126. All of the following are franchise establishments except
a. McDonald’s.
b. Walmart.
c. Holiday Inn.
d. Avis.
e. Dairy Queen.
127. There are three general types of franchising arrangements. In one approach, the franchisor authorizes retailers to
sell a particular brand-name item. This type of arrangement is common in all of the following areas except
a. the soft-drink industry.
b. truck and car sales.
c. shoe sales.
d. the gasoline industry.
e. paint sales.
128. Your friend has just been awarded a franchise in a particular industry. He explains that his franchisor has licensed
him to sell and distribute a product to retailers. Knowing that this type of franchise arrangement is most common in
one particular industry, you suspect that your friend has obtained a franchise in the industry.
a. gasoline
b. automobile sales
c. soft-drink
d. fast-food
e. furniture
129. Which of the following is not a franchise establishment?
a. Holiday Inn
b. AAMCO Transmissions
c. Avis
d. JCPenney
e. KFC
130. Which form of franchising is the most common today?
a. Franchising has become a very unpopular option and is used infrequently today.
b. A manufacturer authorizes a number of retail stores to sell a certain brand-name item.
c. A producer licenses distributors to sell a given product to retailers.
d. A distributor authorizes a producer to make and sell a given product to the ultimate consumer.
e. A franchisor supplies brand names, techniques, or other services instead of a complete product.
131. In the early days of franchise agreements, franchising was used primarily for automobile dealerships and
a. auto-parts stores.
b. dry cleaners.
c. fast-food outlets.
d. larger restaurants.
e. service stations.
132. Manju Iyer asks for your advice in opening a new business. She plans to provide tax-related services to individuals
and small-business owners in her community. Of course, she wants an attractive means of starting and operating
her business with a reasonable hope of succeeding in it. What will be your advice?
a. Start your own independent business.
b. Form a partnership with a CPA.
c. Consider purchasing a franchise.
d. Forget about opening the business because it is too risky.
e. First secure a loan from the Small Business Administration.
133. Doug has always wanted to operate his own fast-food restaurant, but he knows the high failure rate of restaurants.
To increase his chances of success, he should consider
a. getting a loan from the SBA.
b. buying a franchise of a well-established restaurant.
c. hiring only highly educated employees.
d. not having a drive-through at his restaurant.
e. saving money by selling low–quality food.
134. Carmen Catucci is considering going into business. She wants to offer an income tax service. To minimize her
chances of failure, she might consider
a. buying a franchise.
b. starting from scratch.
c. dealing only with wealthy people.
d. trying to enter the manufacturing industry instead.
e. borrowing money from the SBA.
135. You stop at a SUBWAY to get a sandwich for lunch and you notice that they now have TCBY yogurt. This is an
example of a
a. co-branded establishment.
b. franchise.
c. small business.
d. dual-sponsored business.
e. dual-branded franchise.
136. Which statement best describes the general success rate for franchises?
a. Franchises, like other small businesses, have a very high rate of failure.
b. Franchises are slightly more successful overall than other types of businesses.
c. Franchises have about a 50 percent chance of being successful.
d. Franchises have a very high success rate compared to other small businesses.
e. Obtaining a franchise is a guarantee for a successful business.
137. All of the following are advantages to the franchisor except
a. fast and selective distribution of products.
b. no involvement in national advertising campaigns.
c. assurance of how the outlets will be maintained and operated.
d. gains from the franchisee’s high motivation.
e. a freeing up of capital for expansion of goods and services.
138. Which of the following is an advantage to the franchisor in a franchise agreement?
a. Opportunity to start a business with limited capital
b. Access to local advertising materials
c. Fast and selective distribution of products
d. Chance to participate in national advertising
e. Chance to minimize costs through cooperative buying
139. Tim owns a McDonald‘s franchise that is having some troubles. Where is Tim most likely to go for advice and
guidance?
a. The franchisor
b. The SBA
c. SCORE
d. Restaurant consultants
e. Chamber of Commerce
140. Natalie owns a highly successful bakery and coffee shop, Mocha & Muffins. Others have expressed interest in
starting nearly identical shops at various locations. Natalie decides to sell franchises of Mocha & Muffins. Why is
this option a less expensive way to increase the distribution of her treats?
a. She will only have to build as many shops as there are available franchisees.
b. The franchisees will be highly motivated to succeed.
c. She will not incur the high costs of constructing and operating more shops.
d. She will be able to obtain low-interest loans for the new locations.
e. She will be able to offer the franchisees free advice about their shops.
