Chapter 6: Franchising and the Entrepreneur
Learning Objectives
1. Describe the three types of franchising: trade
name, product distribution, and pure.
2. Explain the benefits and the drawbacks of
buying a franchise.
3. Understand the laws covering franchise
purchases.
4. Discuss the right way to buy a franchise.
5. Outline the major trends shaping franchising.
Class Instruction
Introduction
The number of franchises has grown tremendously. The number of U.S.
franchises has increased consistently since the 1970s, and the continued growth
since the mid–1980s documents that franchises continues to play a significant
role in the U.S. and world business economy.
Franchising is
a business structure comprised of semi–independent business owners (referred to
as the franchisees) that pay fees and royalties to a parent company (referred
to as the franchiser) in return for the right to be identified with its
trademark, to sell its products or services, and often to use its business
format and system.
The connection between the franchiser and the franchisee is a unique and
often a highly structured and defined business relationship regarding:
·
Site selection
·
Design
·
Employees
·
Products and services
·
Prices
·
Purchasing
·
Advertising
·
Quality control
·
Support
Types of Franchises LO 1
There are three
types of franchising systems:
1.
Tradename
franchising
2.
Product
distribution franchising
3.
Pure (or comprehensive
or business format) franchising
One of the
primary reasons for interest in a franchise system is that the franchisee is
able to tap into the proven experience and guidance that the franchise offers.
The Benefits of Buying a Franchise LO 2-A
Benefits of franchising include:
·
Management
training and support
·
Brand name
appeal
·
Standardized
quality of goods and services
·
National
advertising programs
·
Financial
assistance – Refer to Figure 6.3: Franchisor Financial Assistance
·
Proven products
and business formats
·
Centralized
buying power
·
Site selection
and territorial protection
·
Greater chance
for success
These benefits
have proven to have a positive impact on the success rate of franchises,
beginning in the first year of operation, compared to nonfranchise ventures.
The Drawbacks of Buying a Franchise LO 2-B
There are some negative
attributes of buying a franchise and those include:
·
Franchise fees
and profit sharing
·
Strict
adherence to standardized operations
·
Restrictions on
purchasing
·
Limited product
line
·
Unsatisfactory
training programs
·
Market
saturation
·
Less freedom
The 10
myths regarding franchising as described in Table 6.1: 10 Myths of
Franchising include:
1. Franchises will be safer and will not
fail
2. Franchises will be economical
3. Franchises will be more successful
based on its size
4. Franchises will be able to have
improvement potential
5. Franchises will be “all the same”
6. Franchises will enable the owner to be
removed from day–to–day management
7. Franchises will be a business anyone
can do
8. Franchises will be the cheapest
business option
9. Franchises will be taking care of my
business problems
10. Franchises will be a business “I” can
run things the way “I” want to
Franchising and the Law LO 3
In response to
problems that occurred in the 1950s to the franchising boom and the associated
franchisers who defrauded their franchisees, strict laws attempt to prevent
such behavior.
Franchise Disclosure Document (FDD): In 2008, the FTC replaced the Uniform
Franchise Offering Circular (UFOC) with the Franchise Disclosure Document
(FDD). The FDD establishes full disclosure and guidelines for the franchising
company. The FDD requires all franchisers to disclose detailed information to
prospective franchisees before any offer or sale of a franchise. This document
contains 23 major topics in its disclosure statement.
Trade Regulation Rule: Enacted by the Federal Trade Commission (FTC) requiring
all franchisers to disclose detailed information on their operations at the
first personal meeting or at least ten days before a franchise contract is
signed, or before any money is paid. In this section, the twenty–three major
topics required by the Trade Regulation Rule are discussed as well.
