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Chapter 05 - How to Form a Business
5-121
Opening and operating a franchise in a different country:
A. Is illegal according to the Clayton Antitrust Act.
B. Is no different than setting up a franchise in the domestic market.
C. May require the owner to adapt to social and cultural differences.
D. Is much less risky than owning a domestically based franchise.
317. Franchisors may send reverse royalties to franchisees who:
A. Have not yet created their own web site.
B. Feel their sales have been hurt by the franchisor's Internet sales.
C. Are using e-commerce to expand their sales territory.
D. Desire to streamline their communication with employees, customers, and vendors.
318. _____________ is by far the most popular target for American franchisors seeking to
establish franchises in other countries.
A. Canada
B. Mexico
C. Great Britain
D. Japan
319.
Chapter 05 - How to Form a Business
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Franchised businesses are successful (both domestically and internationally) because:
A. They require very little start-up revenue.
B. People prefer the owners and employees of franchised businesses.
C. Laws require franchisors to provide the same level of service to franchisees.
D. Customers like the predictability of the product and/or service.
320. An evaluation of franchising would conclude that this type of arrangement:
A. Has become the dominant form of business organization in the United States because it
has many advantages and almost no disadvantages.
B. Appeals to people who want to own a business, but are not comfortable starting a
company from scratch.
C. Has a much higher risk of failure than independent companies.
D. Has little chance of success outside the United States because many foreign countries
do not allow such arrangements.
Feedback: An advantage of franchising is that it allows franchisees to own their business
while taking advantage of an established name and product.
321.
Chapter 05 - How to Form a Business
Which of the following statements best summarizes the experience of American
franchisors in foreign countries?
A. Very few American franchisors of any size have had success in international markets.
B. Large franchisors have had success in other nations, but newer and smaller franchisors
have lacked the financial strength and reputation to succeed in global markets.
C. The only nations in which American franchisors have achieved any success are Great
Britain and Mexico.
D. Both large and small franchises have found success in foreign countries by providing
convenience and a predictable level of service and quality.
Feedback: Literally hundreds of U.S.-based franchisors have outlets in foreign countries.
Even new and relatively small franchisors are finding success in other countries. The key to
international success in franchising is the same as the key to success in the United States:
providing the customer with convenience and a predictable level of service and quality.
322. One important consideration when prospecting for a good franchise business is:
A. The saturation rate of the franchise. The more saturation the better.
B. The market potential for the product or service, at the prices you need to charge.
C. The population level of the area where you will operate. Large populations are too
overwhelming, often needlessly increasing demand.
D. A limited disclosure statement, and being mindful that any disclosure statement may
limit your success.
Feedback: The market potential is very important. Your goal should be to establish yourself
with a franchisor whose product or service has increasing demand in the area where you will
operate. You do not want your idea to be saturated in your territory. You will want the
franchisor to offer full disclosure of rules, policies, and procedures.
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338. In a cooperative, members/customers:
A. Democratically control their businesses by electing a board of directors.
B. Are known as limited partners.
C. Each have unlimited liability for the debts of the firm.
D. Take turns serving on the board that manages the company.
339. People who form cooperatives:
A. Believe the government should play a larger role in the economy.
B. Dislike the notion of having owners, managers, and customers as separate individuals
with separate goals.
C. See competitive behavior as the key to ensuring rapid economic growth.
D. Want to find a way to supply basic necessities free of charge to everyone.
Feedback: People who form cooperatives dislike the notion of separating owners, managers,
and customers into separate groups with separate goals. They tend to favor more cooperation
and a more equal distribution of wealth.
340.
Chapter 05 - How to Form a Business
A distinguishing feature of a cooperative is that it:
A. Maintains a distinct separation between ownership and management.
B. Is only intended to operate for a limited period of time.
C. Is owned and operated by the people who use it.
D. Can have no more than 75 owners, all of whom must be citizens of the United States.
Feedback: A cooperative is an organization that is owned and operated by the people who use
it—producers, consumers and workers with similar needs who pool their resources for mutual
gain.
341. Which of the following statements about farm cooperatives is most accurate? Farm
cooperatives have:
A. Declined in importance in recent years.
B. Become a major force in American agriculture.
C. Run afoul of U.S. antitrust laws in recent years.
D. Increased in number, but decreased in size in recent years.
Feedback: Statistics and examples cited in the text clearly indicate that farm cooperatives,
such as Sunkist, Land O'Lakes, Blue Diamond, and Ocean Spray, are a major force in U.S.
agriculture.
342.