141. Kevin has considered selling franchises of his very successful hardware store. However, he is concerned that the
franchises will destroy the reputation of the company and end up hurting his business. What advice would you give
Kevin?
a. He should not sell franchises because he will have no control over how the franchisees operate their
businesses.
b. He should instead raise the capital to build and operate the new stores himself because this is a cheaper way
to expand.
c. He should hire the managers of the new franchises so that he has control over their operations.
d. Through the franchise agreement, he can ensure that the new stores are operated according to his own
standards.
e. Although he will have a little control over how the franchises operate, he will not be able to influence their
advertising or level of service.
142. Sarah owns a 7-Eleven franchise. What is the primary disadvantage of owning a franchise for Sarah?
a. She has to pay royalties to the franchisor.
b. She cannot use her name as the restaurant name.
c. The franchisor still retains a great deal of control.
d. Sarah is not allowed to hire her own employees.
e. Sarah may not find ways to improve operations.
143. Which statement best characterizes the relationship between franchisor and franchisee in recent years?
a. Disagreements between the two parties have increased, and contract disputes are the cause of many
lawsuits.
b. The relationship between franchisor and franchisee has become so hostile that it is threatening the continued
existence of franchised businesses.
c. Occasional disputes arise between franchisor and franchisee, but legal action is rarely taken.
d. The relationship between these two parties is good because both parties benefit when the franchisee is
successful.
e. Once the franchise agreement is finalized, these two parties have very little to do with one another.
144. Which of the following was established to arbitrate disputes between franchisors and franchisees?
a. Court system
b. Federal Trade Commission
c. National Franchise Mediation Program
d. Partnership for Franchisees’ Rights
e. Association for Franchise Arbitration
145. Evan Dean owns a Wendy‘s franchise. Evan feels that the franchisor is hurting his business by forcing him to use
certain high-priced suppliers. The franchisor says that this power is implied in the franchise agreement. Who is
likely to arbitrate this dispute?
a. Wendy’s CEO
b. Evan Dean
c. The court system
d. National Franchise Mediation Program
e. Wendy’s corporate lawyers
146. What do franchisees typically have to pay to the franchisor?
a. One-time franchise fee
b. Monthly royalties based on sales
c. Nominal fee for business knowledge
d. Approximately half of the franchise’s profits each month
e. One-time franchise fee and monthly royalties based on sales
147. Chelsea is about to purchase a Baskin-Robbins franchise because she loves ice cream. How much work should
Chelsea expect to have to do to make the franchise successful?
a. Most franchisees simply hire managers to run the operations, so she will have to work very little.
b. She will need to work about twenty hours a week to make sure things are running smoothly.
c. She should expect to work very hard, putting in long hours about six days a week.
d. She will have to work a standard forty-hour work week, just as she did at her previous corporate job.
e. Her franchising agreement likely requires her to be at the store whenever it is open.
148. All of the following are disadvantages to the franchisee except
a. a loss of control.
b. continuing royalty fees.
c. hard work.
d. a fee for advertising.
e. starting a business with limited capital.
149. The SBA is offering to help the nation‘s small-business owners enter world markets. SBA assistance includes all of
the following except
a. counseling on how to enter markets overseas.
b. counseling on where to enter markets overseas.
c. matching U.S. small-business executives with potential overseas customers.
d. bringing small U.S. firms into direct contact with potential overseas buyers and partners.
e. offering long-term loans to U.S. business owners.
150. Which of the following organizations aids small businesses with selling overseas?
a. The U.S. Commercial Service
b. The World Bank
c. The International Monetary Fund
d. Multinational Development Bank
e. The Small Business Institute
151. The SBA has defined a small business as one independently owned, operated for profit, and not dominant in its
field.
a. True
b. False
152. Few Americans take advantage of their freedom to start a business.
a. True
b. False
153. Small businesses operate only in the service industry, not in manufacturing.
a. True
b. False
154. Service industries make up about 48 percent of all small businesses.
a. True
b. False
155. About three-quarters of all small businesses are in the service industry.
a. True
b. False
156. The various types of businesses attracting small business are generally grouped into service industries, distribution
industries, and financial industries.
a. True
b. False
157. About half of small businesses are in the production industries.
a. True
b. False
158. Small businesses are generally managed by professional managers.
a. True
b. False