Tutorial 12 (Week 7)

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  • Topic: Franchising, International Franchise Association
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  • Published : March 14, 2012
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Tutorial 12 (week 7)

Topic 5: Franchising


1.| According to our textbook, which of the following is not a quality to look for in prospective franchisees? | | a.| individual, rather than team-oriented |
| b.| ability to follow instructions |
| c.| experience in the industry in which the franchisee operates | | d.| ability to operate with minimal supervision |
| e.| adequate financial resources and a good credit history | Answer: A

2.| According to a concept called ________ theory, it is more effective for the units of a growing chain to be run by franchises than by managers, because managers are usually paid a salary, and may not be as committed to the success of their individual units as franchisees, who are in effect the owners of the units they manage. | | a.| agency | d.| leadership |

| b.| stimulus | e.| motivation |
| c.| control | | |
Answer: A

3.| According to the textbook, from the franchisor's point of view, the primary disadvantage of franchising is that: | | a.| it is not legal in 11 states |
| b.| an organization allows others to profit from its trademark and business method | | c.| franchise organizations consistently makes less money than alternative forms of business ownership | | d.| it typically takes longer to grow an organization via franchising than company-owned stores | | e.| the franchisees, rather than the franchisor, typically makes most of money | Answer: B

4.| Because franchisees put their personal capital at risk, they are highly motivated to make their franchise outlets successful. According to the textbook, this advantage of franchising a business is referred to as: | | a.| franchisee owner-incentive | d.| institutional theory | | b.| franchisee impulse | e.| franchisee motivation | | c.| agency theory | | |

Answer: E

5.| Which of the following was not identified in the textbook as one of the disadvantages of franchising a business? | | a.| loss of control | d.| differences in required business skills | | b.| friction with franchisees | e.| legal expenses | | c.| franchisee motivation | | |

Answer: C

6.| According to the textbook, which of the following is not a cost that is typically associated with buying a franchise? | | a.| intellectual capital fees |
| b.| capital requirements |
| c.| continuing royalty payment |
| d.| advertising fees |
| e.| initial franchise fee |
Answer: A

7.| Which of the following statement is not correct regarding the costs associated with purchasing a franchise? | | a.| The franchisee typically pays a royalty based on a percentage of weekly or monthly net income. | | b.| Capital costs vary by franchisor, but may include the cost of buying land and building a building. | | c.| Additional fees may be charged for activities such as training staff, providing management expertise when needed, and providing computer assistance. | | d.| Franchisees are often required to pay into a national or regional advertising fund. | | e.| The initial franchise fee varies, depending on the franchisor. | Answer: A

8.| Franchisors are required by law to disclose all their costs in a document called the: | | a.| Fairness in Franchising Certificate | d.| Standardized Franchise Code | | b.| Consistent Franchise Offering Code | e.| Franchise Code of Conduct | | c.| Franchise Disclosure Document | | |

Answer: C

9.| In the majority of cases, a franchisee pays the franchisor a royalty based on: | | a.| a predetermined fixed weekly or monthly amount |
| b.| weekly or monthly net income |
| c.| the size of the franchise outlet |
| d.| weekly or monthly gross income |
| e.| the age of the franchise outlet |
Answer: D

10.| Which of the following statement is incorrect regarding...
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