise system.

AACSB:  Application of Knowledge

 

28) Franchising is appropriate when a ________.

  1. A) firm's business methods are not polished, it has a desire to grow, and it is trying to commercialize a technology product
  2. B) firm has a strong trademark, a desire to grow, and a well-designed business method
  3. C) firm is trying to commercialize a technology product, it is well-funded, and it has a desire to grow
  4. D) firm has a weak trademark, it is well-funded, and it has a desire to grow
  5. E) firm has a desire to grow, it has a well-designed business method, and it is well funded

Answer:  B

Diff: 2      Page Ref: 514

LO:  15.2: Describe steps entrepreneurs can take to establish a franchise system.

AACSB:  Analytical Thinking

 

 

29) Which of the following companies is suitable for franchising?

  1. A) Home Depot
  2. B) Dropbox
  3. C) Qdoba Mexican Grill
  4. D) Walmart
  5. E) GoPro

Answer:  C

Diff: 2      Page Ref: 514

LO:  15.2: Describe steps entrepreneurs can take to establish a franchise system.

AACSB:  Analytical Thinking

 

30) The Savvy Entrepreneurial Firm feature in Chapter 15 focuses on Wahoo's Fish Taco, a franchise organization that offers Mexican food mixed with Brazilian and Asian flavors. According to the feature, one of the things the founders of Wahoo did that has contributed to its success is elect to make Wahoo's ________.

  1. A) a relatively slow growth system, focusing on branding and service quality rather than rapid growth
  2. B) a nationwide system, operating in all 50 states
  3. C) an extremely affordable system to buy into, with a $9,000 original franchise fee and an ongoing royalty of only 2-1/2 percent
  4. D) a niche franchise that is only available in theme parks and food courts of malls
  5. E) a fast growth system to establish a clear first-mover advantage in its niche

Answer:  A

Diff: 2      Page Ref: 515

LO:  15.2: Describe steps entrepreneurs can take to establish a franchise system.

AACSB:  Reflective Thinking

31) According to our textbook, which of the following is not a quality to look for in prospective franchisees?

  1. A) Individual, rather than team-oriented
  2. B) Ability to follow instructions
  3. C) Experience in the industry in which the franchisee operates
  4. D) Ability to operate with minimal supervision
  5. E) Adequate financial resources and a good credit history

Answer:  A

Diff: 2      Page Ref: 517

LO:  15.2: Describe steps entrepreneurs can take to establish a franchise system.

AACSB:  Interpersonal Relations and Teamwork

 

32) Franchising is a popular form of business growth.

Answer:  TRUE

Diff: 1      Page Ref: 513

LO:  15.2: Describe steps entrepreneurs can take to establish a franchise system.

AACSB:  Application of Knowledge

 

 

33) Home Depot is an example of an organization that is perfectly suited for franchising.

Answer:  FALSE

Diff: 2      Page Ref: 514

LO:  15.2: Describe steps entrepreneurs can take to establish a franchise system.

AACSB:  Reflective Thinking

 

34) An individual who is team oriented and has experience in the industry in which the franchise competes is a good candidate to be a franchisee.

Answer:  TRUE

Diff: 2      Page Ref: 517

LO:  15.2: Describe steps entrepreneurs can take to establish a franchise system.

AACSB:  Reflective Thinking

 

35) When is franchising appropriate (from the business owner's point of view)? Provide an example of when franchising is appropriate and when it is inappropriate.

Answer:  Franchising is appropriate when a firm has a strong or a potentially strong trademark, a well-designed business method, and a desire to grow. An example is Panera Bread. The company has a strong trademark (in the fast-casual dining segment), a well-designed business method, and a desire to grow. In some instances, franchising is not appropriate. For example, franchising would not work for Wal-Mart. While Panera Bread has a large number of franchised outlets, each individual outlet is relatively small and has a limited menu, and policies and procedures can be written to cover almost any contingency. In contrast, although Wal-Mart is similar to Burger King in that it too has a strong trademark and thousands of outlets, Wal-Mart stores are much larger, more expensive to build, and more complex to run than Panera Bread restaurants. It would also be nearly impossible for Wal-Mart to find an adequate number of qualified people who would have the financial capital and expertise to open Wal-Mart stores on their own.

Diff: 2      Page Ref: 514

LO:  15.2: Describe steps entrepreneurs can take to establish a franchise system.

AACSB:  Analytical Thinking

36) According to a concept called ________ theory, it is more effective for the units of a growing chain to be run by franchisees than by managers because managers are usually paid a salary and may not be as committed to the success of their individual units as franchisees, who are in effect the owners of the units they manage.

