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Chapter 16—Franchise Marketing Channels
MULTIPLE CHOICE
1. Which of the following statement most accurately describes a franchise channel?
a.
It is just a source of information for consumers.
b.
Franchise channels only offer services to consumers.
c.
It is a form of wholesale management.
d.
It is a type of marketing channel.
e.
It is a legal term for retailing.
2. Which of the following statements are relevant to the definition of, “franchise”?
a.
A franchise is a legal agreement.
b.
In a franchise, two parties are involved, the franchisee and franchisor.
c.
In a franchise, parties are independent.
d.
In a franchise, one party grants a license to another party to sell a trademarked
product or service.
e.
All of the above statements are accurate.
3. Product distribution franchises:
a.
Are a new form of Internet franchise.
b.
Mean franchisees license its trademarked product (or services) to franchisors.
c.
Suggests the franchisor provides relatively little in the way of management
assistance to the franchisees.
d.
Exist only in industries that manufacture appliances.
e.
Are rare in automobile and soft drink channels.
4. In product distribution franchises:
a.
Franchisors provide significant operational assistance to franchisees.
b.
The franchisor licenses its trademarked products to franchisees.
c.
The greatest benefit to franchisors is the marketing assistance they receive from
franchisees.
d.
Franchisors spend billions of dollars annually to keep franchisees trained.
e.
Franchisees provide significant operational assistance to franchisors.
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5. Which of the following statements is true regarding, business format franchises?
a.
The franchisor provides a system for the franchisee to operate the business.
b.
Franchisee operational efficiency is more important than working relationships
between franchisors and franchisees
c.
The franchisor provides little beyond a license to use its trademarked products.
d.
They are most common among automobile and soft drink channels.
e.
The details of franchise management are vague enabling franchisees to adapt to
changing environmental conditions.
6. In business format franchises the franchisor provides the complete system for operating the
business. This includes all of the following except:
a.
Marketing strategy.
b.
Financial control procedures
c.
Training.
d.
System to network with competing franchises.
e.
Quality control standards.
7. Which of the following statements best describes franchise channel structure?
a.
It is generally structured between domestic and international channels.
b.
It has a negative image in marketing
c.
It has had a detrimental effect on customer participation
d.
It is structured between single-unit and multi-unit franchises.
e.
It is the basis for mass merchandising.
8. Which of the following is a true statement pertaining to single-unit franchises?
a.
This is the most common form of franchise channel structure.
b.
All franchisees operating under single-unit franchises own and operate one unit.
c.
These franchises operate in environments with little competition.
d.
Single-unit franchises enjoy a favorable image among consumers.
e.
Single-unit franchises are a very low-cost method of selling.
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9.The difference between single-unit and multi-unit franchises is:
a.
Only franchisees operating multi-unit franchisees can own more than a single
franchise..
b.
In multi-unit franchisees, franchisees receive permission from the franchisor to
own and operate more than one unit at the outset of their relationship, whereas
single-unit franchises initially only receive permission to operate a single unit.
c.
Multi-unit franchises require the franchisor to provide greater operational
assistance to their franchisees than do they do for single-unit franchises.
d.
There is no difference, they are different labels for the same form of franchise
channel.
e.
None of the above.
10. Which of the following statements is true about franchising?
a.
It is a channel used exclusively for distribution of consumer durable goods.
b.
The franchisee and franchisor are linked by a bond of voluntary cooperation rather
binding contracts.
c.
Generally, franchise marketing channels are more closely knit (i.e., closer
relationships) than conventional channels.
d.
The challenges managing a franchise channel are fundamentally the same as those
encountered in conventional channels.
e.
All of the above statements are true.
11. Franchise fees:
a.
Compensate the franchisee for the use of its trademark.
b.
Pay for all physical assets (e.g., equipment and building), needed to operate the
franchise.
c.
Is usually a one-time flat fee paid by franchisees to franchisors.
d.
Is based on a percentage of the franchisee’s gross sales.
e.
Is a government tax to register the franchise.
12. A regular and continuous fee paid to the franchisor by the franchisee is called:
a.
Payroll tax.
b.
Sales tax.
c.
Franchise fee.
d.
Usage tax.
e.
Royalty fee
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13.The franchise distribution system is composed of approximately _________ franchise business
establishments that provide more than 11 million jobs.
a.
900
b.
9,000
c.
90,000
d.
900,000
e.
9,000,000
ANS: D (p. 450)
14. Business format franchises are prevalent in which of the following businesses?
a.
Automotive
b.
Business services.
c.
Lodging.
d.
Real estate.
e.
All of the above.
15. As it pertains to the scope and importance of franchising, which of the following statements is
most accurate?
a.
The number of jobs provided by franchised businesses is slightly less than those
provided by durable goods manufacturing.
b.
Franchising and franchise channels continue to grow dramatically
c.
While the number of franchises has grown, the number of kinds of franchises has
remained constant
d.
Franchising is an American business model that does not work well outside the
U.S.
e.
Franchising and franchising channels are not growing in other developed countries.
16. Three major reasons that explain why franchisors distribute via franchise channels are:
a.
(1) reduce uncertainty; (2) obtain training; and (3) obtain assistance from
franchisee.
b.
(1) capital advantages, (2) potential to reduce distribution costs, and (3) possible
high level of managerial motivation fostered by franchising.
c.
(1) capital advantages, (2) obtain training; and (3) obtain assistance from
franchisee
d.
(1) capital advantages, (2) potential to reduce distribution costs, and (3) obtain
assistance from franchisee.
e.
(1) reduce uncertainty; (2) obtain training; and (3) possible high level of
managerial motivation fostered by franchising.
