Deck 7: Pathways to Entrepreneurial Ventures

Question 1

The Federal Trade Commission does not provide information on franchise success.

Answer 1

False

Question 2

In purchasing an existing business, the first question should be: "Why are you selling?"

Answer 2

True

Question 3

In negotiating a deal to purchase an existing business, it is possible to request that the seller retain a minority interest in the firm.

Answer 3

True

Question 4

Franchisees have the option of using the logo and symbols of the franchisor.

Question 5

Much franchise litigation has arisen over franchising fees.

Question 6

It is always important that you weigh advantages against disadvantages in purchasing a franchise.

Question 7

The terms upside gain and downside loss refer to the profits the business can make and the losses it can suffer.

Question 8

The elimination of time and effort associated with starting a company is an advantage of acquiring an ongoing venture.

Question 9

Entrepreneurs who exploit a radical new technology to provide a product and radically disrupt the market through the creation of a new product space represent the highest level of innovation "newness" relative to other alternatives.

Question 10

The prospective investor should obtain as much information as possible on the franchisor.

Question 11

Perhaps the greatest advantage of buying a franchise, as compared to starting a new business or buying an existing one, is that the franchisor will usually provide both training and guidance to the franchisee.

Question 12

The most important area to examine prior to purchasing a business is company profitability.

Question 13

The actual cost of "opening the doors" of a franchise establishment can be more than $200,000.

Question 14

Sales records are of very little value to a buyer in evaluating a company's worth.

Question 15

When purchasing an existing business, the prospective owner should conduct an assessment of the business's current group of employees.

Question 16

It is not uncommon for a buyer to be faced with a franchise fee of $250,000 to $1,000,000.

Question 17

Business brokers specialize in business opportunities and can provide leads and assistance in finding a venture for sale.

Question 18

Uniqueness in a product or service can be demonstrated through a new-new approach or a new-old approach.

Question 19

Generally, the larger and more successful the franchisor, the greater the franchise fee that is charged.

Question 20

The way to approach a new business venture is to design a good or service that is unique.

Question 21

Business-related reasons for selling do not include which of the following?

A)possible trouble for the owner with suppliers
B)changes in leasehold conditions
C)changes in the product supply chain
D)changes in zoning that affect the business

Question 22

"Piggybacking" one's way into a new business involves using a(n) _____ approach.

A)new-new
B)old-new
C)new-old
D)old-old

Question 23

Which of the following is not a disadvantage of a major franchise?

A)franchise fees
B)control exercised by the franchisor
C)track record of the franchisor
D)awareness of unfilled promises from franchisors

Question 24

All of the following should be examined when evaluating the selection of venture except

A)employees.
B)the trademark.
C)furniture.
D)accounts receivable.

Question 25

Which of the following individuals must negotiate a final deal to purchase a business?

A)a lawyer
B)a CPA
C)the potential buyer
D)the potential seller

Question 26

When buying a small business, you need to know all of the following items except the

A)owner's reason for selling.
B)competition in the area.
C)financial picture of the business.
D)owner's family stability and relationships.

Question 27

A new business faces two great dangers: the possibility that it will not find a market for its goods or services and the chance that

A)it will not be able to control its costs.
B)the profits of the business and losses are too great to survive.
C)it will not be able to retain great employees.
D)the entrepreneur will lose his or her passion for the business.

Question 28

An analysis of the competition should look for

A)opportunities.
B)weaknesses.
C)unscrupulous practices.
D)legal action suits.

Question 29

Business-related reasons for selling may include all of the following except

A)trouble with suppliers.
B)changes in leasehold conditions.
C)changes in zoning that affect the business.
D)changes in location.

Question 30

An entity that helps new ventures to develop by providing services such as management training and office space is called an entrepreneurial ecosystem.

Question 31

An agreement not to compete is also known as a

A)trade restriction clause.
B)legal restraint of trade.
C)waiver of competition clause.
D)deferential sale of business clause.

Question 32

Which of the following is not a start-up expense?

A)rent
B)advertising
C)supplies
D)depreciation

Question 33

The final decision to purchase a franchise should be up to the

A)lawyer.
B)financial backer.
C)entrepreneur.
D)accountant.

Question 34

Innovation newness-technology newness and/or market newness-is linked with the level of innovation newness-incremental versus _____ innovations-to classify the overall "newness" of an innovation within an entrepreneurial venture.

A)tapered
B)phased
C)radical
D)abrupt

Question 35

A _____ is a system of distribution that enables a supplier to arrange for a dealer to handle a specific product or service under certain mutually agreed-upon conditions.

A)franchisee
B)franchise
C)franchisor
D)supply chain

Question 36

When buying a business, which of the following is not a factor to consider when investigating the competition?

A)effect of price competition on profits
B)reduction of market share
C)advertising costs
D)number of employees

Question 37

Which of the following is a question that should not be sidestepped when buying a business?

A)Where should the business be located?
B)What types of customers does this store attract?
C)What pricing strategy should the firm use?
D)Are there hidden problems that exist in the operation?

Question 38

Which of the following is an often overlooked asset when acquiring a new business?

A)records
B)buildings
C)equipment
D)employees

Question 39

The individual who arranges for a dealer to handle a specific product or service under certain mutually agreed-upon conditions is known as the

A)franchisee.
B)franchisor.
C)proprietor.
D)partner.

Question 40

The term risk versus loss refers to the amount of return for funds invested.

Question 41

Starting a business by adapting something already on the market is called a _____ approach.