  1. A) incentive
  2. B) stimulus
  3. C) agency
  4. D) stewardship
  5. E) motivation

Answer:  C

Diff: 1      Page Ref: 518

LO:  15.3: Become familiar with the advantages and disadvantages of establishing a franchise system.

AACSB:  Analytical Thinking

 

 

37) According to the textbook, from the franchisor's point of view, the primary disadvantage of franchising is that ________.

  1. A) it is a poorly understood form of business ownership
  2. B) an organization allows others to profit from its trademark and business method
  3. C) franchise organizations consistently make less money than alternative forms of business ownership
  4. D) it typically takes longer to grow an organization via franchising than company-owned stores
  5. E) it is not legal in seven states and the District of Columbia

Answer:  B

Diff: 3      Page Ref: 518

LO:  15.3: Become familiar with the advantages and disadvantages of establishing a franchise system.

AACSB:  Analytical Thinking

 

38) Which of the following is a company that is suitable for franchising but has a relatively small number of franchise outlets?

  1. A) Anytime Fitness
  2. B) Hampton Inn Hotels
  3. C) McDonalds
  4. D) Starbucks
  5. E) The UPS Store

Answer:  D

Diff: 3      Page Ref: 518

LO:  15.3: Become familiar with the advantages and disadvantages of establishing a franchise system.

AACSB:  Application of Knowledge

 

39) Which of the following was not identified in the textbook as one of the disadvantages of franchising a business?

  1. A) Loss of control
  2. B) Friction with franchisees
  3. C) Franchisee motivation
  4. D) Differences in required business skills
  5. E) Legal expenses

Answer:  C

Diff: 2      Page Ref: 519

LO:  15.3: Become familiar with the advantages and disadvantages of establishing a franchise system.

AACSB:  Application of Knowledge

40) An advantage of franchising, from the franchisors point of view, is that franchising helps a venture grow because the franchisees provide the majority of the capital.

Answer:  TRUE

Diff: 2      Page Ref: 518

LO:  15.3: Become familiar with the advantages and disadvantages of establishing a franchise system.

AACSB:  Reflective Thinking

 

41) A management concept called agency theory refutes the value of franchising for organizations with multiple units, like restaurant chains.

Answer:  FALSE

Diff: 2      Page Ref: 518

LO:  15.3: Become familiar with the advantages and disadvantages of establishing a franchise system.

AACSB:  Analytical Thinking

 

42) What are the primary advantages and disadvantages to establishing a franchise system (from the franchisor's point of view)?

Answer:  There are two primary advantages to franchising. First, early in the life of an organization, capital is typically scarce, and rapid growth is needed to achieve brand recognition and economies of scale. Franchising helps an organization grow quickly because franchisees provide the majority of capital. Second, a management concept called agency theory argues that for organizations with multiple units, it is more effective for the units to be run by franchisees than by managers, who run company-owned stores. The theory is that managers, because they are usually paid a salary, may not be as committed to the success of their individual units as franchisees, who are in effect the owners of the units they manage. The primary disadvantage of franchising is that an organization allows others to profit from its trademark and business method.

Diff: 2      Page Ref: 518

LO:  15.3: Become familiar with the advantages and disadvantages of establishing a franchise system.

AACSB:  Application of Knowledge

 

43) The What Went Wrong feature in Chapter 15 focuses on Curves International, the fitness center for women. Since 2006 Curves has closed more than 4,000 locations. Which of the following reasons was not identified in the feature as one of the possible explanations for why so many Curves centers have closed?

  1. A) An inability to find enough potential franchisees
  2. B) The poor economy
  3. C) Cheaper competition
  4. D) The company failed to keep up with changing trends, including more flexible hours for busy working women.
  5. E) The company sold too many franchises that are located too close together.

Answer:  A

Diff: 3      Page Ref: 521

LO:  15.4: Describe actions and issues associated with a decision to buy a franchise.

AACSB:  Reflective Thinking

 

44) According to the textbook, which of the following is not a cost that is typically associated with buying a franchise?

  1. A) Advertising fees
  2. B) Continuing royalty payments
  3. C) Trademark acquisition fee
  4. D) Initial franchise fee
  5. E) Capital requirements

Answer:  C

Diff: 2      Page Ref: 524

LO:  15.4: Describe actions and issues associated with a decision to buy a franchise.

AACSB:  Application of Knowledge

 

45) According to the textbook, a franchisee's weekly or monthly royalty fees are typically around ________ to ________ percent of gross income.

