Question 1

A(n)________ is an amount paid by the franchisee to the franchisor for the continued use of the franchisor's trade name,property,and assistance that is often computed as a percentage of the franchisee's gross sales.

Accepted Answer

A royalty fee is an amount paid by the franchisee to the franchisor for the continued use of the franchisor's trade name, property, and assistance that is often computed as a percentage of the franchisee's gross sales. Assessment fees are typically charged for ongoing support or training, lease fees are paid for the use of property, and contingency fees are only paid if certain outcomes occur.

Question 2

Explain the extent of liability of a franchisor and a franchisee with an example.

Accepted Answer

The answer of Explain the extent of liability of a...

Question 3

Which of the following is true of a franchise agreement?

Accepted Answer

The answer of Which of the following is true of...

Question 4

A franchisee subject to wrongful termination can only recover damages,and not the franchise.

Accepted Answer

A franchisee subject to wrongful termination may be able to recover both damages and the franchise itself if they can prove that the termination was unjustified and in breach of the franchise agreement. Recovery of the franchise may include reinstatement as a franchisee or even the ability to transfer the franchise to a new owner.

Question 5

The franchisor is liable for the contracts entered into and torts committed by the franchisee while the franchisee is acting within the scope of the apparent agency.

Accepted Answer

This is known as vicarious liability and applies when a third party reasonably believes that the franchisee is acting on behalf of the franchisor. In such cases, the franchisor can be held responsible for the actions of the franchisee within the scope of their apparent authority.

Question 6

My-Wear Inc.is an apparel retailer based in San Francisco.It operates through a franchise named KL Apparels in Santa Clara.After about six years of operation,My-Wear Inc.cancelled the franchise with KL Apparels without any notification.The franchise period specified in the contract had not expired and the franchisee had met all standards stated by the franchisor.This constitutes a ________.

Accepted Answer

Termination at will occurs when a franchisor ends a franchise agreement prematurely without a specific cause, especially when the franchisee has met all the standards and the contract period has not expired. This is what happened with My-Wear Inc. and KL Apparels.

Question 7

A franchisor is not permitted to terminate a franchise for any reason.

Accepted Answer

While there are certain rights and protections for franchisees, a franchisor does have the ability to terminate a franchise agreement if certain conditions are met, such as the franchisee repeatedly failing to meet performance standards or violating the terms of the agreement.

Question 8

Apparent agency arises when a franchisee creates the appearance of being a franchisor's agent when in fact an actual agency does not exist.

Accepted Answer

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Question 9

Most franchise agreements permit a franchisor to terminate the franchise ________.

Accepted Answer

Most franchise agreements allow the franchisor to terminate the franchise contract for cause, which means that the franchisee has violated the terms of the agreement in some way. This could include failing to pay royalties, breaching operating standards, or engaging in unethical practices. Terminating a franchise without cause is less common and may be subject to legal challenge.

Question 10

An apparent agency is created when a franchisor and franchisee use the same trade name and trademarks but make no effort to inform the public of their separate legal status.

Accepted Answer

An apparent agency, also known as implied agency, is created when the actions or words of a principal lead a third party to believe that an agent has the authority to act on behalf of the principal, even if no actual agency agreement exists. In the case of franchisors and franchisees using the same trade name and trademarks, if they do not inform the public of their separate legal status, they may be creating an apparent agency.

Question 11

Which of the following is true of a franchise that was terminated-at-will by a franchisor?

Accepted Answer

When a franchise is terminated-at-will by a franchisor, the franchisee can sue to recover damages and the franchise. This means that the franchisee can seek compensation for any financial losses resulting from the termination, as well as try to regain the franchise itself. However, it is important to note that the likelihood of successfully regaining the franchise may be low, depending on the specific circumstances of the termination.

Question 12

An ________ refers to an agency that arises when a franchisor creates the image that a franchisee is its agent when in fact an actual agency does not exist.

Accepted Answer

An apparent agency is created when a franchisor creates the impression that the franchisee is its agent, even though there is no actual agency relationship. This can occur through advertising, marketing, or other actions that suggest to the public that the franchisee is an agent or representative of the franchisor.

Question 13

Unless otherwise stated,the franchisor is liable for the torts of its franchisee.

Accepted Answer

Generally, the franchisor is not liable for the torts committed by its franchisee because the franchisee is an independent business owner. However, in certain circumstances, such as when the franchisor exercises significant control over the franchisee's operation, the franchisor may be held liable for the franchisee's actions.

Question 14

A single failure by a franchisee to meet a quality-control standard is sufficient cause for termination.

Accepted Answer

Franchise agreements typically outline specific procedures and multiple opportunities for a franchisee to correct any failures or breaches in quality-control standards before termination is considered.

Question 15

The termination-at-will clause allows franchisees to sue a franchisor in case of an unjust termination of franchise.

Accepted Answer

The termination-at-will clause typically allows franchisors to terminate a franchise agreement without providing a reason. There may be other provisions in the contract that provide additional protections for the franchisee in case of unjust termination, but this does not necessarily come with the termination-at-will clause itself.

Question 16

When is a franchisor allowed to terminate a franchise? Why are termination-at-will clauses generally held to be void?

Accepted Answer

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Question 17

Termination-at-will clauses in franchise agreements are generally held to be void.

Accepted Answer

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Question 18

Which of the following types of clauses,in a franchise agreement,provides that any claim or controversy arising from the franchise agreement or an alleged breach thereof will be settled outside the courts?

Accepted Answer

An arbitration clause is a provision in a franchise agreement that requires any disputes or claims to be resolved through arbitration rather than through the court system. This clause is often utilized to save time and money as arbitration is usually quicker and less expensive than litigation. The other choices listed are not related to dispute resolution.

Question 19

________ is a business arrangement that occurs when the owner of intellectual property contracts to permit another party to use the intellectual property.

Accepted Answer

Licensing is a business arrangement where the owner of intellectual property grants permission to another party to use their intellectual property in exchange for compensation such as royalties or licensing fees. This allows the licensee to use and benefit from the intellectual property without having to invest in creating or developing it themselves.

Question 20

The party who grants a license is known as the ________.

Accepted Answer

The party who grants a license is known as the licensor.

Quiz 40: Franchises and Special Forms of Businesses

A(n) ________ is an amount paid by the franchisee to the franchisor for the continued use of the franchisor's trade name,property,and assistance that is often computed as a percentage of the franchisee's gross sales.