Red flags to
detect dishonest franchisers occur when franchises:
·
Fail to provide
sufficient documentation
·
Have marginally
successful or no prototypes
·
Offer a poorly
prepared operations manual
·
Promise future
earning with no documentation
·
Demonstrate a
franchise turnover or termination rates
·
Experience an
unusual amount of litigation by franchisees
·
Discourage
having your attorney review the contract
·
Have no written
documentation
·
Exert a high
degree of pressure
·
Claim to be
exempt from federal disclosure laws
·
Promise high
profits with minimal effort
·
Are reluctant
to provide a list of referral franchisees
·
Respond with
evasive, vague answers to your questions
Potential
franchisees need to be aware and cautious when they see these signs. These
issues may indicate that there are real concerns and, in the worst-case
scenario, deception.
The Right
Way to Buy a Franchise LO 4
The steps to consider buying a franchise
are:
1.
Evaluate
yourself
2.
Research your
market
3.
Consider your
franchise options
4.
Get a copy of
the franchiser’s FDD
5.
Talk to
existing franchisees
6.
Ask the
franchiser some tough questions
7.
Make your
choice
Factors that
make a franchise appealing include an association with:
·
A unique
concept
·
The potential
profitability
·
The benefits of
a registered trademark
·
A proven
business system
·
Training
programs
·
Its
affordability
·
The
relationships with other franchisees:
Trends Shaping Franchising LO 5
Franchising has
experienced three major growth waves since its beginning with fast–food
activity in the 1970s, service businesses in the 1980s, and low–cost franchises
that focus on specific market niches. Today, franchisees are better educated,
are more sophisticated, have more business acumen, and are more financially
secure than those of the past. Other trends include:
·
International opportunities: Franchising is becoming a major U.S.
export industry. About 52 percent of U.S. franchisers have outlets in other
countries.
·
Smaller, nontraditional locations: Due to high costs of building
full–scale locations, franchises are putting scaled–down outlets directly in
the path of customers in places such as college campuses, grocery stores, gas
stations, theaters, and airports.
·
Conversion franchising: Owners of independent businesses become franchisees to
gain the advantage of name recognition.
·
Multiple–unit franchising: A franchisee opens more than one unit
in a broad territory within a specific time period. “Franchisers are finding
it’s far more efficient in the long run to have one well–trained franchisee
operate a number of units than to train many franchisees.”
·
Area Development and Master franchising: A franchisee is
given the right to create a semi–independent organization in a particular
territory to recruit, sell, and support other franchisees. Under area
development the franchisee earns the exclusive right to open multiple
units in a specific territory within a specified time. A master franchise is a
method that gives a franchisee the right to create a semi-independent
organization in a particular territory to recruit, sell, and support other
franchises.
·
Cobranding: Franchisers team up with other franchisers selling
complementary products or services by combining two or more franchises under
one roof.
Conclusion
Franchising is
a significant force in the U.S. and world economy. The franchise experience
offers entrepreneurs, regardless of their experience or background, the ability
to own and operate their own business with guidance and support increasing the
chance for success.
Chapter Discussion Questions
1. What is
franchising? (LO 1)
Franchising
involves semi–independent business owners (franchisees) that pay fees and
royalties to a parent company (franchiser) in return for the right to sell its
products or services and often to use its brand, logo, business format and
system.
2. Describe
the three types of franchising and give an example of each. (LO 1)
The three types of franchising with
examples are:
1.
Trade name franchising: The franchisee purchases the right to use the
franchisor’s trade name without distributing particular product under the
franchisor’s name. Examples include True–Value Hardware and Western Auto.
2.
Product distribution franchising: Involves a franchiser licensing a franchisee to sell
specific products under the franchiser’s brand name and trademark through a
selective, limited distribution network. Examples include Exxon, Chevrolet, and
Pepsi Cola.
3.
Pure franchising: Involves providing the franchisee with a complete
business format. Examples include Burger King, H&R Block and Hampton
Hotels.
3. Discuss
the advantages and the limitations of franchising for the franchisee.
(LO 2)
(LO 2)
The benefits of buying a franchise
include:
·
Management training and support – Franchisers provide training programs for franchisees
in an attempt to reduce failures due to incompetent management.
·
Brand name appeal – Franchisee has the ability to identify his business
with a widely recognized product or service, giving the firm immediate drawing
power.
