Question 1

Which of the following has low entry requirements for new franchisees and few established outlets?

Accepted Answer

Beginners typically have low entry requirements for new franchisees and few established outlets, as they are in the initial stages of establishing their franchise network.

Question 2

The BDGM typology of franchising stands for:

Accepted Answer

The answer of The BDGM typology of franchising stands for:
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Question 3

Under the FTC rule, franchisors are required to provide prospective franchisees with information about the company franchising and its principals in a document at least ______days before signing of a franchise agreement

Accepted Answer

The FTC rule requires franchisors to provide the Franchise Disclosure Document (FDD) to prospective franchisees at least 14 days before signing a franchise agreement, but the closest option provided is 10 days.

Question 4

Which of the following franchisors are considered risky?

Accepted Answer

Undercapitalized companies are considered risky because they may not have the financial stability or resources to support their franchisees effectively.

Question 5

Which clause allows the termination of a franchise agreement?

Accepted Answer

Good cause clauses in franchise agreements allow for the termination of the agreement if certain conditions are met, such as failure to meet performance standards, breach of contract, or other specified reasons deemed as "good cause."

Question 6

The 'good cause' clause means that the contract can be terminated if a franchisee:

Accepted Answer

The 'good cause' clause in a contract, particularly in franchise agreements, typically allows for the contract to be terminated if a franchisee engages in behavior that violates the terms of the agreement, such as a breach of contract. This could include failing to meet operational standards, financial mismanagement, or other actions that go against the agreed-upon terms.

Question 7

Which is correct of the Uniform Franchise Disclosure Document?

Accepted Answer

The Uniform Franchise Disclosure Document (UFDD) is required by the Federal Trade Commission (FTC) to ensure that franchisors provide essential information to potential franchisees. It was previously known as the Uniform Franchise Offering Circular (UFOC), indicating that both B and C are correct, making D the correct choice as it encompasses all aspects mentioned.

Question 8

Which of the following is NOT part of the information in the Uniform Franchise Disclosure Document?

Accepted Answer

The Uniform Franchise Disclosure Document (UFDD) provides potential franchisees with information about the franchisor, the franchise system, and the agreements they will need to sign. It includes details on litigation history, initial investment, and renewal and termination conditions, but it does not cover personal lifestyle information of the franchisee.

Question 9

Which of the following aspects a franchisee must consider before signing the franchise agreement?

Accepted Answer

All of the aspects listed are crucial for a franchisee to consider before signing a franchise agreement. This includes aligning the business with personal interests and skills, willingness to invest time in management, and the financial commitment required to buy and run the franchise.

Quiz 4: Franchising for Small Business