Franchising Management Final Exam
Course Introduction
Franchising Management explores the principles, strategies, and practicalities involved in establishing, operating, and expanding franchise businesses. This course covers the legal and financial frameworks of franchising, the roles and responsibilities of franchisors and franchisees, and the development of franchise agreements. Students will analyze case studies, evaluate franchise models, assess site selection and marketing strategies, and learn risk management techniques. Emphasis is placed on ethical considerations, current trends, international franchising, and best practices for maintaining brand consistency and operational success.
Recommended Textbook
Franchising 4th Edition by Richard J. Judd
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22 Chapters
209 Verified Questions
209 Flashcards
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Page 2
Chapter 1: Franchising: History and Overview
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Sample Questions
Q1) The business arrangement,otherwise called a franchise opportunity,has three major components that constitute the essence of what is generally referred to as a franchise.Which one of the following is not part of a franchise business arrangement?
A)use of product or service
B)use of private labels to brand or trademark product or service
C)a franchisor's trademark and/or logo
D)payment of a royalty fee
Answer: B
Q2) In the franchise industry,the person or business providing the rights to an individual for the local distribution and/or sales of a specified product or service is called the:
A)franchisee
B)district developer
C)franchisor
D)city council
Answer: C
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3
Chapter 2: Recognizing Franchising Opportunities
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Sample Questions
Q1) Which one of the following is NOT an advantage of franchising for the franchisee?
A)established product or service
B)technical and managerial assistance
C)quality control standards
D)expansion
Answer: D
Q2) Capital requirements that a potential franchisee must consider prior to becoming part of a franchise system include each of the following except for:
A)franchising fee
B)startup expanses and inventory
C)personal entertainment expenses
D)working capital
Answer: C
Q3) Which of the following is a disadvantage for the franchisor?
A)franchisee motivation
B)bulk purchasing
C)loss of freedom and control as franchise system grows
D)use of capital for reasons other than expansion
Answer: C
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Chapter 3: The Franchisor Business Plan
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Sample Questions
Q1) What is the first step to good site selection?
A)examining a number of sites in terms of their "need" and forecasting demand
B)determining markets in a geographical area with suitable customer demographics
C)selecting the market area with the best combination of demographics in the area
D)determining the appropriate building size and layout
Answer: B
Q2) The most important section of the business plan is:
A)The Management Segment
B)The Executive Summary
C)The Marketing Segment
D)The Legal Requirements
Answer: B
Q3) Which of the following is often referred to as the franchisee's "bible"?
A)the franchisor's business plan
B)the franchising agreement or contract
C)the PERT chart
D)the operations manual
Answer: D
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5
Chapter 4: Franchisor Management, Organization and Administrative Policy
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Sample Questions
Q1) Which one of the following statements is true?
A)Eighty percent of all new products introduced into the marketplace are not accepted and withdrawn.
B)About 75% of U.S.adults are unhappy with their work.
C)About fifteen percent of all marriages in North America fail.
D)A new business is started about every minute in North America
Q2) There are four types of growth opportunities for franchise systems to increase sales and share-of-market within their customer base.Which one below is not one of these tried-and-true approaches for growth?
A)Retain existing customers.
B)Stimulate more purchase within your existing customer base.
C)Offer new products/services in new territories to new customers
D)Cross-sell complementary products/services that meet new or a different combination of existing customer needs.
Q3) Often,strategic initiatives fail because:
A)They are seen as extra work to be accomplished in addition to existing work.
B)They are not announced at a party at the home office.
C)Being strategic,they are developed only the owner/franchisor
D)Competition finds out about them,and beats the firm "to the punch."
Page 6
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Chapter 5: The Franchise Marketing Process
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Sample Questions
Q1) Why would a franchise system monitor its external environment?
A)to identify factors which may pose major threats to or provide significant opportunities for the franchise system.
B)to develop a set of objectives to fit the mission and overall goals of the franchise system.
C)to concentrate resources outside of the firm more than inside of the firm.
D)to second-guess what its suppliers intend to do next.