Marketing Channels 8e
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17. According to the text, the most important reason why franchisors adopt franchise channels is:
a.
Capital advantages
b.
Obtain needed training from franchisees
c.
Potential to reduce distribution costs
d.
Reduce uncertainty
e.
Possible high level of managerial motivation fostered by franchising
18. The reasons given in the text to explain why franchisees participate in franchising include all of the
following except:
a.
Capital advantages
b.
Obtain needed training and assistance from franchisors
c.
Franchisor trademarked product has high recognition among consumers
d.
Reduced uncertainty
e.
Prospects for making adequate returns often higher than is the case for independent
businesses
19. One downside for franchisors participating in franchise channels is:
a.
Increased management flexibility
b.
Low expectations among franchisees
c.
Increased regulatory scrutiny.
d.
Limited independence of the franchisee.
e.
All of the above are about equal.
20. The ___________ is a contract linking all franchisees to the franchisor.
a.
Uniform Franchise Offering Circular (UFOC)
b.
Royalty agreement
c.
Franchise agreement
d.
Uniform Code of Justice (UCJ)
e.
None of the above
Franchise Marketing Channels
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21. The downsides for franchisees participating in franchise channels include all of the following
except:
a.
The obligation to provide a percentage of their gross revenues to the franchisor as
royalty payments.
b.
If a one member of the franchise system generates negative publicity, all
franchisees in the system may suffer.
c.
Negative halo effect.
d.
Limited independence of the franchisee.
e.
Increased regulatory scrutiny.
22. Regarding the issue of control of franchisees by franchisors, which of the following is most
accurate?
a.
Firms selling heavy industrial machinery are most likely to use the franchise model
to control product distribution.
b.
The business franchise model is always an appropriate model to ensure a high
degree of control, regardless of the industry.
c.
Companies like Proctor & Gamble frequently use the franchise channel model for
distribution of consumer goods.
d.
Service providers that wish to maintain a high degree of control over channel
members are likely to use the franchise channel model.
e.
The desired degree of control of franchisees by franchisors is not relevant to the
decision by franchisors to use the franchise channel model.
23. Why does the selection of channel members pose a peculiar, paradoxical challenge for the
franchisor?
a.
Because franchisors want franchisees who are highly motivated but not
entrepreneurial.
b.
Because franchisors want franchisees who are self-motivated, entrepreneurial but
willing to accept direction from the franchisor.
c.
Because franchisors want franchisees who are extremely independent and creative.
d.
Because franchisors want franchisees who are able and willing to modify the fran-
chise model to adapt to local consumer demand.
e.
Because franchisors want franchisees who can conduct business without direction.
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24.How does the motivation of franchise channel members differ from the motivation of channel
members in conventional channels?
a.
Unlike conventional channel management, the motivation of franchise channel
members is unnecessary.
b.
The motivation of franchise channel members addresses support and assistance for
known problems.
c.
The motivation of franchise channel members requires leadership on a continuing
basis.
d.
The motivation of franchise channel members is the same as in conventional chan-
nels.
e.
The motivation of franchise channel members has less to do with cooperation and
partnerships than in conventional channels.
25. As it pertains to the motivation of franchisees, which statement is generally false?
a.
Communications between franchisors and franchisees is one-way, performance
data that flows from the franchisee to the franchisor.
b.
Communications between franchisors and franchisees is two-way, performance
data that flows from the franchisee to the franchisor, and information about
franchisee needs and problems that flows back to the franchisor
c.
The franchisor needs to be aware of the limits of his/her response to franchisee
needs imposed by the franchise agreement.
d.
Franchisors have limited flexibility to respond to each franchisee issue and
problem owing to the nature of the franchise agreement.
e.
The franchisor’s responses are constrained by the programmed business format and
the franchise agreement.
26. Regarding the interfaces between channel management and other marketing mix variables that
exist in franchise channels, which statement is most accurate?
a.
The implementation of marketing mix variables in franchise channels is less fluid
and flexible than in conventional channels.
b.
Strategies related to marketing mix elements can be easily modified in franchise
channels.
c.
The Internet has enhanced franchise marketing.
d.
There are no differences between managing marketing mix elements in franchise
channels versus conventional channels.
e.
In franchise channel management, the nature of the product is the main
determinant of marketing mix elements.
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27. Which two factors are especially relevant in the scope and frequency of franchisee evaluations by
franchisors?
a.
Degree of control and importance of channel members
b.
Importance of channel members and nature of product
c.
Nature of product and number of channel members
d.
Number of channel members and degree of control.
e.
Number of manufacturers in the industry.
28. With regard to the evaluation of franchisee performance and degree of control:
a.
The generally low level of control that a franchisor has over the franchisee enables
the franchisor to request and receive a great deal of performance data.
b.
The generally low level of control that a franchisor has over the franchisee
suggests that the franchisor to can only request performance data infrequently.
c.
Franchisors are able to request and receive various data except data that pertains to
cleanliness of facilities and employee training procedures.
d.
Franchisor access to franchisee performance data is similar to data in conventional
channels by channel members.
e.
The high degree of control by the franchisor helps to provide a guaranteed,
detailed, and regular flow of performance data that benefits both parties.
29. As it pertains to the scope and frequency of franchisee evaluations, which statement about the
importance of channel members is true?
a.
Because the franchisees are the sole source of franchisor’s revenues, and
franchisees represent the contact points with customers, each franchisee is
important.
b.
All franchisees should be considered important to the franchisor regardless of their
size.
c.
Each franchisee “carries the banner” of the franchisor.
d.
The performance of any franchisee can affect the brand equity of the franchise.
e.
All of the above statements are true.