·
Standardized quality of goods and services – Since the quality of the product or
service sold determines the franchiser’s reputation, he maintains uniform
quality standards.
·
National advertising programs – Franchisers design mass advertising programs that
accomplish more than the franchisees could achieve individually.
·
Financial assistance – Entrepreneurs may be able to purchase franchises for
less money requirements than what it costs to start businesses from scratch,
and some franchisers offer financial help.
·
Proven products and business formats – Franchisees can depend on an
established product and business system.
·
Territorial protection – Franchisees are guaranteed territorial protection in
some cases; they have the right to exclusive distribution of the
product/service in this territory.
·
Greater chance for success – The failure rate for franchisees is substantially lower
than that of independent businesses.
The drawbacks of buying a franchise
include:
·
Franchise fees and profit sharing – Franchisees are required to pay initial franchise fees
plus a share of gross receipts throughout the life of the franchise
arrangement.
·
Strict adherence to standardized operations – The franchisee may be restricted in
his freedom to make decisions about business operations.
·
Restrictions on purchasing – Franchisees frequently are required to purchase goods
or services from approved vendors.
·
Limited product line – Franchise agreements normally require franchisees to
sell only approved products and services from the outlet.
·
Unsatisfactory training programs – Some franchisers do not deliver all they promise in a
“franchisee training program.”
·
Market saturation – Some franchisers do not offer franchisees territorial
protection and the market becomes oversaturated.
·
Less freedom – When a franchisee signs a contract, he is agreeing to sell the
franchiser’s product or service following its prescribed formula. In essence,
there is a lack of independence.
4. Why
might an independent entrepreneur be dissatisfied with a franchising
arrangement? (LO 2)
Franchisees surrender a degree of
autonomy and creativity when signing a franchise agreement. Many entrepreneurs
feel stifled by the controls imposed on them by franchisers, and they resist
them. In many cases, the franchisee becomes an “employee” or a “junior partner”
of the larger franchise. In some situation, the franchise system may impose
decisions that increase franchise revenues, but have a negative impact on the
profit potential for the individual franchisee.
5. Fran
Lubbs, who after a five-year stint left the corporate office of Goddard School,
an early education franchise, to become a franchisee, says, “Follow the system.
It’s one of the reasons you bought the franchise. Don’t try to change it, break
it, or fix it.” Do you agree with her? Explain.
(LO 2)
Expect student
to agree with the perspective Lubbs offers for well-established franchise
systems. Franchises with an established history are proven systems based on
previous business experience. They have been modified and apply best practices
based on extensive experience and performance. Modifying the business process
may introduce risk and uncertainty.
Students may
debate that smaller franchises with a limited history may not offer this type
of legacy track record. The attributes of a less mature franchise may benefit
from modifications and improvements.
6. What
kinds of clues should tip off a prospective franchisee that he/she is dealing
with a disreputable franchiser? (LO 3 and
4)
The following clues should tip off a
prospective franchisee that he is dealing with a disreputable franchiser:
·
Claims that the
franchise contract is a standard one that “you don’t need to read.”
·
A franchiser
who fails to give you a copy of the required disclosure document at your first
face–to–face meeting.
·
A marginally
successful prototype store or no prototype at all.
·
A poorly
prepared operations manual outlining the franchise system or no manual at all.
·
Oral promises
of future earnings without written documentation.
·
A high
franchisee turnover rate or a high termination rate.
·
Attempts to
discourage you from allowing an attorney to evaluate the agreement.
·
No written
documentation to support claims and promises.
·
A high–pressure
sale with the implication to sign now or lose the opportunity.
·
Claiming to be
exempt from federal laws requiring complete disclosure of franchise details.
·
“Get–rich–quick
schemes”; promises of huge profits with only minimum effort.
·
Reluctance to
provide a list of present franchisees for you to interview.
·
Evasive, vague
answers to your questions about the franchise and its operations.
7. What
steps should a potential franchisee take before investing in a franchise? (LO 4)
The following steps will help you make
the right choice:
1.
Evaluate yourself: An entrepreneur should first know his own traits, goals,
experience, likes, dislikes, risk–orientation, and other characteristics.
