FRANCHISING

1. The legal written contract between the franchisor
and franchisee which tells each party what each is
supposed to do.

A) Business Format
B) Franchise Regulation
C) Franchise Agreement
D) Disclosure Statement

2. A system for expanding a business and
distributing goods and services - and an opportunity
to operate a business under a recognized brand
name.

A) Franchise Agreement
B) Franchising
C) Franchise
D) Franchise Contact

3. An entity who pays an initial fee and a continuing
fee for the use of the trade name and operating
methods.

A) Franchisor
B) Agent
C) Intermediary
D) Franchisee

4. An entity who provides support and, in some
cases, exercises some control over the way the
business operates under the brand.

A) Agent
B) Franchisor
C) Intermediary
D) Franchisee

5. In franchising, ________ pay fees and royalties to
a _________ in return for the right to sell its
products and services under the franchiser's trade
name and often to use its business format and
system.

A) Business Owner, Parent Company
B) Franchisor, Franchisee
C) Franchisee, Franchisor
D) Franchisee, Business Owner

6. The word "Franchising" was derived from the
French word that means:

A) Free from government
B) Free from independent business
C) Free from servitude
D) Free from standardization

7. Franchising is currently dominated by:

A) Auto dealers
B) Service-oriented business
C) Retail outlets
D) Fast food restaurants

8. In ________ franchising, a franchisee purchases
only the right to become identified with the
franchisors' trade name.

A) Pure
B) Conversion
C) Trade name
D) Product Distribution

9. A significant advantage a franchisee has over the
independent small business owner is participation in
the franchiser's ________.

A) Profits
B) Social gatherings
C) Centralized and large-volume buying power
D) Business policy

10. In franchising, the reputation of the franchisor is
dependent on:

A) The brand name recognition and appeal.
B) The rate of growth and the number of national outlets.
C) Their locations and popularity with the local customer.
D) The quality of the goods and services provided.

11. The primary advantage of buying a franchise
over starting your own business is:

A) In the purchase of franchisor's experience, expertise, and products
B) The fact it is much less expensive than doing your own business start-up
C) The extensive assistance offered in finding startup
D) The absolute territory protection offered by all franchisors

12. Most franchise experts consider the most
important factor in the success of a franchise to be:

A) Location
B) The simplicity of the idea
C) Financing
D) Territorial protection

13. Failure rate for franchisees

A) Higher than the rate for all new businesses
B) No different from the rate of all new businesses
C) All of the above
D) Lower than the rate for all new businesses

14. The biggest challenge facing the growth of new
franchisees:

A) . Competitions from independent entrepreneurs
B) Lack of capital
C) Market saturation
D) The recent downturn in the economy

15. When buying a franchise, the potential
franchisee should first:

A) Search for start-up capital with local banks
B) Evaluate his/herself as to the fit with the franchise
C) Contact the local chamber of commerce for the information of local economy
D) Work in a similar industry for a year

16. Under what circumstances would a typical
franchisor have the right to cancel a franchise
contract.

A) When evaluating a franchise, the potential franchisee should:
B) The franchisee declares bankruptcy
C) The franchisee fails to follow the retail pricing guidelines set by the franchisor
D) If the franchisor decides to buy back the franchise d. None of these

17. When evaluating a franchise, the potential
franchisee should:

A) Interview both current and former franchisees
B) Look at the local labor market to see if there is a pool of appropriate candidates for employment
C) Ask about the oral promises the franchisor will give regarding the future earnings
D) Only interview franchise employees as franchisees vary greatly in their opinions

18. In a franchise agreement, the franchisor controls
the distribution methods of the business venture.

A) True
B) False

19. In addition to other fees, franchisees must also
pay royalties but based only on net profits - no net
profits, no royalties.

A) False
B) True

20. All of the following are the advantages of
venturing in franchising business, EXCEPT:

A) Exclusive territory
B) Limited territory
C) Brand recognition
D) Economies of scale

21. All of the following are the factors that affects
Market Demand, EXCEPT:

A) Lack of capital
B) Marketing
C) Pricing
D) Economic Conditions

22. Refers to business arrangements where the
franchisor grants the right to operate a business
using its brand, system, and support to franchisee
in exchange for initial fees and ongoing royalties.

A) Business venture
B) Franchising opportunities
C) Franchising
D) Corporate industry

23. The most litigated subject of the franchising
agreement is

A) Termination of contract
B) Franchising fee
C) Resale price maintenance clauses
D) Advertising expenditures

24. Most franchise experts consider the most
important factor in the success of a franchise to be:
a. The simplicity of the idea

A) Location
B) Financing
C) Territorial protection
D) Franchising

25. A non-stock voluntary organization that oversees
and promotes ethical and responsible practices in
the Philippines that provides support and guidance
to both franchisors and franchisees and play crucial
role in the development and growth of franchising
industry in the country.

