Question 1

Frank enters into an agreement with Grab n' Eat Burgers,Inc. ,to operate a franchise in Homeville.Later,the franchisor grants franchises to others within the same territory,causing Frank to suffer a significant loss in profits.In Frank's suit against the franchisor,his best argument is that Grab n' Eat​

Accepted Answer

The best argument Frank has against the franchisor is that they violated the implied covenant of good faith and fair dealing. This covenant is inherent in all contracts and requires that each party act with honesty, fairness, and good faith towards the other. By granting franchises to others within Frank's territory and causing him to suffer a significant loss in profits, the franchisor may have breached this covenant.

Question 2

Rico,the owner of Simply Sushi,is a sole proprietor.What are the chief characteristics,advantages,and disadvantages of this form of business organization? Rico wants to obtain additional capital to expand Simply Sushi,but she does not want to lose control of the firm.As a sole proprietor,what is her best option to attain these goals?​

Accepted Answer

The answer of Rico,the owner of Simply Sushi,is a sole...

Question 3

Soup Factory,Inc. ,uses a Web site to provide downloadable information to prospective franchisees.This electronic information is the equivalent of an offer that must comply with​

Accepted Answer

The Federal Trade Commission's Franchise Rule requires franchisors to provide certain disclosures to prospective franchisees before they sign a franchise agreement. This includes providing them with a Franchise Disclosure Document (FDD), which gives potential franchisees detailed information about the franchisor and the franchise system. The information provided on Soup Factory, Inc.'s website would be considered part of the FDD and must comply with the Franchise Rule.

Question 4

Instead of setting up a business to market her own products,Rita considers entering into a distributorship franchise with Sports Equipment Corporation.This involves the transfer of​

Accepted Answer

A distributorship franchise involves the transfer of a license to sell a franchisor's products, which is the case with Sports Equipment Corporation. Therefore, Rita would need to obtain a license from the franchisor to sell their products in her own business.

Question 5

Pay-Mor Convenience Stores,Inc. ,is a franchisor.Randy operates a Pay-Mor franchise.Sam is one of Randy's employees.As a franchisor,if Pay-Mor controls the day-to-day operations of the business to a significant degree,it may be liable for tortious acts by​

Accepted Answer

As a franchisor, if Pay-Mor controls the day-to-day operations of the business to a significant degree, it may be liable for tortious acts by Pay-Mor, Randy, or Sam. This is because the franchisor has a significant control over the franchisee's operations and therefore has a duty to prevent harm caused by its franchisees and their employees.

Question 6

Made in the USA Clothing Inc.gives notice to Neely that it is terminating their franchise arrangement.Winding up the business requires​

Accepted Answer

When a franchise arrangement is terminated, the franchisee is usually required to return any property belonging to the franchisor. This includes items such as signage, product samples, and marketing materials. Therefore, the winding up of the business in this case requires the return of the franchisor's property. A new franchise agreement is not necessary since the arrangement is being terminated. Closing immediately (choice B) may not be feasible as there may be obligations to customers, suppliers, and employees that need to be fulfilled. Neely's death, disability, or insolvency (choice C) may also not be relevant in this scenario.

Question 7

Digital Wizards,Inc. ,a franchisor of computer technicians,wishes to standardize the pricing practices of its franchisees because they have engaged in price-cutting to increase their respective shares of the market.The most prudent action might be for Digital Wizards to​

Accepted Answer

Suggesting prices allows Digital Wizards Inc. to guide its franchisees towards standardized pricing without engaging in price fixing, which could raise legal issues. This approach encourages uniformity while respecting the autonomy of the franchisees.

Question 8

Spicy Sauces,Inc. ,and Tom's Bottling Plant have a manufacturing franchise arrangement.This involves the transfer of​

Accepted Answer

A manufacturing franchise arrangement involves the transfer of the formula to make a certain product. Therefore, the correct answer is C. A licensing arrangement involves the transfer of a license, a trade name arrangement involves the transfer of a trade name, and a franchise ownership arrangement involves the transfer of ownership of the business.

Question 9

Big Sandwiches LLC wants to present information in "disclosure documents" via the Internet to prospective franchisees.Among other legal requirements with which the franchisor must comply,prospective franchisees must​

Accepted Answer

The franchisees must be able to download or save all electronic documents. This is a legal requirement to ensure that prospective franchisees have access to all the necessary information before they sign any agreement with the franchisor. Providing e-mail addresses or registering with the Federal Trade Commission are not legal requirements for disclosure documents. Agreeing to settle any lawsuits is also not a legal requirement; instead, it is typically part of the franchise agreement itself.

