Question 1

Fact Pattern 2-1
Jumbo Juice Inc. offers entrepreneurs the opportunity to operate a franchise under the Jumbo Juice trade name as a member of a select group of dealers that engage in retail juice sales.
-Refer to Fact Pattern 2-1.To potential investors, Jumbo Juice must provide

Accepted Answer

Jumbo Juice must provide projected earnings figures to potential investors as actual earnings figures cannot be guaranteed and hypothetical earnings figures may be misleading. Projected earnings figures provide a realistic estimate of potential earnings based on various variables and assumptions.

Question 2

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 controlling the day-to-day operations of the franchise, Pay-Mor may be liable for tortious acts committed by Pay-Mor, Randy, or any employees like Sam.

Question 3

Teresa buys a franchise from Urgent Medical Clinics, LLC. If their agreement is like most franchise agreements, it will specify that Urgent Medical can terminate the franchise

Accepted Answer

Most franchise agreements specify that the franchisor can terminate the franchise only for cause, such as the franchisee's breach of the agreement or failure to pay fees. This provides some level of protection for the franchisee and ensures that the franchisor has a valid reason for terminating the franchise.

Question 4

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...

Question 5

Fact Pattern 2-1
Jumbo Juice Inc. offers entrepreneurs the opportunity to operate a franchise under the Jumbo Juice trade name as a member of a select group of dealers that engage in retail juice sales.
-Refer to Fact Pattern 2-1.Jumbo Juice makes earnings claims to potential investors. For those claims, the franchisor

Accepted Answer

The franchisor must have a reasonable basis for any earnings claims made to potential investors. This means that the claims must be supported by actual data or evidence, and cannot be purely hypothetical or unfounded.

Question 6

Restful Inn Motel Corporation wants to terminate its franchise arrangement with Steve's Cabins. Their contract does not provide for notice of termination or set a time for winding up the business. This means that to wind up, Steve's

Accepted Answer

Since the contract does not provide for notice of termination or set a time for winding up, Restful Inn must provide Steve's Cabins with a reasonable time to wind up. Even though there is no notice requirement in the contract, it is still implied under common law. Therefore, the best choice is (A) as it states that Steve's has a reasonable time, with notice.

Question 7

Fact Pattern 2-1
Jumbo Juice Inc. offers entrepreneurs the opportunity to operate a franchise under the Jumbo Juice trade name as a member of a select group of dealers that engage in retail juice sales.
-Refer to Fact Pattern 2-1.Before a franchise contract is signed, Jumbo Juice must explain

Accepted Answer

The answer of Fact Pattern 2-1
Jumbo Juice Inc. offers entrepreneurs...

Question 8

Flynn buys a Greasy Burger, Inc., franchise. Greasy requires that its franchisees buy its products exclusively for every phase of their operations. Because Flynn wishes to buy less expensive products, he challenges the requirement. His best argument is probably that the requirement violates

Accepted Answer

The requirement to buy products exclusively from Greasy Burger, Inc. raises antitrust concerns, as it may constitute a violation of the Sherman Antitrust Act or the Clayton Act. These laws prohibit vertical price fixing and other anticompetitive practices that limit or restrain free trade. Flynn could challenge the requirement as a violation of federal antitrust laws.

Question 9

Oberon buys a Pro Club Health & Fitness, Inc., franchise, which the franchisor later terminates. In determining whether the termination was proper, a court will generally

Accepted Answer

In determining whether the termination of a franchise agreement was proper, a court will generally balance the rights of both parties. The court will consider the circumstances surrounding the termination, including whether the franchisor complied with the terms of the franchise agreement and whether the termination was based on a valid reason. The court will also consider the impact of the termination on both the franchisor and the franchisee, as well as any harm caused to consumers. This approach provides a fair and equitable analysis of the situation and allows for a just and appropriate resolution of any disputes.

Question 10

Savory 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 franchisor must ensure that the prospective franchisees can download or save all electronic documents. This is because the franchise disclosure documents contain a lot of important information that the prospective franchisee should be able to save for future reference. A and C are not legal requirements for disclosure documents, and D is not necessary as registration with the FTC is done directly with the government agency, and not through a website.

Question 11

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...

Question 12

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

Accepted Answer

Terminating a franchise arrangement requires the return of the franchisor's property, which may include the use of the franchisor's brand name, intellectual property, and other proprietary information. It may also involve the return of equipment, supplies, and inventory provided by the franchisor. Therefore, the winding up of the business requires the return of the franchisor's property.

Quiz 2: Small Businesses and Franchises

Fact Pattern 2-1 Jumbo Juice Inc. offers entrepreneurs the opportunity to operate a franchise under the Jumbo Juice trade name as a member of a select group of dealers that engage in retail juice sales. -Refer to Fact Pattern 2-1.To potential investors, Jumbo Juice must provide