2.
Research your market: Get to know the market and the area you plan to serve.
3.
Consider your franchise options: Read trade journals such as Franchise Opportunities Guide, published by the International
Franchise Association. Many magazines such as Entrepreneur, Inc., and
Success offer information about franchising.
4.
Obtain a copy of franchiser’s FDD: This document summarizes the details
that will govern the franchise agreement. It outlines exactly the rights and
obligations of the franchisee.
5.
Talk to existing franchisees: One of the best ways to evaluate the
reputation of a franchiser.
6.
Ask the franchiser the tough questions: Gather as much information regarding
the franchise beforehand.
8. Two
franchising experts recently debated the issue of whether new college graduate
should consider franchising as a pathway to entrepreneurship. (The text elaborates on these two
positions.) Which view do you think
is correct? (LO 2 and
4)
Expect students
to select one position and defend it. The Kushell position supports the fact that entrepreneurs are younger and
better informed than ever before.
Pro College Students:
Many of these young entrepreneurs are technically proficient, are energetic,
have an intimate understanding of their peer market, and may be highly creative
in identifying market needs and solutions. This group also brings a fresh
viewpoint and an ability to see beyond obstacles.
Con College Student:
One of the most significant challenges college students face is due to their
inexperience. The learning curve can introduce uncertainty and risk. In
addition, their youth may not be taken seriously when working with older
business people and engaging in business transactions. Securing financing may
prove to be an example of these types of challenges.
9. What
is the FTC’s Trade Regulation Rule? Outline the protection the Trade Regulation
Rule gives all prospective franchisees. (LO 3)
The Trade Regulation Rule requires all
franchisers to disclose detailed information on their operations at the first
personal meeting or at least ten days before the franchise contract is signed,
or before any money is paid. Its purpose is to help potential franchisees
investigate the franchise deal and to introduce consistency into the
franchiser’s disclosure statements. It does not verify the accuracy of the
data, thus no protection is provided. This information may serve as a starting
point for investigation.
10. Describe
the current trends in franchising. (LO 5)
Current trends in franchising include:
·
International opportunities: Franchising is becoming a major U.S.
export industry. About 52 percent of U.S. franchisers have outlets in other
countries.
·
Smaller, nontraditional locations: Due to high costs of building
full–scale locations, franchises are putting scaled–down outlets directly in
the path of customers in places such as college campuses, grocery stores, gas
stations, theaters, and airports.
·
Conversion franchising: Owners of independent businesses become franchisees to
gain the advantage of name recognition.
·
Multiple–unit franchising: A franchisee opens more than one unit
in a broad territory within a specific time period. “Franchisers are finding
it’s far more efficient in the long run to have one well–trained franchisee
operate a number of units than to train many franchisees.”
·
Area Development and Master franchising: A franchisee is
given the right to create a semi–independent organization in a particular
territory to recruit, sell, and support other franchisees. Under area
development the franchisee earns the exclusive right to open multiple
units in a specific territory within a specified time. A master franchise is a
method that gives a franchisee the right to create a semi-independent
organization in a particular territory to recruit, sell, and support other
franchises.
·
Cobranding: Franchisers team up with other franchisers selling
complementary products or services by combining two or more franchises under
one roof.
11. One
franchisee says, “Franchising is helpful because it gives you somebody [the
franchiser] to get you going, nurture you, and shove you along a little. But,
the franchiser won’t make you successful. That depends on what you bring to the
business, how hard you are prepared to work, and how committed you are to
finding the right franchise for you.” Do you agree? Explain. (LO 4)
It is true that franchising allows a
franchisee to begin with a given structure, and establishes rules and
guidelines for the business. While these “givens” do help, they will not make
the franchisee successful. The franchisee must contribute to the business.
Characteristics such as enthusiasm and commitment are not a part in the plan
“given” to the franchisee by the franchiser. These things must come from within
the franchisee and be communicated throughout the organization in order for it
to be successful.