  1. A) 1; 2
  2. B) 2; 3
  3. C) 3; 4
  4. D) 4; 5
  5. E) 5; 6

Answer:  D

Diff: 3      Page Ref: 524

LO:  15.4: Describe actions and issues associated with a decision to buy a franchise.

AACSB:  Application of Knowledge

 

46) In the majority of cases, a franchisee pays the franchisor a royalty based on ________.

  1. A) a predetermined fixed weekly or monthly amount
  2. B) weekly or monthly net income
  3. C) the size of the franchise outlet
  4. D) weekly or monthly gross income
  5. E) the age of the franchise outlet

Answer:  D

Diff: 2      Page Ref: 524

LO:  15.4: Describe actions and issues associated with a decision to buy a franchise.

AACSB:  Analytical Thinking

 

47) The Partnering for Success feature in Chapter 15 focuses on how franchise organizations can boost their sales while at the same time reduce their expenses. The technique that the feature recommends to achieve these dual objectives is ________.

  1. A) strategic alliances
  2. B) joint ventures
  3. C) outsourcing
  4. D) licensing
  5. E) co-branding

Answer:  E

Diff: 2      Page Ref: 525

LO:  15.4: Describe actions and issues associated with a decision to buy a franchise.

AACSB:  Reflective Thinking

48) There are two primary advantages to buying a franchise over other forms of business ownership. First, the franchisor typically provides training, technical expertise, and other forms of support, and second, ________.

  1. A) franchising is almost a sure way of making a profit
  2. B) a franchise agreement is typically easy to exit if expectations aren't met
  3. C) franchisors typically encourage creativity on the part of franchisees
  4. D) the franchisor provides an entrepreneur the ability to own a business using a tested and refined business method
  5. E) franchise organizations are consistently more profitable than non- franchise organizations in the same industry

Answer:  D

Diff: 3      Page Ref: 526

LO:  15.4: Describe actions and issues associated with a decision to buy a franchise.

AACSB:  Application of Knowledge

 

49) According to the textbook, the main disadvantage of buying a franchise is ________.

  1. A) franchise organizations typically grow slower than non-franchise organizations in the same industry
  2. B) franchisors typically provide poor levels of support
  3. C) the cost involved
  4. D) the service sector of the U.S. economy is waning in importance
  5. E) franchising is waning in its popularity

Answer:  C

Diff: 2      Page Ref: 527

LO:  15.4: Describe actions and issues associated with a decision to buy a franchise.

AACSB:  Analytical Thinking

 

50) Which of the following is not an advantage of buying a franchise?

  1. A) A proven product or service within an established system
  2. B) Franchisor ongoing support
  3. C) Availability of financing
  4. D) Potential for business growth
  5. E) Duration and nature of the commitment

Answer:  E

Diff: 2      Page Ref: 527

LO:  15.4: Describe actions and issues associated with a decision to buy a franchise.

AACSB:  Application of Knowledge

 

 

51) All of the following are advantages to buying a franchise except ________.

  1. A) restrictions on creativity
  2. B) potential for business growth
  3. C) availability of financing
  4. D) a proven product or service within an established market
  5. E) franchisor's ongoing support

Answer:  A

Diff: 2      Page Ref: 527

LO:  15.4: Describe actions and issues associated with a decision to buy a franchise.

AACSB:  Analytical Thinking

52) In the majority of cases, a franchisee pays a royalty based on a percentage of weekly or monthly net income.

Answer:  FALSE

Diff: 3      Page Ref: 524

LO:  15.4: Describe actions and issues associated with a decision to buy a franchise.

AACSB:  Application of Knowledge

 

53) Franchisees are often required to pay into a national or regional advertising fund, even if the advertisements are directed at goals other than promoting the franchisor's product or service.

Answer:  TRUE

Diff: 2      Page Ref: 524

LO:  15.4: Describe actions and issues associated with a decision to buy a franchise.

AACSB:  Analytical Thinking

 

54) The royalty fees a franchisee pays are usually around four to five percent of gross income.

Answer:  TRUE

Diff: 2      Page Ref: 524

LO:  15.4: Describe actions and issues associated with a decision to buy a franchise.

AACSB:  Reflective Thinking

 

55) One of the most important questions a prospective franchisor should consider is whether the fees and royalties charged by a franchisor are consistent with the franchise's value or worth.

Answer:  TRUE

Diff: 2      Page Ref: 524

LO:  15.4: Describe actions and issues associated with a decision to buy a franchise.

AACSB:  Reflective Thinking

 

 

56) How can a person tell if franchising is right for them?

Answer:  Purchasing a franchise should be weighed against the alternatives of buying an existing business or launching an entrepreneurial venture from scratch. Answering the following questions will help determine whether franchising is a good fit for people thinking about starting their own business.

