Deck 1: Franchising: History and Overview

Question 1

Composite data about the franchise industry itself suggests which approach to franchising continues to experience strong growth:

A)product- and trade-name franchising
B)business format franchising
C)co version franchising
D)all of the above are growing about equally

Answer 1

B
Business format franchising may be the strongest growth engine of the U.Seconomy since the 1950's,particularly in the retail sector

Question 2

The approach to be used by a franchisee in providing the franchisor's products or services to the customer is called:

A)business licensing
B)free-form business opportunity
C)business format franchising
D)an open business opportunity

Answer 2

C
See definition and description of business format franchising in the text

Question 3

A dealer who distributes product from a product line supplied by a franchisor is considered to be engaged in:

A)product- and trade-name franchising
B)business format franchising
C)an independent business venture
D)none of the above

Answer 3

A
Product-and trade-name franchising is where a dealer (franchisee)identifies with the supplier (franchisor)through a specified product line
For example,General Motors Corporation is the supplier/franchisor and Bob's Buick Agency is the franchisee

Question 4

Probably the earliest example of franchising in the United States is most likely to be:

A)Kentucky Fried Chicken
B)McDonald's
C)Western Auto
D)McCormick Harvesting Machine Company

Question 5

The number of franchised business establishments has continued to growth in the U.S.Today there are approximately ( )franchise businesses in operation.

A)150,000
B)less than 1,000
C)approximately 800,000
D)Over 2,500,000

Question 6

The business arrangement,otherwise called a franchise opportunity,has three major components that constitute the essence of what is generally referred to as a franchise.Which one of the following is not part of a franchise business arrangement?

A)use of product or service
B)use of private labels to brand or trademark product or service
C)a franchisor's trademark and/or logo
D)payment of a royalty fee

Question 7

In the franchise industry,the person or business providing the rights to an individual for the local distribution and/or sales of a specified product or service is called the:

A)franchisee
B)district developer
C)franchisor
D)city council

Question 8

A major reason for success of franchising is that the franchisor can use all of the following from the franchisee EXCEPT for the franchisee's:

A)financial equity
B)personal drive and motivation
C)community goodwill
D)proven methods of operation

Question 9

Which of the following industries provides the earliest and lasting example of franchising in the U.S.economy?

A)beverage industry
B)retail fast-food industry
C)automotive industry
D)steel industry

Question 10

In 1979,the Federal Trade Commission established Rule 436.1,also known as the Franchise Disclosure Act,for the purpose of:

A)encouraging expansion of franchise systems
B)diminishing illegal and unethical practices
C)recruiting independent businesses to become franchisees
D)none of the above