12. Robyn
Vescovi, a former financial executive who recently became a Tasti D-Lite
franchisee, offers the following advice to first-time franchisees:
Do your homework: (The
text elaborates on these four points positions.)
·
Research the brand.
·
Know the team behind this brand and
understand their vision for that product/business.
·
Know yourself and your limits.
·
Be involved!
(LO
4)
Expect students to state their position
regarding the “homework” that Vescovi recommends. The following consideration
may be a part of their position to support Vescovi’s perspective.
·
Understand what you are buying into: Does the brand have value to the market
you plan to serve and is this a brand you can support and sell?
·
Know the people behind the brand: Are these people you can work with and become a part of
the team that pursues a common vision?
·
Evaluate yourself: Have you assessed your own traits, goals, experience,
likes, dislikes, risk–orientation, and other characteristics. Do they match
those of the franchise?
·
Commit: This experience
will become a significant part of your life and you need to invest in the franchise
any many ways – time, money and energy. .
Chapter Overview
1. Describe the three types of
franchising: trade name, product distribution, and pure.
- Trade-name franchising involves a franchisee purchasing the right to become affiliated with a franchisor’s trade name without distributing its products exclusively.
- Product distribution franchising involves licensing a franchisee to sell products or services under the franchisor’s brand name through a selective, limited distribution network.
- Pure franchising involves a selling a franchisee a complete business format.
2. Explain the benefits and the
drawbacks of buying a franchise.
- Franchises offer many benefits: management training and support, brand-name appeal, standardized quality of goods and services, national advertising programs, financial assistance, proven products and business formats, centralized buying power, territorial protection, and a greater chance of success.
- Franchising also suffers from certain drawbacks: franchise fees and profit sharing, strict adherence to standardized operations, restrictions on purchasing, limited product lines, unsatisfactory training programs, market saturation, and less freedom.
3. Explain the laws covering
franchise purchases.
The FTC requires all franchisors to
disclose detailed information on their operations in a UFDD at the first
personal meeting or at least 14 days before a franchise contract is signed or
before any money is paid. The FTC rule covers all franchisors. The UFDD
requires franchisors to provide information on 23 topics in their disclosure
statements. The UFDD is an extremely helpful tool for prospective franchisees.
4. Discuss the right way to buy a
franchise.
The following steps will help you
make the right franchise choice: evaluate yourself, research your market,
consider your franchise options, get a copy of the franchisor’s UFOC, talk to
existing franchisees, ask the franchisor some tough questions, and make your
choice.
5. Outline the major trends shaping
franchising.
Key trends shaping franchising today
include the changing face of franchisees; international franchise
opportunities; smaller, nontraditional locations; conversion franchising;
multiple-unit franchising; master franchising; and cobranding (or combination
franchising).
Self-Study Review
1. Which of the following is an
accurate description of a franchise system?
A) A franchise system is one in which a parent company purchases
hundreds of smaller companies, often started by entrepreneurs.
B) A franchise system is a scheme in which an individual at the top of
a hierarchical structure makes an income from residuals of the commissions of
those beneath him.
C) In a franchise
system, a semi-independent owner pays fees and royalties to a parent company
for the right to sell its products and/or services.
D) A franchise system is one in which the parent company builds many
different locations of an original successful business.
E) A franchise system is one in which an original company decides to
open hundreds of international locations.
See page 195 for help in selecting this answer.
2. ________ is where the
franchisee purchases the right to use all of the elements of a fully integrated
business operation.
A) Pure
franchising
B) Segment franchising
C) Trademark franchising
D) Multiple franchising
E) Product distribution franchising
See "Types of Franchising," page
196–197.
3. Why is the purchase of a
franchise sometimes considered to be a better option than starting a business
independently, from scratch?
A) The upfront costs are lower for the rights to a franchise than they
are for a new independent business.
B) The franchiser will absorb the first few years' losses as a part of
the services provided.
C) The franchisee
receives a business system, training, support, advice, and brand recognition
that an independent entrepreneur would not receive.
D) The franchisee receives a portion of the profits of the parent
company, whereas the independent entrepreneur would not.
