Question 1

________ franchising involves the owner of an existing business becoming a franchisee to gain the advantage of name recognition.

Accepted Answer

Conversion franchising involves an existing business owner converting their business into a franchise to take advantage of the franchisor's brand recognition and operating systems. This allows the former owner to operate under the franchisor's brand name, which is likely to be better known than the existing business's name, and benefit from the franchisor's support and management assistance while still being a business owner.

Question 2

A master franchise is also called:

Accepted Answer

A master franchise is a type of franchise agreement in which the franchisee not only operates their own unit(s), but also has the right to grant sub-franchises or develop a certain area by opening new units. Therefore, a master franchise can also be called a sub-franchise or an area developer.

Question 3

What franchisee turnover rate is probably sound?

Accepted Answer

A franchisee turnover rate of less than 5 percent is considered sound because it indicates that the franchise system is stable and successful, with franchisees able to generate profits and maintain their businesses over the long term. Higher turnover rates may suggest problems with the franchise model or inadequate support and training provided to franchisees.

Question 4

By definition,a franchise is owned by a semi-independent franchisee who pays a fee to a franchiser in return for the right to sell the franchised goods or services.

Accepted Answer

A franchise agreement typically involves the franchisee paying a fee or ongoing royalties to the franchiser in exchange for the right to use the franchiser's trademark, business model, and support to operate a business under their brand name.

Question 5

________ is when owners of independent businesses become franchisees to gain the advantage of name recognition.

Accepted Answer

Conversion franchising refers to when independent business owners choose to become franchisees in order to gain the advantages of established name recognition, systems, and products. This allows them to leverage the power of an established brand to attract customers and grow their business.

Question 6

When franchise contracts are renewed:

Accepted Answer

The answer of When franchise contracts are renewed:
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Question 7

The most efficient method of franchising,from the franchiser's point-of-view,which has become popular in the 1990s and permits one franchisee to hold several franchises from the same franchise company,is called:

Accepted Answer

Multiple-unit franchising allows the franchiser to expand their business with minimal effort and cost since they are dealing with an already established franchisee who is familiar with their systems and processes. It also allows for greater control and consistency within the franchise system. Master franchising involves the franchisee having the right to sub-franchise within a specific geographic area, while conversion franchising involves converting an existing business into a franchise. Piggybacking is not a recognized term in franchising.

Question 8

Trade name franchising involves licensing the rights to sell specific products under the manufacturer's brand name.

Accepted Answer

The answer of Trade name franchising involves licensing the rights...

Question 9

The ________ requires all franchisers to disclose detailed information on their operations at the first personal meeting or at least fourteen days before a franchise contract is signed or any money is paid.

Accepted Answer

The requirement mentioned in the question is for the Franchise Disclosure Document (FDD), which is a legal document that franchisers in the United States must provide to potential franchisees. The FDD includes information on the franchiser's business operations, history, fees, and obligations, among other things. The Federal Trade Commission's Trade Regulations Rule specifies the requirements for the content and timing of FDD disclosures. The FCC (Federal Communications Commission) and FDA (Food and Drug Administration) do not regulate franchising in this way.

Question 10

When the franchisee has the right to establish a semi-independent organization in a particular territory to recruit,sell,and support other franchises,it is called a ________ franchise.

Accepted Answer

A master franchise allows the franchisee to establish a semi-independent organization in a particular territory to recruit, sell, and support other franchises. The master franchisee acts as a mini-franchisor for the territory they are responsible for, while still operating under the franchisor's systems and guidance.

Question 11

The franchiser has the right to cancel a contract if a franchisee:

Accepted Answer

The franchiser has the right to cancel a contract if a franchisee declares a bankruptcy, fails to make required payments on time, or fails to maintain quality standards. Therefore, all of the above options are correct.

Question 12

In a franchise arrangement,the franchiser controls the distribution methods of the business venture.

Accepted Answer

The answer of In a franchise arrangement,the franchiser controls the...

Question 13

The fastest growth rate in franchises is among:

Accepted Answer

The article states that the fastest growth rate in franchises is among "innovative, nontraditional franchisers with fresh approaches." Therefore, option B is the best choice. Options A, C, and D are not supported by the information provided.

Question 14

The type of franchising growing fastest is product distribution franchising.

Accepted Answer

Business format franchising is growing faster than product distribution franchising because it offers a complete business format, including brand, operational systems, and support, which is more attractive to potential franchisees looking for a comprehensive business model.

Question 15

Pure franchising occurs when the franchisee purchases only the right to become identified with the franchiser's trade name.

Accepted Answer

Pure franchising involves not only the right to use the franchiser's trade name but also a complete system for operating the business, including marketing, operational processes, and often a range of support services.

Question 16

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

Accepted Answer

Pure franchising allows franchisees to use all the aspects of a business operation, including the trademark, products or services, operating systems and procedures, and support and training.

Question 17

Franchising benefits the franchisor by providing a quick way to expand the distribution system and a way to grow without the cost and effort to develop managers internally.

Accepted Answer

Franchising allows the franchisor to expand their business quickly without the expense of building and managing new locations themselves. It also allows them to use the resources and efforts of the franchisees to grow the brand.

Question 18

Establishing a Mrs.Fields Cookies franchise inside a Hardees fast-food franchise is an example of ________ franchising.

Accepted Answer

Piggyback franchising is when a franchisor allows a franchisee to sell its products or services within the franchisee's own business. In this case, Hardees is the franchisee and is selling Mrs. Fields Cookies within its own fast-food franchise.

Question 19

Perhaps the best way to evaluate the reputation of a franchiser is to ________ several franchise owners.

Accepted Answer

The best way to evaluate the reputation of a franchiser is to both meet and interview several franchise owners. By doing so, you can get first-hand information on their experiences, successes, and challenges with the franchiser. This can give you a better understanding of the franchiser's support, training, and overall management style. Writing to the franchise owners may also be helpful, but meeting and interviewing them will provide greater insight.

Question 20

In franchising,royalties are paid by the franchisee to the franchisor.

Accepted Answer

Royalties are a percentage of the franchisee's revenue that is paid to the franchisor as part of the franchise agreement.

Quiz 4: Franchising and the Entrepreneur