Q2) The category most franchise systems are in is the one that has focus on product or service qualities or characteristics with prices being a second-level or a lower order concern to the purchaser.Identify which generic category fits most franchise systems below.
A)convenience goods or services
B)homogeneous sopping goods or services
C)heterogeneous shopping goods or services
D)special products or services
Q3) Which one of the following is Not one of the "Four P's" in marketing?
A)product
B)process
C)price
D)promotion
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Chapter 6: Selling Franchises and Marketing Research
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Sample Questions
Q1) Which of the following is NOT one of the four P's of selling?
A)power
B)pleasure
C)profit
D)practice
Q2) How might you describe the professional approach to sales?
A)talks 70%,listens 30%
B)pushy
C)customer oriented
D)faster
Q3) How much of successful selling consists in simply listening to the prospective buyer?
A)5%
B)25%
C)50%
D)80%
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8
Chapter 7: Co-Branding
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Sample Questions
Q1) Approximately what percentage of food franchises are co-branded units?
A)5 %
B)20%
C)50%
D)75%
Q2) What crucial element is necessary for the success of co-branding partners?
A)sufficient time to integrate the brands
B)natural synergy between the brands
C)distinctive differences between the brands
D)a strong personal relationship between the franchisors
Q3) What factor generally determines which co-branding method is chosen by a franchisor?
A)expertise
B)personal preference
C)profit potential
D)none of these is a determining factor.
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Chapter 8: Managing the Franchisors Operations Process
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Sample Questions
Q1) The primary administrative costs of administering a franchise program typically include those of:
A)clarifying and disseminating costs of operation about the prototype unit
B)hiring and training salespeople to recruit or solicit prospective franchisees
C)running background checks on the director of franchising and the initial salespeople hired to sell franchises
D)developing an estimate of the number of franchisees to be recruited and signed in the first year of franchising
Q2) The general purpose of a promotions package by the franchisor to potential franchisees is to:
A)solicit and sign franchisees
B)inform potential franchisees about the business in general terms only
C)learn as much about potential franchisees while sharing limited brochure materials about the franchise system, D)none of the above
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10
Chapter 9: Location and Site Selection
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Sample Questions
Q1) Which of the following types of businesses benefit from being located near competitors?
A)unique business
B)comparative business
C)competitive business
D)none of these types benefits from being located near competitors.
Q2) Which philosophy of expansion is,as a rule,the best method for franchisors?
A)the shotgun approach
B)the rifle shot approach
C)seeding
D)whichever method the franchisor deems appropriate for a their particular business
Q3) Which of the following sequences of the three-step location model is correct?
A)BPI,DMAs,Individual Site Analysis
B)DMAs,Individual Site Analysis,BPI
C)DMAs,BPI,Individual Site Analysis
D)Individual Site Analysis,DMAs,BPI
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Chapter 10: Accounting and Financial Statements:
Presentation and Uses
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Sample Questions
Q1) Franchisors capitalizing or financing their businesses are generally required to disclose three key financial statements.Which of the following is not one of those statements?
A)income statement or operating statement
B)balance sheet or statement of financial position
C)net profit statement or bottom line
D)cash flow or cash budget statement
Q2) A franchise's economic figures must be recorded,then transferred and balanced before final calculations can be determined.Which of the following sequences indicates the path taken by these figures during the accounting process?
A)journal,general ledger,financial statements
B)general ledger,journal,financial statements
C)financial statements,journal,general ledger
D)journal,financial statements,general ledger
Q3) What do financial ratios analyze?
A)the "bottom line"
B)the return to the franchised business owner
C)the "net" profit
D)all of the above
12
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Chapter 11: Financial Management and Fiscal Planning
Tools and Techniques
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Sample Questions
Q1) "Pro forma" accounting statements as used in business financial planning means:
A)actual accounting of income and expenses
B)actual accounting of assets and liabilities
C)a statement of anticipated costs and revenues or change in assets,liabilities and equity based upon prior (operating)financial performance.