  • Are you willing to take orders?
  • Are you willing to be part of a franchise "system"?
  • How will you react if you make a suggestion to your franchisor and your suggestion is rejected?
  • What are you looking for in a business? How hard do you want to work?
  • How willing are you to put your money at risk to "buy-into" someone else's system?

Diff: 2      Page Ref: 520

LO:  15.4: Describe actions and issues associated with a decision to buy a franchise.

AACSB:  Reflective Thinking

 

57) According to the textbook, the first rule of buying a franchise is ________.

  1. A) asking for a copy of the franchisor's annual report
  2. B) checking the profitability of similar franchises
  3. C) making sure the franchisor's industry is conductive to franchising
  4. D) making proper arrangements for financing
  5. E) not making a hasty decision

Answer:  E

Diff: 3      Page Ref: 528

LO:  15.5: Explain the steps an entrepreneur goes through to buy a franchise.

AACSB:  Analytical Thinking

58) List and explain three of the common misconceptions about franchising.

Answer: 

  • Franchising is a safe investment. Franchising, in and of itself, is no safer an investment than any other form of business ownership.
  • A strong industry ensures franchise success. While it is generally important to operate in a growing industry, the strength of an industry does not make up for a poor product, a poor business system, poor management, or inappropriate advertising. There are many firms that fail in growing industries just as there are firms that succeed in unattractive ones.
  • The franchisor is a nice person-he'll help me out if I need it. Although it may be human nature to rely on the goodwill of others, don't expect anything from your franchisor that isn't spelled out in the franchise agreement.

Diff: 3      Page Ref: 529

LO:  15.5: Explain the steps an entrepreneur goes through to buy a franchise.

AACSB:  Application of Knowledge

 

 

59) To avoid making a hasty judgment, a franchisee may not purchase a franchise for ________ days from the time the Franchise Disclosure Document is received.

  1. A) 3
  2. B) 5
  3. C) 10
  4. D) 14
  5. E) 30

Answer:  D

Diff: 3      Page Ref: 530

LO:  15.6: Identify and explain the various legal aspects associated with the franchise relationship.

AACSB:  Application of Knowledge

 

60) The ________ contains 23 categories of information that give a prospective franchisee a broad base of information about the background and financial health of the franchisor.

  1. A) Franchise Due Diligence Certificate
  2. B) Franchise Offering Contract
  3. C) Standardized Franchise Contract
  4. D) Franchise Disclosure Document
  5. E) Franchise Code of Conduct

Answer:  D

Diff: 2      Page Ref: 530

LO:  15.6: Identify and explain the various legal aspects associated with the franchise relationship.

AACSB:  Application of Knowledge

 

61) The Franchise Disclosure Document is accepted in (or by) ________.

  1. A) 11 states
  2. B) all 50 states, all of Canada, and parts of Mexico
  3. C) 39 states and all of Canada
  4. D) all 50 states and parts of Canada
  5. E) all nations participating in the North America Free Trade Agreement

Answer:  D

Diff: 2      Page Ref: 531

LO:  15.6: Identify and explain the various legal aspects associated with the franchise relationship.

AACSB:  Application of Knowledge

 

62) The Franchise Disclosure Document contains ________ categories of information.

  1. A) 8
  2. B) 14
  3. C) 23
  4. D) 35
  5. E) 44

Answer:  C

Diff: 2      Page Ref: 531

LO:  15.6: Identify and explain the various legal aspects associated with the franchise relationship.

AACSB:  Application of Knowledge

 

63) The document that consummates the sale of a franchise is called the ________.

  1. A) franchise disclosure document
  2. B) franchise agreement
  3. C) license agreement
  4. D) uniform franchise contract
  5. E) franchise circular

Answer:  B

Diff: 2      Page Ref: 531

LO:  15.6: Identify and explain the various legal aspects associated with the franchise relationship.

AACSB:  Application of Knowledge

 

64) While franchise agreements vary, each agreement typically contains these sections: the ________ agreement and the ________ agreement.

  1. A) statutory; purchase
  2. B) franchise; buy
  3. C) buy; membership
  4. D) procurement; statutory
  5. E) purchase; franchise

Answer:  E

Diff: 2      Page Ref: 531

LO:  15.6: Identify and explain the various legal aspects associated with the franchise relationship.

AACSB:  Application of Knowledge

 

 

65) While franchise agreements vary, each agreement typically contains the purchase agreement and the ________ agreement.

  1. A) legal
  2. B) procurement
  3. C) conversion
  4. D) sell
  5. E) franchise

Answer:  E

Diff: 2      Page Ref: 531

LO:  15.6: Identify and explain the various legal aspects associated with the franchise relationship.