Question 10

Faye is interested in buying a franchise from Gas n' Snax Stores Inc.This transaction,like other franchise deals,is regulated to protect

Accepted Answer

Franchise regulations are in place to protect prospective franchisees from dishonest franchisors. These regulations typically require franchisors to provide detailed disclosure documents detailing the franchisor-franchisee relationship, the business model, and other important information to help prospective franchisees make informed decisions. The regulations also impose limits on franchisors regarding the types of fees they can charge and require them to adhere to certain standards for support services and training.

Question 11

Cathy buys an exclusive territory in which she is authorized to set up a plant to make Delite Dairy products.After receiving the recipes,Cathy begins making Evie's-brand yogurt and other Delite products.This is​

Accepted Answer

Cathy has purchased an exclusive territory and has been authorized to set up a plant to manufacture Delite Dairy products. This depicts a manufacturing franchise.

Question 12

Mucho Tacos,Inc. ,sells franchises.Mucho Tacos imposes on its franchisees standards of operation and personnel training methods.What is the potential pitfall to Mucho Tacos if it exercises too much control over its franchisees?​

Accepted Answer

The answer of Mucho Tacos,Inc. ,sells franchises.Mucho Tacos imposes on...

Quiz 16: Small Businesses and Franchises

Soup Factory,Inc. ,uses a Web site to provide downloadable information to prospective franchisees.This electronic information is the equivalent of an offer that must comply with​

Instead of setting up a business to market her own products,Rita considers entering into a distributorship franchise with Sports Equipment Corporation.This involves the transfer of​

Pay-Mor Convenience Stores,Inc. ,is a franchisor.Randy operates a Pay-Mor franchise.Sam is one of Randy's employees.As a franchisor,if Pay-Mor controls the day-to-day operations of the business to a significant degree,it may be liable for tortious acts by​

Made in the USA Clothing Inc.gives notice to Neely that it is terminating their franchise arrangement.Winding up the business requires​

Digital Wizards,Inc. ,a franchisor of computer technicians,wishes to standardize the pricing practices of its franchisees because they have engaged in price-cutting to increase their respective shares of the market.The most prudent action might be for Digital Wizards to​

Spicy Sauces,Inc. ,and Tom's Bottling Plant have a manufacturing franchise arrangement.This involves the transfer of​

Big Sandwiches LLC wants to present information in "disclosure documents" via the Internet to prospective franchisees.Among other legal requirements with which the franchisor must comply,prospective franchisees must​

Faye is interested in buying a franchise from Gas n' Snax Stores Inc.This transaction,like other franchise deals,is regulated to protect

Cathy buys an exclusive territory in which she is authorized to set up a plant to make Delite Dairy products.After receiving the recipes,Cathy begins making Evie's-brand yogurt and other Delite products.This is​

Mucho Tacos,Inc. ,sells franchises.Mucho Tacos imposes on its franchisees standards of operation and personnel training methods.What is the potential pitfall to Mucho Tacos if it exercises too much control over its franchisees?​

Soup Factory,Inc. ,uses a Web site to provide downloadable information to prospective franchisees.This electronic information is the equivalent of an offer that must comply with

Instead of setting up a business to market her own products,Rita considers entering into a distributorship franchise with Sports Equipment Corporation.This involves the transfer of

Pay-Mor Convenience Stores,Inc. ,is a franchisor.Randy operates a Pay-Mor franchise.Sam is one of Randy's employees.As a franchisor,if Pay-Mor controls the day-to-day operations of the business to a significant degree,it may be liable for tortious acts by

Made in the USA Clothing Inc.gives notice to Neely that it is terminating their franchise arrangement.Winding up the business requires

Digital Wizards,Inc. ,a franchisor of computer technicians,wishes to standardize the pricing practices of its franchisees because they have engaged in price-cutting to increase their respective shares of the market.The most prudent action might be for Digital Wizards to

Spicy Sauces,Inc. ,and Tom's Bottling Plant have a manufacturing franchise arrangement.This involves the transfer of

Big Sandwiches LLC wants to present information in "disclosure documents" via the Internet to prospective franchisees.Among other legal requirements with which the franchisor must comply,prospective franchisees must

Cathy buys an exclusive territory in which she is authorized to set up a plant to make Delite Dairy products.After receiving the recipes,Cathy begins making Evie's-brand yogurt and other Delite products.This is

Mucho Tacos,Inc. ,sells franchises.Mucho Tacos imposes on its franchisees standards of operation and personnel training methods.What is the potential pitfall to Mucho Tacos if it exercises too much control over its franchisees?