D)none of the above
Q2) Often considered the most critical financial component of working capital is
A)marketable securities
B)inventory management and recovery
C)cash
D)accounts receivable
Q3) To fund a franchise business,most franchisee use:
A)a single source of funding
B)multiple sources of funding
C)already have sufficient liquidity to fund the startup and need no additional funding
D)none of the above
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13
Chapter 12: Information Systems in Franchising
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Sample Questions
Q1) What is the primary purpose of information systems in a large franchise?
A)to increase profits
B)to generate data which can be used to accumulate working knowledge
C)to leverage working knowledge
D)both a and c
Q2) Which of the following is NOT an element of virtual relationship management in e-business strategy?
A)collaboration with suppliers through Internet
B)collaboration with suppliers through Extranet
C)collaboration with consumers through Internet
D)intra-enterprise collaboration through Intranet
Q3) What is the primary purpose of information systems in a mid-size franchise?
A)to improve operations at franchisor's headquarters
B)to leverage working knowledge
C)to generate data which can be used to accumulate working knowledge
D)to increase profits
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14
Chapter 13: Franchise Legal Documents
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Sample Questions
Q1) Why do most franchisors use the UFOC format for disclosure?
A)not all states accept the FTC rule format.
B)the UFOC covers more ground than the FTC rule format.
C)the FTC rule format covers more ground and is more complicated to use.
D)the UFOC is accepted in more registration states than the FTC rule format.
Q2) Which of the following allows a developer to build a num?ber of franchised businesses in a particular market area?
A)Franchise Agreement
B)Sub-Franchising Contract
C)Area Development Agreement
D)UFOC
Q3) What sort of disclosure document is required by the FTC Rule?
A)the format prescribed by the FTC
B)the UFOC,or uniform franchise offering circular
C)both of the above formats
D)one of the above formats
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15
Sample Questions
Q1) Which of the following documents outlines how the intellectual property of the franchise is to be used by the franchisee?
A)the Confidentiality Agreement
B)the Intellectual Property Contract
C)the Franchise Agreement
D)the Operations Manual
Q2) Which of the following is a protectable property right granted by the government that protects an invention,new device,or innovation?
A)patent
B)copyright
C)trade secret
D)trademark
Q3) When do copyright laws go into effect for a written work?
A)when the work is published
B)when the work is written
C)when the work is registered
D)when a copyright notice is attached to it
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Chapter 15: Investigating Franchise Opportunities
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Sample Questions
Q1) Popular franchise directories,which may be the primary first step in information collection for prospective franchisees include all but one of the following.Which should not be included?
A)the Franchise Handbook
B)the New York Times
C)the Executive Guide to Franchise Opportunities
D)the Franchise Opportunities Guide
Q2) The Disclosure Document in franchising means the same as:
A)Uniform Franchise Offering Circular
B)"Rule 245" of the Sherman Anti-Trust Act
C)the Walsh-Healy Act of 1970
D)the commitment to no "tying" agreements between franchise systems.
Q3) Rule 436 is a rule issued by ( )provides franchisors and franchisees with certain legal rights under federal law.
A)Interstate Commerce Commission
B)Department of Commerce
C)Federal Trade Commission
D)U.S.Small Business Administration
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Chapter 16: Financing Your Franchised Business
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Sample Questions
Q1) The primary goal of any franchise company is to:
A)make a Profit
B)have ever-increasing sales
C)expand internationally
D)lobby Congress for exceptions to Rule 436.1.
Q2) The executive summary part of the financial package
A)details how the business intends to generate its profit through the descriptions of products or services offered by the franchisee
B)explains the business,and sparks the interest of the reader in how the funds will be used
C)enumerates all expenses necessary before the first customer enters the door
D)focuses on the franchising agreement between franchisor and franchisee so the reader understands all contracts,licenses and other legal requirements of the business.
Q3) The franchisee's major financial obligation is to:
A)the Internal Revenue Service
B)one's State Department of Revenue
C)City or County health department
D)the franchisor
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Chapter 17: Marketing the Franchisee Business
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Sample Questions
Q1) Over time,most franchisors have developed a system for providing marketing services to franchisees.These services usually include three of the following.Which service is generally not included?