AACSB:  Application of Knowledge

66) In addition to FTC disclosure requirements, ________ states have laws providing additional protection to franchisees.

  1. A) 6
  2. B) 10
  3. C) 15
  4. D) 33
  5. E) 47

Answer:  C

Diff: 3      Page Ref: 531

LO:  15.6: Identify and explain the various legal aspects associated with the franchise relationship.

AACSB:  Application of Knowledge

 

67) The Franchise Disclosure Document contains a total of 23 categories of information that give a prospective franchisee a broad base of information about the background and financial health of the franchisor.

Answer:  TRUE

Diff: 2      Page Ref: 530

LO:  15.6: Identify and explain the various legal aspects associated with the franchise relationship.

AACSB:  Application of Knowledge

 

68) A prospective franchisee should fully understand all the information contained in the Franchise Disclosure Document before a franchise agreement is signed.

Answer:  TRUE

Diff: 2      Page Ref: 531

LO:  15.6: Identify and explain the various legal aspects associated with the franchise relationship.

AACSB:  Application of Knowledge

 

 

69) The Franchise Disclosure Document is the document that consummates the sale of a franchise.

Answer:  FALSE

Diff: 2      Page Ref: 531

LO:  15.6: Identify and explain the various legal aspects associated with the franchise relationship.

AACSB:  Application of Knowledge

 

70) According to a recent FTC report, instances of problems between franchisors and their franchisees tend to be ________.

  1. A) prevalent practices
  2. B) isolated occurrences
  3. C) nonexistent
  4. D) prevalent practices for product and trademark franchise systems and isolated occurrences for business format franchise systems
  5. E) isolated occurrences for product and trademark franchise systems and prevalent practices for business format franchise systems

Answer:  B

Diff: 2      Page Ref: 533

LO:  15.7: Discuss two additional issues—franchise ethics and international franchising—entrepreneurs should think about when considering franchising.

AACSB:  Ethical Understanding and Reasoning

71) International opportunities for franchising are becoming ________.

  1. A) less prevalent
  2. B) neither more nor less prevalent
  3. C) more prevalent for product and trademark franchise systems and less prevalent for business format franchise systems
  4. D) more prevalent
  5. E) less prevalent for product and trademark franchise systems and more prevalent for business format franchise systems

Answer:  D

Diff: 2      Page Ref: 534

LO:  15.7: Discuss two additional issues—franchise ethics and international franchising—entrepreneurs should think about when considering franchising.

AACSB:  Reflective Thinking

 

 

72) In regard to international franchising, under a(n) ________ franchise agreement, the U.S. franchisor grants the rights to an individual or company (the developer) to develop multiple franchised businesses within a country or territory.

  1. A) indirect
  2. B) global
  3. C) concurrent
  4. D) direct
  5. E) express

Answer:  D

Diff: 2      Page Ref: 535

LO:  15.7: Discuss two additional issues—franchise ethics and international franchising—entrepreneurs should think about when considering franchising.

AACSB:  Application of Knowledge

 

73) Jim Pierce just purchased the rights to develop multiple School of Rock franchises in Germany. Jim just purchased a(n) ________ franchise arrangement.

  1. A) concurrent
  2. B) indirect
  3. C) lateral
  4. D) direct
  5. E) subordinate

Answer:  D

Diff: 2      Page Ref: 535

LO:  15.7: Discuss two additional issues—franchise ethics and international franchising—entrepreneurs should think about when considering franchising.

AACSB:  Application of Knowledge

74) In the context of international franchising, under a ________ franchise arrangement, the U.S. firm grants the rights to an individual or company (the master franchisee) to develop one or more franchise businesses and to license others to develop one or more franchise businesses within the country.

  1. A) master
  2. B) direct
  3. C) subordinate
  4. D) concurrent
  5. E) multinational

Answer:  A

Diff: 2      Page Ref: 535

LO:  15.7: Discuss two additional issues—franchise ethics and international franchising—entrepreneurs should think about when considering franchising.

AACSB:  Application of Knowledge

 

 

75) The majority of franchisors are highly ethical individuals who are interested only in making a fair return on their investment.

Answer:  TRUE

Diff: 1      Page Ref: 533

LO:  15.7: Discuss two additional issues—franchise ethics and international franchising—entrepreneurs should think about when considering franchising.

AACSB:  Ethical Understanding and Reasoning

 

 

 

-----
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

 

For Test Bankz, Quiz Answers and Case study Guides, email toThis email address is being protected from spambots. You need JavaScript enabled to view it.

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