Question 1

A major advantage of a franchise contract is the national advertising campaign that most franchisors provide free of charge for their franchisees.

Accepted Answer

Franchisees typically contribute to a national advertising fund, so the advertising is not free of charge.

Question 2

Pure franchising involves the right to use all the elements of a fully integrated business operation.

Accepted Answer

Pure franchising allows the franchisee to use all of the elements of a fully integrated business operation, including the business name, trademarks, systems, and processes, as well as ongoing training and support from the franchisor.

Question 3

Franchisors generally do which of the following regarding financial assistance to franchisees?

Accepted Answer

Franchisors typically assist in finding financing for franchisees and may occasionally provide direct assistance in a specific area such as equipment financing. However, providing direct financing is less common and royalty fee waivers are not a common practice. Some franchisors may require that franchisees have their own financing in place before qualifying for a franchise, but they typically still provide assistance in finding financing options.

Question 4

McDonald's is an example of a ________ franchise.

Accepted Answer

McDonald's is an example of a "pure" franchise, which is also known as a business format franchise. This type of franchise provides a complete business system, including brand, operational procedures, and support.

Question 5

Before entering a franchise contract, a potential investor should ask, "What can a franchise do for me that I cannot do for myself?"

Accepted Answer

Before investing in a franchise, it's important to understand the unique benefits and advantages that come with the franchise model. This includes access to established branding, marketing and advertising support, training and guidance, and a proven business model. By asking what a franchise can offer that cannot be achieved independently, potential investors can make a more informed decision about whether franchising is the best path for their goals and needs.

Question 6

Trade name franchising is a system of franchising in which a franchisee purchases the right to use the franchisor's trade name without distributing particular products under that name.

Accepted Answer

Trade name franchising is a type of franchising where the franchisee buys the right to use the franchisor's brand name and trade name without necessarily selling specific products that are associated with that brand. This type of franchising allows the franchisee to use the brand name to operate their business while retaining their independence in terms of the products or services they offer.

Question 7

When a franchisee buys a franchise, (s)he is purchasing the expertise and the business of the franchisor.

Accepted Answer

When a franchisee buys a franchise, he or she is purchasing the right to use the franchisor's trademark, operating system, and support in exchange for payment of ongoing fees and royalties. This allows the franchisee access to the franchisor's established business model, expertise, and brand recognition.

Question 8

When it comes to purchasing products, equipment, and incurring other expenses, the franchisor ________.

Accepted Answer

According to the franchise agreement, the franchisor can set prices for the products that the franchisees purchase, but the franchisor cannot set the retail price that the franchisees charge to customers. The franchisees are free to set their own retail prices based on their local market. The franchisor can require franchisees to purchase from approved suppliers, but cannot force them to buy from the franchise company.

Question 9

Examples of some benefits franchise systems offer include management training, brand appeal, standardization of goods and services, national advertising, proven business formats, centralized buying power, and site selection assistance.

Accepted Answer

Franchise systems typically offer these benefits to their franchisees.

Question 10

Benefits of involvement in a franchise experience include ________.

Accepted Answer

Involvement in a franchise experience provides management training and support, brand name appeal and standardization of goods and services, as well as national advertising exposure and financial assistance. Therefore, all of the choices are benefits of franchise involvement.

Question 11

Define franchising. Explain the three types of franchising. Which is the fastest-growing segment?

Accepted Answer

The answer of Define franchising. Explain the three types of...

Question 12

A significant advantage a franchisee has over an independent business is the participation in the franchisor's ________ largely due to the ________ the franchise offers.

Accepted Answer

The participation in the franchisor's centralized buying power provides the franchisee with economies of scale, which helps in reducing costs and increasing profitability. This is largely due to the fact that the franchisor has a greater purchasing power and can negotiate better deals with suppliers.

Question 13

Some franchisors offer ________ to give existing franchisees the right to exclusive distribution of brand name goods or services within a particular geographic area.

Accepted Answer

Territorial protection refers to the right of a franchisee to exclusively operate within a certain geographic region without any competition from other franchisees within the same franchise system. This helps to prevent franchisees from competing against each other and ensures that each franchisee has a defined market to serve.

Question 14

A franchise is a system of distribution in which semi-independent business owners pay ________ and ________ to a parent company in return for the right to become identified with its trademark, to sell its product or services, and often to use its business format and system.

Accepted Answer

Franchise owners typically pay upfront fees to join the system and ongoing royalties based on their sales. This helps the parent company maintain control over the use of its trademark and business format while allowing franchise owners to benefit from the brand recognition and support provided by the parent company. Option A is close but not entirely accurate, as franchise owners typically pay a fixed royalty rate rather than a percentage of sales. Option C is not typically seen in franchise agreements. Option B is too vague and does not accurately describe the types of costs associated with franchising.

Question 15

Pure franchising involves a system of franchising in which a franchisor sells a franchisee a complete business format and system.

Accepted Answer

Pure franchising is a system where the franchisor offers a complete business format and system to the franchisee. This includes everything from brand image, designs, marketing strategies, products or services, and operational procedures. In this type of franchising, the franchisee gets a turnkey business and is expected to follow the franchisor’s system and pay ongoing fees for the right to use the franchisor’s brand and system.

Question 16

Franchises total annual sales represent more than ________ and employ nearly ________ workers in the Unities Sates in more than 300 industries.

Accepted Answer

Franchises in the United States have total annual sales of more than $710 billion and employ nearly 7.8 million workers across more than 300 industries.

Question 17

A recent study reports that the success rate of franchisees increases when a franchise system ________.

Accepted Answer

A franchise system that requires franchisees to actively manage their operations, has built a strong brand name, and provides training programs to improve knowledge and skills increases the success rate of franchisees.

Question 18

A franchise is an arrangement in which semi-independent business owners pay fees and royalties to a parent company in return for the right to sell its products or services and often to use its business format and system.

Accepted Answer

This statement accurately describes the definition of a franchise.

Question 19

________ franchising involves providing the franchisee with a complete business system, with an established name, the building layout and design, accounting systems, and other elements while ________ franchising allows the franchisee to use the franchisor's trade name without distributing the products exclusively under the franchisor's name.

Accepted Answer

The answer of ________ franchising involves providing the franchisee with...

Question 20

Franchise royalty fees typically range from ________ to ________ percent with an average of 6.7 percent.

Accepted Answer

The answer of Franchise royalty fees typically range from ________...

Quiz 8: Franchising and the Entrepreneur