247. (p. 133) A merger involving a commercial bakery and a grocery retailer would be an example of a:
D. conglomerate merger.
248. (p. 133) A merger involving a major candy company and a steel producer would be an example of a:
A. vertical merger.
249. (p. 133) In a leveraged buyout, the managers of a firm, its employees, or other investors attempt to:
A. move the company elsewhere and start over.
250. (p. 133) When a firm is taken private, its stock is:
A. converted into bonds.
251. (p. 134; Dealing with Change box) According to the boxed material in Chapter 5 entitled “Dealing with Change,”
which of the following results from the wave of mergers and acquisitions that occurred during the last decade is
most likely to occur?
A. A few large companies will come to dominate most major U.S. industries.
252. (p. 133) Continental Foods is looking at a possibility of agreeing to a conglomerate merger. A likely reason
Continental may be looking at this type of merger is a desire to:
A. expand its market share.
253. (p. 133) Trans Globe Airlines has recently looked into a merger with Royal Blue Airlines, a financially
troubled rival. The firms believe the merger will create a stronger company that can offer travelers more flights
to a wider variety of destinations. This proposed merger is an example of a:
A. conglomerate merger.
254. (p. 133) Hair’s to You, a nationwide network of hair styling salons, recently approached Flair All, Inc., a
maker of hair care products, about the potential for a merger. Many of Flair All’s products are used by
professional hair stylists, and Hair’s to You believes that such a merger would ensure a supply of good quality
products for use in its salons. If the firms do merge, it would be an example of a:
D. diagonal merger.
255. (p. 133) The strategy of investors who are attempting a leveraged buyout is to:
D. use investment tax credits from the government to acquire all of the physical assets owned by the firm.
256. (p. 133) Mel is a major stockholder in Precision Transmission Services (PTS), a nationwide network of
transmission repair shops founded by his father. Currently, PTS stock is sold on the open market, but Mel has
talked to several relatives about his desire to get all of the PTS stock back in his family’s hands. Mel is
interested in:
D. forming a master limited partnership.
257. (p. 134) A ___________ is an arrangement whereby someone with a good idea for a business sells the rights
to use the business name and to sell a product or service to others in a given territory.
A. conditional grant
258. (p. 134) A(n) _____________ is someone who has a good idea for a business and who sells the right to use
the business name and to sell a product or service within a given territory.
A. intrapreneur
259. (p. 134) A person who buys the right to use a business name and sell a product within a given territory is
called a:
D. venture capitalist.
260. (p. 135) A franchise can be formed:
A. only as a general partnership.
261. (p. 135) The most popular type of business for franchising is:
D. medical services.
262. (p. 134) A ____________ is the share of profits or percentage of sales a franchisee pays to a franchisor.
D. co-pay
263. (p. 135) Which of the following is an advantage of franchises?
A. shared profit
264. (p. 135) One reason franchises have become so popular is that this arrangement provides the franchisee with:
D. the right to retain all profits earned by their franchise.
265. (p. 138) Women and minorities:
A. now own more than 60 percent of all franchise outlets.
266. (p. 139) Women have:
D. greater access to credit than men do.
267. (p. 140) Global franchising offers:
A. few opportunities for American investors.
268. (p. 141) Opening and operating a franchise in a different country:
A. is illegal according to the Clayton Antitrust Act.
D. desire to streamline their communication with employees, customers, and vendors.
270. (p. 140) _____________ is by far the most popular target for American franchisors seeking to establish
franchises in other countries.
D. Japan
271. (p. 135-136) 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
272. (p. 136) Mary is interested in becoming a franchisee in Cactus Katie’s Grill, a very successful fast food chain
specializing in food dishes from the American southwest. Which of the following problems is Mary most likely
to encounter if she agrees to become a franchisee?
D. lack of managerial assistance
273. (p. 137) Marco is a franchisee with Daggies, a chain of sandwich shops. His business was doing well until
several Daggies franchisees got in trouble and were forced to close their shops. Soon afterward, Marco’s
business deteriorated and he too was forced to close. This is an example of:
D. management by exception.
274. (p. 139) Which of the following statements identifies an advantage for women who have become franchisors
in recent years?
A. The federal government has offered a series of special financial incentives to women to encourage them to
convert their businesses into franchises.
275. (p. 140-141) 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.
276. (p. 137; Legal Briefcase box) According to the boxed material entitled “Legal Briefcase,” if a franchise opportunity
sounds too good to be true, you:
D. should try to become the franchisor rather than the franchisee.
277. (p. 134) Daggie’s Sandwiches, Inc., sells the rights to use its name and sell its sandwiches in a given market
area to aspiring business people who are willing to pay agreed upon fees and meet certain contractual terms.
Daggie’s:
D. offers a tax-free investment potential.
278. (p. 134) Midas Muffler sells franchises to prospective businesspersons who want to use the Midas name and
offer Midas products. In a franchise arrangement, Midas would be the__________, and the buyer of the
franchise is the __________.
A. owner; limited partner
279. (p. 138; figure 5.8) Which of the following statements about buying a franchise is most accurate?
D. Buying a franchise is the simplest and least expensive way to set up a business, since the franchisor has
already worked out all of the details for setting up and running the business.
280. (p. 140) Which of the following statements about operating a U.S.-based franchise in a foreign country is
most accurate?
A. U.S.–based franchises are most likely to succeed in a foreign market if they use the same strategies and
procedures used by franchises in the United States.