Question 1

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

Accepted Answer

Business format franchises are known for being more rigid and demanding than other types of franchises because they require franchisees to follow specific operating procedures and guidelines. This is because the franchisor is not just selling a product, but a complete business system. Agricultural machinery dealerships and soft-drink bottlers are examples of product and trademark franchises, not business format franchises. Business format franchises are legal in all states. The franchisor may generate income from selling products to franchisees, but this is not the primary source of income for the franchisor.

Question 2

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

Accepted Answer

The two types of franchise systems are product trademark, where the franchisee sells the franchisor's products under the franchisor's name and trademark, and business format, where the franchisor provides the franchisee with a complete business format, including training, support, and an operating system. This is also known as a "business format franchise." Therefore, the correct answer is E ("product trademark; business format").

Question 3

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 ________.

Accepted Answer

Franchise fees typically include both an initial fee paid at the beginning of the franchise agreement and ongoing royalty payments based on a percentage of the franchisee's sales. This allows the franchisor to benefit financially from the success of the franchisee's business. Option B is incorrect because most franchisors require ongoing royalty payments, not just a one-time fee. Option C is unlikely as it would involve the franchisor taking an ownership stake in the franchisee's business, which is not typical in a franchise agreement. Option D is partially correct, but does not include the initial franchise fee. Option E is unlikely as it would require the franchisor to take an ownership stake in the franchisee's business in addition to the initial franchise fee.

Question 4

Which of the following is NOT an industry in which business format franchises predominate?

Accepted Answer

Soft drink bottlers do not typically operate under a business format franchise model. They may operate under a different type of franchise model or as company-owned operations.

Question 5

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

Accepted Answer

A product and trademark franchise is a type of franchise where a single manufacturer grants the right to use its trademark and distribute its products to a network of dealers or distributors.

Question 6

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.

Accepted Answer

Jenna has entered into an area franchise agreement, which allows her to open multiple franchise locations within a specified geographic region, in this case, the city limits of Lawrence, Kansas.

Question 7

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

Accepted Answer

A multiple-unit franchisee is an individual who operates more than one outlet of the same franchisor.

Question 8

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

Accepted Answer

The answer of According to the textbook, the Comfort Keepers...

Question 9

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

Accepted Answer

Sub franchisees are the individuals who buy franchises from master franchisees, operating under the structure established by the master franchise agreement.

Question 10

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.

Accepted Answer

This statement accurately describes the concept of franchising.

Question 11

________ 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 businesses in exchange for an initial franchise fee and an ongoing royalty.

Accepted Answer

Franchising is a form of business ownership in which a successful firm licenses its trademark and business methods to other businesses in exchange for a franchise fee and ongoing royalties. The franchisee operates independently but must adhere to certain rules and guidelines established by the franchiser.

Question 12

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

Accepted Answer

James Ryan owns a product and trademark franchise, as he has been distributing Coors Beer specifically for the past 20 years.

Question 13

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 ________.

Accepted Answer

A master franchisee has the right to sub-franchise or sell the franchise to other individuals or entities within their designated area. This allows the master franchisee to expand the brand's presence in their territory without having to directly operate each location themselves.

Question 14

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.

Accepted Answer

Melanie purchased a business format franchise, which is a type of franchise where the franchisor provides the franchisee with a complete system for conducting the business, including a formula for doing business, training, advertising, and other forms of assistance.

Question 15

Which of the following statements is incorrect regarding franchising?

Accepted Answer

Franchising is not a relatively new form of business organization. In fact, it has been around for over a century.

Question 16

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 ________.

Accepted Answer

Chelsea and Scott Sloan chose franchising to grow Uptown Cheapskate quickly without making a huge investment in real estate.

Question 17

General Motors operates a ________ franchise system.

Accepted Answer

The answer of General Motors operates a ________ franchise system.
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Question 18

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

Accepted Answer

An individual franchise agreement is specific to a single franchise for a particular location, unlike a general franchise agreement, which allows the franchisee to operate multiple franchises in multiple locations.

Question 19

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

Accepted Answer

A product and trademark franchise is the type of franchise that grants the franchisee the right to buy the franchisor's products and use its trade name.

Question 20

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

Accepted Answer

Business format franchises are more popular than product trademark franchises.

Quiz 15: Franchising