Question 1

Clark Jensen recently opened a Planet Smoothie franchise. So far, he is very satisfied with Planet Smoothie because in exchange for an initial franchise fee and an ongoing royalty payment, Planet Smoothie has provided Clark a formula for doing business along with training, advertising, and other forms of assistance. Clark purchased a ________ franchise.

Accepted Answer

Clark purchased a business format franchise, which is a type of franchise where a franchisor provides a complete business format, including a formula for doing business, training, advertising, and other forms of assistance in exchange for a franchise fee and ongoing royalty payments. This type of franchise allows the franchisee to use the franchisor's trademarks, trade names, and business practices while maintaining some independence in operating the business.

Question 2

The people who buy franchises from master franchises are typically called:

Accepted Answer

The term commonly used to refer to people who buy franchises from master franchises is subfranchisees.

Question 3

Katherine Collins has been a Chrysler dealer for the past 20 years. Katherine owns a:

Accepted Answer

Katherine Collins, as a Chrysler dealer, owns a product and trademark franchise, where she sells the franchisor's products and uses its trademark.

Question 4

The Partnering for Success feature in Chapter 15 focuses on how franchise organizations can boost their sales while at the same time reduce their expenses. The technique that the feature recommends to achieve these dual objectives is:

Accepted Answer

The answer of The Partnering for Success feature in Chapter...

Question 5

College Nannies and Tutors, the company profiled in the opening feature for Chapter 15, was started by Joseph Keeley, a student at St. Thomas University in St. Paul, Minnesota. According to the feature, Keeley met Peter Lytle, the angel investor who funded his startup, at:

Accepted Answer

The opening feature for Chapter 15 states that Keeley met Peter Lytle, the angel investor who funded his startup, at "the awards ceremony for a business plan competition that Keeley won."

Question 6

An individual who owns and operates more than one outlet of the same franchisor, whether through an area or a master franchise agreement, is referred to as a:

Accepted Answer

An individual who owns and operates more than one outlet of the same franchisor is referred to as a multiple-unit franchisee. This is the most commonly used term in the franchise industry for this type of franchisee. The other options (A, B, C, D) are not commonly used terms in the franchise industry to describe this type of franchisee.

Question 7

There are two distinctly different types of franchise systems:

Accepted Answer

The two distinctly different types of franchise systems are product trademark franchise and business format franchise. Product trademark franchise allows the franchisee to use the franchisor's trademark and sell their products, whereas business format franchise provides the franchisee with a complete business format to operate under, including marketing, operations, and training. Therefore, the best choice is E.

Question 8

According to the textbook, one of the first companies in the United States to utilize franchising was:

Accepted Answer

According to the textbook, one of the first companies in the United States to utilize franchising was Singer Sewing Machine.

Question 9

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

Accepted Answer

This statement is incorrect as business format franchises are more popular than product trademark franchises.

Question 10

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

Accepted Answer

Franchising is a form of business ownership in which an established company, called the franchisor, allows another business to use its trademark and business model in exchange for an initial franchise fee and ongoing royalties. This allows the franchisee to benefit from the franchisor's established brand and business processes, while the franchisor earns income from the fees and royalties paid by the franchisee.

Question 11

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

Accepted Answer

An individual franchise agreement is a contract that grants the rights to operate a franchised business in a specific location. It involves the sale of a single franchise, which differs from a multi-unit franchise agreement, where one agreement covers multiple locations. Therefore, option A is the best choice for the given question. The other options do not accurately describe the concept of a franchise agreement for a specific location.

Question 12

Which of the following statements is incorrect regarding franchising?

Accepted Answer

The answer of Which of the following statements is incorrect...

Question 13

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 an arrangement where the franchisor grants the right to the franchisee to buy its goods and use its trade name. The franchisor also supports the franchisee with marketing and advertising assistance.

Question 14

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 offer and sell franchises to other people in its area, known as sub-franchising. They do not have the right to stop making royalty payments or use their own operating manuals, as they are still bound by the franchisor's terms and guidelines. They also cannot sell products made by companies other than the franchisor, as that goes against the franchise agreement.

Question 15

Franchising is appropriate when:

Accepted Answer

Franchising is appropriate when a firm has a strong trademark, a desire to grow, and a well-designed business method. This is because franchising allows a firm to expand its brand and business method while minimizing the risks and costs of expansion. Additionally, franchising allows for local ownership and management, which can lead to increased customer loyalty and brand recognition in different markets.

Question 16

According to the textbook, in 2005 nearly ________ individual franchise outlets were operating in the United States.

Accepted Answer

The answer of According to the textbook, in 2005 nearly...

Question 17

Which of the following companies would not be suitable for franchising?

Accepted Answer

Lowe's operates in the retail sector, which typically does not lend itself well to franchising. Unlike service-oriented businesses (such as tutoring or tax preparation) or food and beverage businesses (such as Smoothie King or McDonald's), retail businesses require a significant amount of inventory and overhead costs. It can be difficult for a franchisee to manage inventory levels and operate with the same buying power as the franchisor, making it less conducive to franchising.

Question 18

Phil Atkinson recently entered into an agreement with Quizno's Subs to open seven Quizno's Subs franchises. According to the agreement that Phil entered into, he has the right to open up to six Quizno's Subs franchises within the city limits of Stillwater, Oklahoma. Phil has entered into an:

Accepted Answer

Phil Atkinson has entered into an area franchise agreement with Quizno's Subs, giving him the right to open up to six franchises within the city limits of Stillwater, Oklahoma. This type of franchise agreement allows the franchisee to open multiple locations within a defined geographic area.

Question 19

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 other business in exchange for:

Accepted Answer

Franchising typically involves the initial payment of a franchise fee, which grants the franchisee the right to use the franchisor's trademark and business model. In addition, the franchisee usually pays an ongoing royalty based on a percentage of sales. Therefore, the best choice is A, which includes both an initial franchise fee and an ongoing royalty. Options C and E are not common in franchising, as franchisors generally do not take equity positions in their franchisees' businesses.

Question 20

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

Accepted Answer

The statement that "the business format franchisor obtains the majority of its income from selling its products to its dealers at a markup" is incorrect. A business format franchisor typically obtains its income from franchise fees and royalties paid by the franchisee. The franchisor may sell products or services to the franchisee, but this is not the primary source of income.

Quiz 15: Franchising