E) The franchiser will come into the franchisee's company and operate
it until it becomes profitable, which would never be an option for the
independent entrepreneur.
See "The Benefits of Buying a
Franchise," pages 198–204.
4. Since franchises are so
widespread, often nationally and internationally interspersed, how is
advertising handled between the franchiser and franchisee?
A) The franchiser does all of the marketing for the franchisee, in
return for royalties.
B) The franchisee pays the franchiser to arrange for all of the
advertising that is to be performed.
C) The franchiser puts national ads in the papers and on the
television, and anything else is up to the franchisee.
D) The franchisee
pays a marketing fee to support company-wide advertising, and is also often
required to spend a predetermined amount on advertising in the local market to support
her location.
E) There is no prevalent pattern for how advertising is conducted
within a franchise system. It varies from franchise to franchise.
See "National Advertising Programs,"
page 200.
5. Which of the following is NOT
considered to increase the success rate of franchisees when included by the
franchise, as noted in a recent survey.
A) Requires prior industry experience
B) A strong brand name
C) No absentee ownership
D) Offers training programs to improve knowledge and skills
E) Provides
financial assistance
See "Greater
Chance for Success," pages 202–204.
6. Where can an entrepreneur
find the most accurate information about the total cost of opening a certain
franchise?
A) In the local newspaper
B) Franchise
Disclosure Document
C) On the parent company's web site
D) From other entrepreneurs that have opened the franchise
E) From the government offices of the state wherein the parent company
has incorporated
See "Franchising
and the Law," page 207–211.
7. The following are all factors
to consider whether you are franchise material.
A) Patience
B) General business skills
C) People skills
D) Leadership ability
E) All of the
above
See "Are You Franchise Material? - Table
6.2," page 212.
8. Which of the following is a
factor that can signal that a franchiser does NOT have underlying issues?
A) Reassurance that there is no need to read the contract - his word is
as strong as oak
B) Reassurance that there is no need to go to the expense of hiring an
attorney - her attorney will help you through the confusing parts
C) Promises that you will earn your required rate of return, without
documentation of this outcome from other locations
D) A low franchisee
turnover rate
E) Presentation of a one-time only, sign-today discount on franchise
fees
See "Get a Copy of the Franchisor's
FDD," pages 213–214.
9. Which of the following
characteristics would suggest that a franchise might prove to be a good
business opportunity?
A) The franchise's business concept has already been proven by a number
of established competitors in the marketplace offering the same product.
B) The franchise offers a hot, trendy product that is unproven in the market.
C) The franchise is so new that it has not been covered by the media,
and thus you will be one of the first franchisees in the nation.
D) Favorable
information from past franchisees
E) The franchise turnover rate is around 25%.
See "Talk to Existing Franchisees,"
pages 214–215.
10. What current trends are
impacting franchising?
A) Multiple units
B) International potential
C) Master franchising
D) Smaller non-traditional locations
E) All of the
above
See "Trends
Shaping Franchising," page 216–223.
Chapter Review
1. __________ franchising
involves licensing the franchisee to sell specific products under the
manufacturer's brand name and trademark through a selective, limited
distribution network.
A) Tradename
B) Product distribution
C) Pure
D) Process
2. Which of the following is a
benefit of franchising to the franchisee?
A) A business system
B) National advertising programs
C) Brand name appeal
D) All the above
3. A proper location is critical
to the success of any small business and franchise is no exception.
True
False
4. Which one is NOT a drawback
of buying a franchise?
A) The franchisor
shares the learning curve with the franchisee.
B) Franchise fees and ongoing royalties.
C) Strict adherence to standardized operations.
D) Restrictions on purchasing.
5. Which of the following are
clues that should arouse suspicion of an entrepreneur about to invest in a
franchise?
A) A marginally successful prototype store or no prototype at all.
B) No written documentation to support claims and promises.
C) Evasive, vague answers to questions about the franchise and its
operation.
D) All of the
above.
6. When researching a potential
franchise market, which of the following is an important question to ask?
A) How strong is the competition?
B) Who are the potential customers?
