Chapter 15: Franchising
CHAPTER 15
Franchising
MULTIPLE-CHOICE QUESTIONS
What Is Franchising, and How Does It Work?
Answer: C 1. Today, there are roughly __________ franchise systems in the United
Hard States.
Page: 440
A. 1,200
B. 1,900
C. 2,500
D. 4,000
E. 5,500
Answer: C 2. Which of the following statements is incorrect regarding franchising?
Hard
Page: 440 A. franchising is growing in popularity in the U.S.
B. there are some instances in which franchising is not appropriate
C. new technologies are often introduced through franchise systems
D. the failure rate for franchise systems is relatively high
E. franchising, by its very nature, involves the sharing of knowledge
between a franchisor and a franchisee
Answer: C 3. In the United States, franchise systems collectively account for about
Hard __________ of all retail sales.
Page: 440
A. 10%
B. 25%
C. 33%
D. 50%
E. 75%
Answer: B 4. __________ is a form of business ownership in which a firm that
Easy already has a successful product or service licenses its trademark and
Page: 441 method of doing business to other business in exchange for an initial
franchise fee and an ongoing royalty.
A. Outsourcing
B. Franchising
C. Outsource
D. Subcontracting
E. Joint Venturing
230
,Chapter 15: Franchising
Answer: A 5. Franchising is a form of business ownership in which a firm that already
Medium has a successful product or service licenses its trademark and method of
Page: 441 doing business to other business in exchange for:
A. an initial franchise fee and an ongoing royalty
B. an initial franchise fee
C. an equity position in the new business
D. an ongoing royalty
E. an initial franchise fee and an equity position in the new business
Answer: B 6. According to the textbook, one of the first companies in the United
Medium States to utilize franchising was:
Page: 441
A. McDonald’s
B. Singer Sewing Machine
C. H&R Block
D. Coca-Cola
E. Curves International
Answer: E 7. There are two distinctly different types of franchise systems:
Medium
Page: 442 A. product trademark franchise, business arrangement franchise
B. product plus franchise, business format franchise
C. business design franchise, product improvement franchise
D. product extension franchise, business design franchise
E. product trademark franchise, business format franchise
Answer: A 8. A __________ franchise is an arrangement under which the franchisor
Medium grants to the franchisee the right to buy its products and use its trade
Page: 442 name.
A. product and trademark
B. product extension
C. business format
D. production plus
E. business design
Answer: B 9. Katherine Collins has been a General Motors dealer for the past 30
Medium years. Katherine owns a:
Page: 442
A. business format franchise
B. product and trademark franchise
C. business design franchise
D. product plus franchise
E. product and business format franchise
231
, Chapter 15: Franchising
Answer: D 10. Clark Jensen recently opened a Smoothie King franchise. So far, he is
Medium very satisfied with Smoothie King because in exchange for an initial
Page: 442 franchise fee and an ongoing royalty payment, Smoothie King has
provided Clark a formula for doing business along with training,
advertising, and other forms of assistance. Clark purchased a
__________ franchise.
A. business extension
B. formula driven
C. sales extension
D. business format
E. product and trademark
Answer: C 11. Which of the following statements is incorrect regarding product and
Hard trademark franchises?
Page: 442
A. Rather than obtaining a royalty or franchise fee, the product and
trademark franchisor obtains the majority of its income from.
selling its products to its dealers or distributors at a markup
B. General Motors establishes product trademark rather than
business format franchises.
C. Product trademark franchises are by far more popular than
business format franchises.
D. Product and trademark franchisees are typically permitted to operate
in a fairly autonomous manner.
E. A product trademark franchise typically connects a single
manufacturer with a network of dealers or distributors.
Answer: B 12. Which of the following statements is incorrect regarding business
Hard format franchises?
Page: 442
A. Burger King sells business format franchises.
B. The business format franchisor obtains the majority of its
income from selling its products to its dealers at a markup.
C. A business format franchises can be very rigid and demanding.
D. Automotive services and convenience stores are well-known
examples of business format franchises.
E. In a business format franchise, the franchisor provides a formula
for doing business to the franchisee along with training and other
forms of support.
232
, Chapter 15: Franchising
Answer: A 13. A(n) __________ involves the sale of a single franchise for a specific
Easy location.
Page: 443
A. individual franchise agreement
B. one-of-a-kind franchise agreement
C. pinpoint franchise agreement
D. specific franchise agreement
E. precise franchise agreement
Answer: B 14. Terry Atkinson recently entered into an agreement with Quizno’s Subs
Medium to open seven Quizno’s Subs franchises. According to the agreement
Page: 443 that Trent entered into, he has the right to open up to six CD Quizno’s
Subs franchises within the city limits of Columbia, Missouri. Trent has
entered into an:
A. individual franchise agreement
B. area franchise agreement
C. locality franchise agreement
D. district franchise agreement
E. neighborhood franchise agreement
Answer: E 15. The people who buy franchises from master franchises are typically
Medium called:
Page: 444
A. minor franchisees
B. secondary franchisees
C. mini-franchisees
D. subordinate franchisees
E. subfranchisees
Answer: A 16. A master franchisee, in addition to having the right to open and operate
Medium a specific number of locations in a particular area, also has the right to:
Page: 444
A. offer and sell the franchise to other people in its area
B. stop making royalty payments if its sales decline
C. sell products made by companies other than the franchisor
D. use its own operating manuals to run its franchise outlets
E. stop making royalty payments if it is losing money
233
CHAPTER 15
Franchising
MULTIPLE-CHOICE QUESTIONS
What Is Franchising, and How Does It Work?
