Full Test Bank Franchising Chapter.11

CHAPTER 11: FRANCHISING

TEST BANK

A) MULTIPLE CHOICE

Select the "most correct" option:

1. Which of the following would be an example of a Business Format franchise?

a. Petro Canada.

b. Tim Horton's.

c. Toyota.

d. Popsicle.

2. The most popular franchise arrangement is:

a. single-unit.

b. multi-unit.

c. multi-brand.

d. master franchise.

3. The right to produce and sell the franchisor's product is called:

a. licensing.

b. dealership.

c. conversion franchising.

d. none of the above.

4. The cost of a franchise may include:

a. royalty payments.

b. advertising expenditures.

c. the franchise fee.

d. all of the above.

5. Multi-level marketers usually:

a. work from their homes.

b. sell to consumers.

c. receive commissions from the sales of their recruits.

d. all of the above.

6. The code of the Canadian Franchise Association gives franchisees:

a. freedom to form and join associations.

b. the right to see the financial statements of the franchisor.

c. the right to a full refund if dissatisfied.

d. all of the above.

7. The biggest advantage of owning a franchise over an independent firm is likely:

a. training provided by the franchisor.

b. brand recognition.

c. advertising.

d. marketing research.

8. Most of the magazines and other publications about franchising:

a. are critical of the industry.

b. forbid advertising of specific franchises.

c. are published by franchisor associations.

d. are published by franchisee associations.

9. With "floor plan" financing, title to the product in the franchisee's inventory is:

a. held by the franchisee.

b. held by a third party.

c. held by the franchisor.

d. there is no title to the product.

10. On average, buying a franchise:

a. is the lowest risk start-up method.

b. has the same risk as starting a brand new business.

c. has the same risk as buying an existing independent firm.

d. is risk-free.

11. Benefits to the franchisor when adding additional franchisees include all of the following except:

a. Cost-effective expansion

b. Royalty payments

c. Additional revenue sources

d. Minimized growth risks

12. To assess a franchising opportunity, one should consider which of the following:

a. location

b. the market potential

c. the sales forecast

d. all of the above

B) TRUE OR FALSE

1. T F Dealership franchising tends to give the franchisee more freedom than

business format franchising.

2. T F Pyramid Selling is an illegal form of Multi-level Marketing.

3. T F Most Multi-level Marketers make well-above-average incomes.

4. T F The owner of a territory franchise has the right to sell franchises to others.

5. T F Franchisors such as automobile manufacturers can dictate the prices

charged by their franchisees.

6. T F The Franchisor is the buyer of a complete method of doing business.

7. T F Canada tends to have stricter franchising regulations than most of the US.

8. T F Buying an existing franchise is legally simpler than buying a new one.

9. T F Major franchisors tend to be highly negotiable over contract details.

10. T F The ability to innovate is an important characteristic for a franchisee.

11. T F Franchising legislation in Canada is federally regulated

C) FILL IN THE BLANKS

1. When the same franchisee owns two different franchise brands at the same site, this is called franchising.

2. Assets against which there are no liens are referred to as .

3. Changing an independent small business into a franchise outlet is referred to as

franchising.

4. An arrangement where a franchisee has the right to sell franchises to others within a particular territory is called a franchise.

5. The law that restricts national price setting is known as the federal Act.

6. The selling of the right to produce and distribute a particular brand of product or service is called_____________________.

7. ____________________________financing is a technique of lending money to a retailer for purposes of buying inventory, where title to the inventory remains with the supplier.

D) SHORT ANSWER

1) In three or four sentences discuss your personality and skills explaining why you would (or would not) make a good franchisee.

2. Briefly explain the major advantages of buying a franchise over other start-up methods.

3. Name and describe four franchising formats.

E) ESSAY

1. Explain the major provisions of existing or pending franchise legislation. Explain the growing trend for disclosure requirements. (1 page max).

2. Outline a typical process of buying a franchise from the first contact with the franchisor to the final signing of the contract. Note how the process favours the franchisor.

3. Discuss the benefits and drawbacks of buying a franchise

4. Explain some of the common contract issues to look for in a franchise agreement.