C) What gaps exist in the market?
D) All the above.
7. All of the following
characteristics make a franchisor stand out EXCEPT:
A) A unique concept or marketing approach.
B) Profitability.
C) A big
billboard.
D) Affordability.
8. Which one of these is NOT an
advantage of buying a new franchise instead of an established franchise?
A) Potential for
high return on investment.
B) Business concept is not tested or established.
C) Possibility of lower fees as a "pioneer" of the concept
D) All the above
9. Which of the following
characteristics of a franchise system does NOT increase the success rate of
franchisees?
A) Franchisees have industry experience.
B) Franchisees must not be absentee owners.
C) Franchise has built a strong brand name.
D) Franchise does
not offer training programs designed to improve franchisees' knowledge and
skills.
10. A large number of companies
are no longer piggybacking or engaging in combination franchising.
True
False
11. The person or company that
offers a franchise for purchase is called the _____.
A) licensor
B) franchisee
C) franchisor
D) licensee
12. Which of the following
statements is true about owning a franchise?
A) The franchisee has as much freedom to make decisions as any other
entrepreneur.
B) The franchisee does not have to depend on the performance of the
other franchisees in the chain.
C) When the franchise expired, the franchisee has the right to renew
the agreement.
D) The franchisor
offers management and technical assistance to the franchisee.
13. Franchise sellers are
required by law to give potential franchisees, in writing, the number and
percentage of owners who have done as well as the sellers claim the franchisee
will do.
True
False
14. Jason purchased a franchise
agreement for $12,000. The first year, the franchise earned $20,000. He paid
the franchise company 5 percent royalty and 3 percent advertising fees for the
year. What was the total amount Jason paid in royalty and advertising fees that
year?
A) $1,200
B) $960
C) $2,560
D) $1,600
15. What is piggybacking?
A) A method of
franchising in which two or more franchises team up to sell complementary
products or services under one roof.
B) A franchising trend in which owners of independent businesses become
franchisees to gain the advantage of name recognition.
C) A system of franchising in which a franchisor sells a franchisee a
complete business format and system.
D) A system of franchising in which franchisee purchases the right to
use the franchisor's trade name without distribution particular products under
the franchisor's name.
16. What is trade name
franchising?
A) A system of franchising in which a franchisor sells a franchisee a
complete business format and system.
B) A system of
franchising in which franchisee purchases the right to use the franchisor's
trade name without distribution particular products under the franchisor's name.
C) A system of franchising in which franchisor licenses a franchisee to
sell its products under the franchisor's brand name and trademark through a
selective, limited distribution network.
D) A franchising trend in which owners of independent businesses become
franchisees to gain the advantage of name recognition.
16. What is conversion
franchising?
A) A franchising trend in which owners of independent businesses become
franchisees to gain the advantage of name recognition.
B) A system of franchising in which franchisee purchases the right to
use the franchisor's trade name without distribution particular products under
the franchisor's name.
C) A franchising trend
in which owners of independent businesses become franchisees to gain the
advantage of name recognition.
D) A method of franchising in which two or more franchises team up to
sell complementary products or services under one roof.
17. What is a Franchise
Disclosure Document?
A) A method of franchising in which two or more franchises team up to
sell complementary products or services under one roof.
B) A system of franchising in which a franchisor sells a franchisee a
complete business format and system.
C) A list of available franchises.
D) A document that every franchisor is required by law to give prospective franchisees before any offer or sale of a franchise; it outlines 23 important pieces of information.
D) A document that every franchisor is required by law to give prospective franchisees before any offer or sale of a franchise; it outlines 23 important pieces of information.
18. What is product distribution
franchising?
A) A system of
franchising in which franchisor licenses a franchisee to sell its products under
the franchisor's brand name and trademark through a selective, limited
distribution network
B) A system of franchising in which a franchisor sells a franchisee a
complete business format and system.
C) A method of franchising in which two or more franchises team up to
sell complementary products or services under one roof.
D) A franchising trend in which owners of independent businesses become
franchisees to gain the advantage of name recognition.
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