RETAIL MANAGEMENT EXAM 2 FSU
HOPKINS (YOU'RE WELCOME)
QUESTIONS & UPDATED CORRECT
SOLUTIONS
Types of Ownership - Correct Answer ✔✔ Independent Retailer
Chain
Franchise
Leased Department
independent retailer - Correct Answer ✔✔ 70% of independents are owned and
operated by owners/owners families
account for 1/3 of total store sales
(Exm. local store)
independent retailer advantages/disadvantages - Correct Answer ✔✔ Advantages
Flexibility in formats, locations, and strategy
Control over investment costs, personnel functions, and strategies
Easier to manage personal image
Consistency and independence
Strong entrepreneurial leadership
Disadvantages
Lack of bargaining power
Labor intensive operations
Over-dependence on owner
Chain - Correct Answer ✔✔ Operate multiple outlets under common ownership
Engage in some level of centralized or coordinated purchasing and decision making
(Exm. Target)
Chain advantages/disadvantages - Correct Answer ✔✔ Advantages
Bargaining power
Efficiency maintained by computerization, warehouse sharing, and other functions
Defined management philosophy
Disadvantages
Excessive standardization due to extreme concern for bargaining power
Limited flexibility
Higher investment costs
Complex managerial control
, Limited independence among personnel
Franchise - Correct Answer ✔✔ A contractual agreement between a franchisor and a
retail franchisee
Franchisee pays an initial fee and a monthly percentage of gross sales in exchange for
the exclusive rights to sell goods and services in an area
Can(not always) require an initial investment, liquid cash requirement, and net worth
requirement
(Exm. McDonalds)
franchise advantages/disadvantages - Correct Answer ✔✔ Advantages
low capital required
acquisition of well-known names
operating/ management skills taught
cooperative marketing possible
exclusive rights
Disadvantages
royalties are based on sales, not profits (can be problematic/promotes efficiency)
over-saturation could occur
franchisors may overstate potential
contractual confinement
agreements may be cancelled or voided
Leased Department - Correct Answer ✔✔ A leased department is a department/space
in a retail store that is rented to an outside party
The outside party (lessee) is responsible for all aspects of its business and pays a
percentage of sales as rent
The retail store sets operating restrictions to ensure consistency and coordination
(exm. Walmart having stuff in front like mcDonalds, Nails, Hair cut)
Leased Department advantages/disadvantages - Correct Answer ✔✔ Advantages
provides one-stop shopping to customers
lessees handle management
reduces store costs
provides a stream of revenue
Disadvantages
lessees may negate store image (MAC at Macy's)
procedures may conflict with department store
problems may be blamed on department store rather than lessee
Destination Retailer - Correct Answer ✔✔ Some combination of price-oriented and cost
efficient, exclusive merchandise, and superior customer service to make it a destination
Wide or deep merchandise strategy
(Exm. Trader Joe's, IKEA, Bass Pro Shop)
HOPKINS (YOU'RE WELCOME)
QUESTIONS & UPDATED CORRECT
SOLUTIONS
Types of Ownership - Correct Answer ✔✔ Independent Retailer
Chain
Franchise
Leased Department
independent retailer - Correct Answer ✔✔ 70% of independents are owned and
operated by owners/owners families
account for 1/3 of total store sales
(Exm. local store)
independent retailer advantages/disadvantages - Correct Answer ✔✔ Advantages
Flexibility in formats, locations, and strategy
Control over investment costs, personnel functions, and strategies
Easier to manage personal image
Consistency and independence
Strong entrepreneurial leadership
Disadvantages
Lack of bargaining power
Labor intensive operations
Over-dependence on owner
Chain - Correct Answer ✔✔ Operate multiple outlets under common ownership
Engage in some level of centralized or coordinated purchasing and decision making
(Exm. Target)
Chain advantages/disadvantages - Correct Answer ✔✔ Advantages
Bargaining power
Efficiency maintained by computerization, warehouse sharing, and other functions
Defined management philosophy
Disadvantages
Excessive standardization due to extreme concern for bargaining power
Limited flexibility
Higher investment costs
Complex managerial control
, Limited independence among personnel
Franchise - Correct Answer ✔✔ A contractual agreement between a franchisor and a
retail franchisee
Franchisee pays an initial fee and a monthly percentage of gross sales in exchange for
the exclusive rights to sell goods and services in an area
Can(not always) require an initial investment, liquid cash requirement, and net worth
requirement
(Exm. McDonalds)
franchise advantages/disadvantages - Correct Answer ✔✔ Advantages
low capital required
acquisition of well-known names
operating/ management skills taught
cooperative marketing possible
exclusive rights
Disadvantages
royalties are based on sales, not profits (can be problematic/promotes efficiency)
over-saturation could occur
franchisors may overstate potential
contractual confinement
agreements may be cancelled or voided
Leased Department - Correct Answer ✔✔ A leased department is a department/space
in a retail store that is rented to an outside party
The outside party (lessee) is responsible for all aspects of its business and pays a
percentage of sales as rent
The retail store sets operating restrictions to ensure consistency and coordination
(exm. Walmart having stuff in front like mcDonalds, Nails, Hair cut)
Leased Department advantages/disadvantages - Correct Answer ✔✔ Advantages
provides one-stop shopping to customers
lessees handle management
reduces store costs
provides a stream of revenue
Disadvantages
lessees may negate store image (MAC at Macy's)
procedures may conflict with department store
problems may be blamed on department store rather than lessee
Destination Retailer - Correct Answer ✔✔ Some combination of price-oriented and cost
efficient, exclusive merchandise, and superior customer service to make it a destination
Wide or deep merchandise strategy
(Exm. Trader Joe's, IKEA, Bass Pro Shop)