Answer: C 1. Today, there are roughly __________ franchise systems in the United
Hard States.
Page: 440
A. 1,200
B. 1,900
C. 2,500
D. 4,000
E. 5,500
Answer: C 2. Which of the following statements is incorrect regarding franchising?
Hard
Page: 440 A. franchising is growing in popularity in the U.S.
B. there are some instances in which franchising is not appropriate
C. new technologies are often introduced through franchise systems
D. the failure rate for franchise systems is relatively high
E. franchising, by its very nature, involves the sharing of knowledge
between a franchisor and a franchisee
Answer: C 3. In the United States, franchise systems collectively account for about
Hard __________ of all retail sales.
Page: 440
A. 10%
B. 25%
C. 33%
D. 50%
E. 75%
Answer: B 4. __________ is a form of business ownership in which a firm that
Easy already has a successful product or service licenses its trademark and
Page: 441 method of doing business to other business in exchange for an initial
franchise fee and an ongoing royalty.
A. Outsourcing
B. Franchising
C. Outsource
D. Subcontracting
E. Joint Venturing
230
,Chapter 15: Franchising
Answer: A 5. Franchising is a form of business ownership in which a firm that already
Medium has a successful product or service licenses its trademark and method of
Page: 441 doing business to other business in exchange for:
A. an initial franchise fee and an ongoing royalty
B. an initial franchise fee
C. an equity position in the new business
D. an ongoing royalty
E. an initial franchise fee and an equity position in the new business
Answer: B 6. According to the textbook, one of the first companies in the United
Medium States to utilize franchising was:
Page: 441
A. McDonald’s
B. Singer Sewing Machine
C. H&R Block
D. Coca-Cola
E. Curves International
Answer: E 7. There are two distinctly different types of franchise systems:
Medium
Page: 442 A. product trademark franchise, business arrangement franchise
B. product plus franchise, business format franchise
C. business design franchise, product improvement franchise
D. product extension franchise, business design franchise
E. product trademark franchise, business format franchise
Answer: A 8. A __________ franchise is an arrangement under which the franchisor
Medium grants to the franchisee the right to buy its products and use its trade
Page: 442 name.
A. product and trademark
B. product extension
C. business format
D. production plus
E. business design
Answer: B 9. Katherine Collins has been a General Motors dealer for the past 30
Medium years. Katherine owns a:
Page: 442
A. business format franchise
B. product and trademark franchise
C. business design franchise
D. product plus franchise
E. product and business format franchise
231
, Chapter 15: Franchising
Answer: D 10. Clark Jensen recently opened a Smoothie King franchise. So far, he is
Medium very satisfied with Smoothie King because in exchange for an initial
Page: 442 franchise fee and an ongoing royalty payment, Smoothie King has
provided Clark a formula for doing business along with training,
advertising, and other forms of assistance. Clark purchased a
__________ franchise.
A. business extension
B. formula driven
C. sales extension
D. business format
E. product and trademark
Answer: C 11. Which of the following statements is incorrect regarding product and
Hard trademark franchises?
Page: 442
A. Rather than obtaining a royalty or franchise fee, the product and
trademark franchisor obtains the majority of its income from.
selling its products to its dealers or distributors at a markup
B. General Motors establishes product trademark rather than
business format franchises.
C. Product trademark franchises are by far more popular than
business format franchises.
D. Product and trademark franchisees are typically permitted to operate
in a fairly autonomous manner.
E. A product trademark franchise typically connects a single
manufacturer with a network of dealers or distributors.
Answer: B 12. Which of the following statements is incorrect regarding business
Hard format franchises?
Page: 442
A. Burger King sells business format franchises.
B. The business format franchisor obtains the majority of its
income from selling its products to its dealers at a markup.
C. A business format franchises can be very rigid and demanding.
D. Automotive services and convenience stores are well-known
examples of business format franchises.
E. In a business format franchise, the franchisor provides a formula
for doing business to the franchisee along with training and other
forms of support.
232
, Chapter 15: Franchising
Answer: A 13. A(n) __________ involves the sale of a single franchise for a specific
Easy location.
Page: 443
A. individual franchise agreement
B. one-of-a-kind franchise agreement
C. pinpoint franchise agreement
D. specific franchise agreement
E. precise franchise agreement
Answer: B 14. Terry Atkinson recently entered into an agreement with Quizno’s Subs
Medium to open seven Quizno’s Subs franchises. According to the agreement
Page: 443 that Trent entered into, he has the right to open up to six CD Quizno’s
Subs franchises within the city limits of Columbia, Missouri. Trent has
entered into an:
A. individual franchise agreement
B. area franchise agreement
C. locality franchise agreement
D. district franchise agreement
E. neighborhood franchise agreement
Answer: E 15. The people who buy franchises from master franchises are typically
Medium called:
Page: 444
A. minor franchisees
B. secondary franchisees
C. mini-franchisees
D. subordinate franchisees
E. subfranchisees
Answer: A 16. A master franchisee, in addition to having the right to open and operate
Medium a specific number of locations in a particular area, also has the right to:
Page: 444
A. offer and sell the franchise to other people in its area
B. stop making royalty payments if its sales decline
C. sell products made by companies other than the franchisor
D. use its own operating manuals to run its franchise outlets
E. stop making royalty payments if it is losing money
233