A)stock-option purchase into the franchise system itself
B)a franchisee's grand opening package
C)continuing advertising support
D)other marketing and promotional items
Q2) A market can be defined by four of the following means.Which one below is not considered as a primary means to define a market?
A)type of product/service offered
B)robot-analyzed menu choices based upon on-site traffic
C)customer characteristics
D)geography
E)specific location
Q3) Marketing research in franchising is done primarily by
A)the franchisor
B)the independent franchisees
C)both franchisor and franchisee collaboratively
D)contracted outside survey research firms.
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Page 19
Chapter 18: Managing the Franchisee Business Stage Six:
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Sample Questions
Q1) Which of the following is not usually a component of the Franchise Defense Manual?
A)written records of all promises made by the franchisor
B)sale policies and positions of the franchisor
C)pricing policies
D)all of the above should be a part of the Franchise Defense Manual
Q2) Which of the following is not typically a franchisee "right" granted in the written franchising agreement?
A)right to transfer or sell the business
B)right to relocate within a designated sales area
C)right to develop and sell new products or services
D)fair and equitable performance standards
Q3) As stated in the text,all of these items are among the ten most common legal problems of franchisees except:
A)sharing advertising costs
B)minimum performance requirements
C)fees for support services
D)correct information being provided to the IRS
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Chapter 19: The Franchising Relationship
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Sample Questions
Q1) What can a franchisor do to enhance awareness in the franchisor-franchisee relationship?
A)encourage the formation of local or regional clubs for franchisees
B)offer awards or performance incentives to successful franchisees
C)take periodic surveys to monitor franchisees' feelings and concerns
D)all of the above
Q2) Which of the following best describes the franchisor-franchisee relationship?
A)steering-power/pedal-power
B)superior/subordinate
C)partnership
D)A or C but not B
Q3) How should a FAC be developed?
A)independently by the franchisor
B)independently by the franchisee
C)by the franchisor in cooperation with all the franchisees and corporate headquarters
D)by the franchisor and franchisees only
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Chapter 20: Franchiser Support Services Stage Seven:
Current Issues in Franchising
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Sample Questions
Q1) Why is an effective communication system so important for a franchise?
A)an effective communication system helps the franchise look organized.
B)an effective communication system helps attract more franchisees.
C)an effective communication system will affect the franchise's success and foster continued growth and development of the franchise.
D)an effective communication system will affect the franchise's success,foster continued growth and development of the franchise,and ensure effective superior-subordinate relationships.
Q2) What is required of the person in charge of a franchisee training program?
A)experience as a franchisor
B)understanding of the needs of the particular franchised business
C)knowledge about the training process
D)both b and c
Q3) What is the greatest support for a franchisee?
A)a good training manual
B)lots of start-up capital
C)the opportunity for success
D)frequent contact with field representatives
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Chapter 21: Social Responsibility and Business Ethics
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Sample Questions
Q1) Which of the following is NOT an argument for businesses to be socially responsible:
A)to create a positive public image for the business
B)to discourage further government regulations
C)social responsibility is a core business purpose
D)to enhance stock price of the firm in the long run
Q2) Which of the following are factors in identifying and transmitting values to future generations?
A)family
B)laws
C)education
D)all of the above.
Q3) Business social responsibility
A)obligations are easily defined
B)is a matter of complying local,state and federal laws and regulations
C)is supported by a broad public mandate
D)consists of the obligations a business has to society
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Chapter 22: International Franchising
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Sample Questions
Q1) The largest U.S.franchise restaurant system in China is
A)McDonald's
B)KFC
C)Wendy's
D)Burger King
Q2) A product strategy which involves changing the product to meet local conditions and consumer demands is called:
A)product conversion
B)product adaptation
C)straight product utilization
D)product invention
Q3) The most common restrictions levied by a government in international trade are?
A)quotas
B)tariffs
C)embargo
D)exchange controls
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