Question 1

General Motors operates a ________ franchise system.

Accepted Answer

C

Question 2

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

Accepted Answer

An individual franchise agreement is for a single franchise at a specific location. This is different from a general franchise agreement, which allows the franchisee to open multiple franchises in different locations. The other answer choices do not accurately describe this type of franchise agreement.

Question 3

________ 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 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. This allows the franchisee to utilize the franchisor's established brand name, operating system, and marketing strategies to start and operate their own business.

Question 4

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

Accepted Answer

Soft drink bottlers primarily operate under product distribution franchises, where they are granted the right to distribute a company's products in a specific territory.

Question 5

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 provides a complete formula for doing business, including the use of trademarks and operating methods, along with training and various other forms of assistance in exchange for an initial franchise fee and ongoing royalty payments.

Question 6

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

Accepted Answer

A multiple-unit franchisee is a person who owns and operates more than one outlet of the same franchisor.

Question 7

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

Accepted Answer

Business format franchises are known for being very specific and dictating many aspects of how the franchisee runs their business. This level of rigidity can be demanding for franchisees. Option A is incorrect because business format franchises are actually the most popular type of franchise. Option C is incorrect because these are examples of product and trademark franchises. Option D is incorrect because business format franchises are legal in all states. Option E is incorrect because the franchisor's income primarily comes from franchise fees and royalties, not markups on products.

Question 8

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

Accepted Answer

The two distinctly different types of franchise systems are product trademark franchise and business format franchise. The product trademark franchise allows the franchisee to use the franchisor's trademarked products or services, while the business format franchise provides the franchisee with a complete system for operating the business.

Question 9

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 huge investments in real estate, which is a common reason for businesses to opt for franchising.

Question 10

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

Accepted Answer

Business format franchises are more popular than product trademark franchises.

Question 11

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

Accepted Answer

James Ryan owns a Coors Beer distributorship which is a type of product and trademark franchise. He is using the Coors brand and distributing their product as part of his business.

Question 12

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

The language in the agreement suggests that Jenna has the right to operate within a specific geographic area, or "area" franchise agreement. The terms "city," "locality," and "district" suggest smaller or more limited territories, while "individual" could refer to a single franchise as opposed to a multi-unit agreement.

Question 13

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 14

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

Accepted Answer

A product and trademark franchise involves a manufacturer who provides its trademarked products to a network of dealers or distributors who sell them to consumers.

Question 15

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 franchising as a business model.

Question 16

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 17

Which of the following statements is incorrect regarding franchising?

Accepted Answer

Franchising is not a new form of business organization, as it has been in existence for several decades.

Question 18

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 exactly described as an arrangement under which the franchisor grants the franchisee the right to buy its products and use its trade name. Option B (product extension) describes a strategy where a company offers new products that are related to their existing products. Option C (business format) describes a franchise arrangement where the franchisor provides the complete business model including training, marketing, and operational support. Option D (production plus) and E (business design) are not relevant to the concept of franchising.

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 another business in exchange for ________.

Accepted Answer

Franchising involves the franchisor granting the rights to use their brand and business methods to a franchisee in exchange for an initial fee and ongoing royalties. This allows the franchisee to benefit from the established brand and business model of the franchisor, while the franchisor benefits from the expansion and profit of the franchisee's business.

Question 20

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, meaning they can offer and sell the franchise to other people in their area. This allows them to expand the brand's reach and potentially earn additional revenue. Options A, E, and B are not accurate as it is mandatory for the franchisee to pay royalty fees regardless of their sales or profits, and they are only allowed to sell products approved by the franchisor. Option D is also incorrect as the franchisee must follow the franchisor's operating manuals and guidelines.

Quiz 15: Franchising