A) Philippine Association of Franchising Opportunist
B) Philippine Franchising Agency
C) Philippine Franchise Association
D) Philippine Franchising Industry Association, Inc.

26. Franchises account for about _____% of all retail
sales.

A) 63
B) 50
C) 74
D) 34

27. Franchise royalty fees typically average ______
of a franchise's gross sales

A) 1-15%
B) 3-7%
C) 1-3%
D) 7-2%

28. All of the following are the elements of
Franchising Feasibility Study, EXCEPT

A) Competition
B) Financial Projections
C) Legal Considerations
D) Risk Analysis

29. is less risky than the joint ventures

A) Branding
B) Franchising
C) Logo
D) Business fee

30. After acquiring another brand, employee turnover
increases due to cultural clashes. What should
management have addressed earlier?

A) Advertising budget
B) Cultural integration plan
C) Pricing strategy
D) Inventory system

31. A company expects cost savings by merging two
franchises but instead faces higher operational costs.
What likely went wrong?

A) Weak branding
B) Poor product quality
C) Understaffing
D) Overestimation of synergies

32. A franchisee acquires another brand without
consulting the franchisor, violating the franchise
agreement. What is the main consequence?

A) Contract termination risk
B) Improved operations
C) Better market share
D) Increased profits.

33. A franchise owner acquires a similar brand
operating in the same area. Sales decline across both
brands. What is the primary issue?

A) Supplier conflict
B) Pricing error
C) Market cannibalization
D) Employee dissatisfaction

34. A business acquires a popular franchise at a very
high price based on current trends, but demand
declines shortly after, What mistake was made?

A) Poor location choice
B) Overvaluation due to trend-basedassumptions
C) Ignoring legal requirements
D) Weak staffing

35. After acquiring a smaller brand, management
decides to keep operations separate rather than
integrate them. When is this most appropriate?

A) When both brands use the same suppliers
B) When integration costs outweigh benefits
C) When the acquired brand is underperforming
D) When both brands have identical markets

36. A fast-food franchise owner is considering
acquiring a premium coffee brand that targets a
different market segment. What is the most critical
factor to evaluate?

A) Similarity of store layout
B) Equipment compatibility
C) Number of existing branches
D) Alignment of target markets and brand positioning

37. The payment done by the franchisee to
franchisor based on gross sales is:

A) A national advertising fee
B) The start-up fee
C) royalty
D) A technical assistance fee

38. A franchisee plans to acquire another franchise
using a large loan. Sales projections are optimistic
but uncertain. What should be prioritized?

A) Marketing campaign
B) Loan approval
C) Sensitivity analysis and cash flow projections
D) Expansion speed

39. A well-known burger franchise acquires a
struggling healthy food brand. Customers begin to
question the company's identity. What issue is most
evident?

A) Brand dilution
B) Operational inefficiency
C) Legal liability
D) Supply chain failure

40. A company acquires a franchise but later
discovers hidden liabilities and unpaid taxes. What
process was insufficient?

A) Market research
B) Due diligence
C) Training program
D) Customer analysis

41. A type of franchise that involves selling products
directly to consumers.

A) Hospitality franchise
B) Food service franchise
C) Wholesale franchise
D) Retail franchise

42. Despite all the benefits, there are number of
disadvantages to franchisees:

A) Time consumed by the management training and support the franchisor provides
B) Strict adherence to standardized Operations
C) Cost of national advertising
D) Territory limitations

43. Below are the elements in assessing the
suitability of potential locations for the franchise
venture, EXCEPT:

A) Financial projections
B) Foot traffic
C) Demographics
D) Competition

44. Under what circumstances would a typical
franchisor have the right to cancel a franchise
contract

A) None of these
B) The franchisee declares bankruptcy
C) The franchisee fails to follow the retail pricing guidelines set by the franchisor
D) If the franchisor decides to buy back the franchise

45. The success of franchising is largely due to:

A) All of these factors
B) More college students choosing to go to work for themselves rather than for corporations.
C) The mutual benefits it provides to the franchisor and franchisee.
D) The economic growth of the developed nations economy

46. Refers to the comprehensive analysis of the
market including industry trend, customer
demographics, and competitors’ analysis.

A) Operational analysis
B) Risk analysis
C) Financial analysis
D) Market analysis

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