A)franchising
B)buying
C)new-new
D)new-old

Question 42

An organization that offers a range of support services and funding opportunities for new ventures is called a(n)

A)business accelerator.
B)business incubator.
C)entrepreneurial ecosystem.
D)infrastructural support.

Question 43

Which of the following is not considered by entrepreneurs when examining opportunities for possible ventures?

A)business brokers
B)newspaper ads
C)the cost of replacing an employee
D)professional sources

Question 44

The Franchise Disclosure Document (FDD) contains how many categories?

A)41
B)23
C)9
D)100

Question 45

Competitor factors in a buying decision do not include

A)quality of the competition.
B)location of the competition.
C)age of the competition's owners.
D)number of competitors.

Question 46

Which of the following is an example of an intangible asset?

A)reputation
B)inventory
C)plant facility
D)machinery

Question 47

The buyer is likely to have power over the seller in the negotiation to purchase a business if

A)the seller has already purchased another business.
B)potential buyers are numerous.
C)the buyer's backers wish to invest quickly.
D)the seller has no deadline for selling.

Question 48

Evaluating franchise opportunities include finding out more about all of the following except the

A)franchisor.
B)franchise.
C)franchisee.
D)franchise location.

Question 49

An additional consideration to keep in mind when negotiating to purchase an existing business includes requesting that the seller retain _____ in the firm.

A)a minority interest
B)a majority interest
C)either a minority or a majority interest
D)minority dependence

Question 50

The franchisee's responsibilities do not include

A)a financial investment.
B)payment of a fee.
C)engaging in a continuous business relationship.
D)designing the product specifics.

Question 51

The individual who buys the franchise is the

A)franchisee.
B)franchisor.
C)shareholder.
D)partner.

Question 52

The franchisor's responsibility does not include providing

A)a company name.
B)symbols and logos.
C)management and training.
D)a business relationship.

Question 53

Which of the following is not an advantage to buying a franchise business?

A)training and guidance
B)financial assistance
C)brand-name appeal
D)structured fees

Question 54

Which of the following is not a key question a prospective buyer needs to ask in buying a business?

A)Why is the business being sold?
B)What is the owner's personal net worth?
C)How many of the employees will remain?
D)What type of competition exists?

Question 55

The _____ approach indicates the importance of people's awareness of their daily lives for developing new business ideas.

A)new-new
B)old-old
C)old-new
D)new-old

Question 56

The person who purchases the franchise is usually required to do all of the following except

A)invest money in the operation.
B)maintain a specified quality of performance.
C)pay a fee.
D)design a logo for the unit.

Question 57

Which of the following is not a factor regarding the condition of inventory?

A)salability
B)quality
C)age
D)suppliers

Question 58

After the prospective entrepreneur has gathered all of the necessary information, it is up to the _____ to make the final decision on the matter.

A)entrepreneur
B)entrepreneur and his or her financial advisor
C)board of directors
D)legal advisors

Question 59

Which of the following is not currently cited as a trend creating business opportunities?

A)green products
B)breakfast cereals
C)health care
D)concierge services

Question 60

Which of the following costs add to the cost of franchising pertaining to principal and interest payments?

A)insurance
B)payroll
C)legal and professional fees
D)debt services

Question 61

The extra value a business can command in a sale is known as

A)goodwill.
B)saleable value.
C)market value.
D)asset value.

Question 62

What is the role of business brokers in acquiring an established entrepreneurial venture?

Question 63

A franchise system can be used for handling

A)goods and services.
B)services only.
C)inventory.
D)materials.

Question 64

The advantages of franchising do not include

A)training and guidance.
B)brand-name appeal.
C)a proven track record.
D)franchise fees.

Question 65

The person who sells the franchise is usually required to do all of the following except

A)pay a fee.
B)provide professional management training to the unit's staff.
C)help out with financial assistance.
D)provide continuing aid and guidance to the person buying the franchise.

Question 66

Briefly explain the new-old approach to creating new ventures.

Question 67

Coming up with a unique good or service is a _____ approach, while adapting something that is currently on the market or extending the offering to an area where it is not presently available is a(n) _____ approach.

A)new-new; old-old
B)new-old; old-old
C)new-new; new-old
D)new-old; old-new

Question 68

Which of the following is not considered an emerging Internet opportunity?

A)niche consumables
B)educational tutoring
C)mobile advertising
D)nanotechnology

Question 69

A franchise is any arrangement where the owner has licensed others to sell goods or services by which of the following?

A)trademark
B)contact
C)license
D)patent

Question 70

A business has to increase its sales annually to net as much as it did in the previous year when

A)profits are rising as fast as sales.
B)profits are not rising as fast as sales.
C)sales are trending upward.
D)sales and profits are trending down at the same rate.

Question 71

Which of the following costs do not add to the cost of franchising?

A)insurance
B)prepaid utility bills
C)legal and professional fees
D)opening product inventory

Question 72

When should a potential franchisee receive the Franchise Disclosure Document (FDD)?

A)two days before signing a contract or paying any money
B)at least 10 days before signing a contract or paying any money
C)two days before signing a contract
D)at least 10 days before paying any money

Question 73

Which of the following is not a key question to ask when buying a business?

A)Why is the business being sold?
B)Is the building heated with gas or electricity?
C)What is the condition of the inventory?
D)How many of the employees will remain?

Question 74

A(n) _____ approach indicates the importance of people's awareness of their daily lives for developing new business ideas.

A)new-new
B)old-old
C)old-new
D)new-old

Question 75

Why did the Federal Trade Commission enact the Franchise Disclosure Rule?