Deck 14: Franchising and Purchasing an Existing Business

Question 1

According to the International Franchise Association (IFA), in 2007 there were almost 1,250,000 franchises established in the United States.

Answer 1

False

Question 2

According to the International Franchise Association (IFA), in 2007, franchises provided about 14 million jobs.

Answer 2

False

Question 3

A franchisee makes money when the franchisor stays in business and does well.

Answer 3

False

Question 4

The availability of continued training opportunities should be a factor in buying a franchise.

Question 5

The authors of our book suggest that a person interested in buying an existing business could find potential businesses to buy by talking to attorneys and CPAs for suggestions.

Question 6

When considering the purchase of an existing business, you should do a self-analysis to examine if you have the unique talent for operating the business, or if you would change the mission of the business.

Question 7

In the opening case, Patrick Leon Esquerre's advisor and key supporter was:

A) Bill Gates
B) Warren Buffet
C) Donald Trump
D) none of these

Question 8

In the opening case, Patrick Leon Esquerre had a number of opportunities to be in the _________ industry.

A) food
B) marketing
C) retail
D) wholesale

Question 9

The International Franchise Association in 2007 reported there are _________ million establishments in the United States providing _________ million jobs.

A) 2; 13
B) 0.9; 18
C) 1; 15
D) 2; 12

Question 10

A document called the _________ has been the accepted format for satisfying franchise requirements.

A) Uniform Franchise Offering Circular
B) United Franchising Offering Circular
C) Uniform Franchise Offering Agreement
D) United Franchise Circular Agreement

Question 11

The _________ is a reliable source for locating potential franchisor firms.

A) United Franchise Association
B) International Franchise Association
C) National Franchise Association
D) Combined Franchise Association

Question 12

Which of the following statements about the risk involved in buying a franchise is correct?

A) Buying a franchise can dramatically increase the risk of failure.
B) Buying a franchise can dramatically decrease the risk of failure.
C) There is no difference in the risk of buying a franchise compared to buying an existing business.
D) There is no difference in the risk of buying a franchise compared to starting a business from nothing but an idea.

Question 13

Which of the following statements is correct about the level of risk involved in purchasing an existing business?

A) Buying a franchise can dramatically increase the risk of failure.
B) Buying a franchise can dramatically decrease the risk of failure.
C) Buying an existing business is less risky than buying a franchise.
D) There is no difference in the risk of buying a franchise compared to starting a business from nothing but an idea.

Question 14

Why is it a risky choice to buy an existing business that has filed for bankruptcy?

A) It takes special knowledge and skills to conduct an effective turnaround.
B) The current owner may not want to sell the business.
C) Customers may boycott the new owner due to their loyalty to the current owner.
D) Suppliers may offer extra discounts to the new owner to support the turnaround.

Question 15

When considering the purchase of an existing business, which of the following is NOT a question recommended by the authors of our book to ask when conducting a self-assessment?

A) Will I change the mission of this business?
B) Will I want to position the product/service differently?
C) What unique talents do I have that are directly related to the success of this business?
D) All of these are good questions to ask in a self-assessment.

Question 16

During the period when the previous owner of an existing business is transitioning ownership to the new owner, a number of tasks should be completed. Which of the following statements is correct about these tasks?

A) If there are too many employees, enact a layoff plan immediately.
B) Make all significant changes slowly over a long period of time.
C) Ensure the former owner comes to the business every day for at least 30 days following the sale.
D) Wait at least six months before informing customers and suppliers of the sale of the business.

Question 17

In the Friend's Home Health Care case study, Cheryl Williams considered which of the following franchise opportunities?

A) fast food
B) storage
C) both of these
D) none of these

Question 18

In the Friend's Home Health Care case study, Cheryl Williams decided upon which of the following franchise opportunities?

A) fast food
B) storage
C) both of these
D) none of these

Question 19

In the Friend's Home Health Care case study, Cheryl Williams decided upon which of the following fast food franchise opportunities?

A) burgers and fries
B) sandwiches/wraps
C) pizza
D) none of these

Question 20

In the Friend's Home Health Care case study, Cheryl Williams's research on franchises concluded that:

A) the cost of a variety of franchised sandwich shops was dramatically more than that of franchised storage
B) the cost of a variety of franchised sandwich shops was dramatically less than that of franchised storage
C) the cost of a variety of franchised sandwich shops was practically the same as that of franchised storage
D) none of these

Question 21

In the Flow Right Brewery & Bar case study, Jack Chen had a good job working for a(n):

A) accounting firm
B) law firm
C) engineering firm
D) none of these

Question 22

In the Flow Right Brewery & Bar case study, Jack Chen wanted to leave his job and start his own business because:

A) his prospects for rising any further in the organization were limited
B) he was concerned with the strategic direction that the firm was pursuing
C) he believed the advice of longtime employees was being routinely ignored
D) all of these

Question 23

In the Flow Right Brewery & Bar case study, Jack Chen looked at which of the following franchises?

A) fast food based
B) Internet based
C) service based
D) none of these

Question 24

A franchisor wants a franchisee in one territory to operate the business in the _________ manner as a franchisee in another territory.

Question 25

Whey buying a franchise, what issues should the potential franchisee examine?