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FRANCHISING
Contributed by: Agustin
  • 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 Agreement
C) Franchise Regulation
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) Franchising
B) Franchise Contact
C) Franchise Agreement
D) Franchise
  • 3. An entity who pays an initial fee and a continuing
    fee for the use of the trade name and operating
    methods.
A) Agent
B) Intermediary
C) Franchisee
D) Franchisor
  • 4. An entity who provides support and, in some
    cases, exercises some control over the way the
    business operates under the brand.
A) Franchisor
B) Intermediary
C) Agent
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) Franchisor, Franchisee
B) Franchisee, Business Owner
C) Business Owner, Parent Company
D) Franchisee, Franchisor
  • 6. The word "Franchising" was derived from the
    French word that means:
A) Free from servitude
B) Free from government
C) Free from independent business
D) Free from standardization
  • 7. Franchising is currently dominated by:
A) Auto dealers
B) Fast food restaurants
C) Retail outlets
D) Service-oriented business
  • 8. In ________ franchising, a franchisee purchases
    only the right to become identified with the
    franchisors' trade name.
A) Trade name
B) Conversion
C) Product Distribution
D) Pure
  • 9. A significant advantage a franchisee has over the
    independent small business owner is participation in
    the franchiser's ________.
A) Centralized and large-volume buying power
B) Profits
C) Business policy
D) Social gatherings
  • 10. In franchising, the reputation of the franchisor is
    dependent on:
A) The quality of the goods and services provided.
B) The brand name recognition and appeal.
C) The rate of growth and the number of national outlets.
D) Their locations and popularity with the local customer.
  • 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 absolute territory protection offered by all franchisors
C) The fact it is much less expensive than doing your own business start-up
D) The extensive assistance offered in finding startup
  • 12. Most franchise experts consider the most
    important factor in the success of a franchise to be:
A) Financing
B) Location
C) Territorial protection
D) The simplicity of the idea
  • 13. Failure rate for franchisees
A) All of the above
B) Higher than the rate for all new businesses
C) Lower than the rate for all new businesses
D) No different from the rate of all new businesses
  • 14. The biggest challenge facing the growth of new
    franchisees:
A) Lack of capital
B) . Competitions from independent entrepreneurs
C) The recent downturn in the economy
D) Market saturation
  • 15. When buying a franchise, the potential
    franchisee should first:
A) Evaluate his/herself as to the fit with the franchise
B) Search for start-up capital with local banks
C) Work in a similar industry for a year
D) Contact the local chamber of commerce for the information of local economy
  • 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) If the franchisor decides to buy back the franchise d. None of these
D) The franchisee fails to follow the retail pricing guidelines set by the franchisor
  • 17. When evaluating a franchise, the potential
    franchisee should:
A) Ask about the oral promises the franchisor will give regarding the future earnings
B) Look at the local labor market to see if there is a pool of appropriate candidates for employment
C) Interview both current and former franchisees
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) False
B) True
  • 19. In addition to other fees, franchisees must also
    pay royalties but based only on net profits - no net
    profits, no royalties.
A) True
B) False
  • 20. All of the following are the advantages of
    venturing in franchising business, EXCEPT:
A) Economies of scale
B) Limited territory
C) Exclusive territory
D) Brand recognition
  • 21. All of the following are the factors that affects
    Market Demand, EXCEPT:
A) Economic Conditions
B) Pricing
C) Marketing
D) Lack of capital
  • 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) Corporate industry
B) Franchising
C) Franchising opportunities
D) Business venture
  • 23. The most litigated subject of the franchising
    agreement is
A) Franchising fee
B) Termination of contract
C) Advertising expenditures
D) Resale price maintenance clauses
  • 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) Franchising
D) Territorial protection
  • 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 Franchising Agency
B) Philippine Association of Franchising Opportunist
C) Philippine Franchising Industry Association, Inc.
D) Philippine Franchise Association
  • 26. Franchises account for about _____% of all retail
    sales.
A) 34
B) 63
C) 50
D) 74
  • 27. Franchise royalty fees typically average ______
    of a franchise's gross sales
A) 7-2%
B) 1-3%
C) 3-7%
D) 1-15%
  • 28. All of the following are the elements of
    Franchising Feasibility Study, EXCEPT
A) Financial Projections
B) Risk Analysis
C) Legal Considerations
D) Competition
  • 29. is less risky than the joint ventures
A) Business fee
B) Branding
C) Franchising
D) Logo
  • 30. After acquiring another brand, employee turnover
    increases due to cultural clashes. What should
    management have addressed earlier?
A) Cultural integration plan
B) Inventory system
C) Advertising budget
D) Pricing strategy
  • 31. A company expects cost savings by merging two
    franchises but instead faces higher operational costs.
    What likely went wrong?
A) Understaffing
B) Poor product quality
C) Weak branding
D) Overestimation of synergies
  • 32. A franchisee acquires another brand without
    consulting the franchisor, violating the franchise
    agreement. What is the main consequence?
A) Better market share
B) Contract termination risk
C) Improved operations
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) Market cannibalization
C) Pricing error
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) Weak staffing
B) Poor location choice
C) Overvaluation due to trend-basedassumptions
D) Ignoring legal requirements
  • 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 have identical markets
B) When the acquired brand is underperforming
C) When integration costs outweigh benefits
D) When both brands use the same suppliers
  • 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) Equipment compatibility
B) Number of existing branches
C) Alignment of target markets and brand positioning
D) Similarity of store layout
  • 37. The payment done by the franchisee to
    franchisor based on gross sales is:
A) A national advertising fee
B) royalty
C) A technical assistance fee
D) The start-up 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) Expansion speed
C) Loan approval
D) Sensitivity analysis and cash flow projections
  • 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) Legal liability
C) Supply chain failure
D) Operational inefficiency
  • 40. A company acquires a franchise but later
    discovers hidden liabilities and unpaid taxes. What
    process was insufficient?
A) Due diligence
B) Customer analysis
C) Training program
D) Market research
  • 41. A type of franchise that involves selling products
    directly to consumers.
A) Food service franchise
B) Hospitality franchise
C) Retail franchise
D) Wholesale franchise
  • 42. Despite all the benefits, there are number of
    disadvantages to franchisees:
A) Cost of national advertising
B) Time consumed by the management training and support the franchisor provides
C) Territory limitations
D) Strict adherence to standardized Operations
  • 43. Below are the elements in assessing the
    suitability of potential locations for the franchise
    venture, EXCEPT:
A) Financial projections
B) Demographics
C) Foot traffic
D) Competition
  • 44. Under what circumstances would a typical
    franchisor have the right to cancel a franchise
    contract
A) The franchisee declares bankruptcy
B) The franchisee fails to follow the retail pricing guidelines set by the franchisor
C) If the franchisor decides to buy back the franchise
D) None of these
  • 45. The success of franchising is largely due to:
A) The mutual benefits it provides to the franchisor and franchisee.
B) More college students choosing to go to work for themselves rather than for corporations.
C) The economic growth of the developed nations economy
D) All of these factors
  • 46. Refers to the comprehensive analysis of the
    market including industry trend, customer
    demographics, and competitors’ analysis.
A) Market analysis
B) Financial analysis
C) Operational analysis
D) Risk analysis
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