Franchising in small business MCQs

Franchising in small business MCQs

Try to answer these 20+ Franchising in small business MCQs and check your understanding of the Franchising in small business subject. Scroll down and let's begin!

1: Business-format Franchising is a type of franchising in which the franchisee adopts the franchisor’s _____ of operation.

A.   Incomplete method

B.   Limited method

C.   Entire method

D.   All of the above

2: Information that franchisors are required to provide to potential franchisees is known as?

A.   Cash flow statement

B.   Profit-and-Loss Statement

C.   Disclosure Statements

D.   None of them

3: Due Diligence is the process of thoroughly investigating the accuracy of information after signing a franchise (or any other) agreement.

A.   True

B.   False

4: Franchise is an illegitimate license to operate an individually owned business as part of a larger chain.

A.   True

B.   False

A.   True

B.   False

6: The small businessperson who purchases the franchise so as to sell the _____ of the franchisor.

A.   Product

B.   Service

C.   Both a and b

D.   None of them

7: Franchise fee is the _____ made to become a franchise.

A.   One time payment

B.   Yearly payment

C.   10 Years of payments

D.   None of them

8: Franchisor is the parent company that _____ to franchisees.

A.   Develops a product

B.   Business process

C.   Sells the rights

D.   All of them

9: Product distribution franchising is a type of franchising in which the franchisee agrees to ?

A.   Purchase the products of the franchisor

B.   Use the franchisor’s name

C.   Both a and b

D.   None of them

10: Royalty fees are the ongoing payments that franchisees pay to franchisors—usually a percentage of _____.

A.   Gross profit

B.   Gross sales

C.   Net sales

D.   Net Profit

11: The small business person who purchases the franchise in order to sell the product or service is known as the ______.

A.   Franchisor

B.   Franchisee

C.   Company of origin

D.   Opening company

12: While traveling across country over the summer, Gwen and Audrey stayed in well-known, franchised accommodations rather than opting for independent, unknown motels. This example demonstrates which advantage to franchisees?

A.   Efficiency

B.   Financial assistance

C.   Professional guidance

D.   Proven product

13: From the perspective of the ______, the biggest advantage is the expansion of distribution sources with limited equity investments.

A.   Customer

B.   Employee

C.   Franchisor

D.   Franchisee

14: A type of franchise in which the franchisee agrees to purchase the products of the franchisor or use the franchisor’s name is called ______.

A.   Product-distribution franchise

B.   Business-format franchise

C.   Dealership franchise

D.   Logo franchise

A.   Franchise agreement

B.   Disclosure statement

C.   Contract

D.   Business obligation

16: Business-format franchising is commonly used in which of the following?

A.   Gasoline stations

B.   Soft-drink bottlers

C.   Car dealerships

D.   Fast-food restaurants and lodging establishments

17: Which of the following can significantly reduce costs for a franchisee and thus increase profit margins?

A.   Controlled expansion

B.   Franchise fees

C.   Bulk purchasing

D.   Advertising costs

18: Most franchise contracts run ______.

A.   Indefinitely

B.   From 1 to 5 years

C.   From 15 to 20 years

D.   From 5 to 15 years

19: The major trade association of franchising is the ______.

A.   International Franchise Association

B.   American Franchisee Association

C.   American Association of Franchisees and Dealers

D.   Global Franchise Association

20: Saving money on inventory needs, equipment, and supplies is an advantage for the franchisee that is called ______.

A.   Recognized standards

B.   Marketing expertise

C.   Efficiency

D.   Professional guidance

21: A problem with the cost of purchasing a franchise is that the franchisee is usually required to raise most of the capital ______.

A.   Before beginning operations

B.   Within one month of beginning operations

C.   Within six months of beginning operations

D.   Within one year of beginning operations

22: A McDonald’s hamburger that tastes the same at any location in the world is an example of which of the following benefits to the franchisee?

A.   Recognized standards

B.   Marketing expertise

C.   Efficiency

D.   Professional guidance

23: Identification of risks, fees, benefits, and restrictions of operating a franchise would be included in the ______.

A.   Disclosure statement

B.   Franchise agreement

C.   Franchise contract

D.   Purchase agreement

24: The ongoing payments that franchisees pay to franchisors--which are usually a percentage of gross sales--are known as ______.

A.   Franchise agreement

B.   Franchise fee

C.   Royalty fee

D.   Initial investment fee

25: The biggest disadvantage to the franchisor is which of the following?

A.   Profit sharing

B.   Disputes with franchisees

C.   Loss of control

D.   Communication breakdowns

26: A starbucks franchise located inside a target store is called ______ franchising.

A.   Folded

B.   Internalized

C.   Cooperative

D.   Piggyback.