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Exam 34: Small Businesses and Franchapterises

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Question 1

True/False

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The Franchise Rule requires a franchisor to establish and enforce rules with respect to its franchisees.

A) True
B) False

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Question 2

Multiple Choice

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Juice Inc. offers entrepreneurs the opportunity to operate a franchise under the Juice trade name as a member of a group of dealers that engage in retail beverage sales. To prospective franchisees, Juice must disclose

A) the range of goods and services included.
B) the value of the franchise.
C) the estimated profitability of the franchise.
D) all of the choices.

E) B) and C)
F) A) and D)

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Question 3

Multiple Choice

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Digital Wizards Inc., a franchisor of computer technicians, wishes to standardize the pricing practices of its franchisees because they have engaged in price-cutting to increase their respective shares of the market. The most prudent action might be for Digital Wizards to

The Franchise Rule requires a franchisor to provide potential earnings figures to its prospective franchisees.

Anyone who does business without creating a separate business organization has a franchise.

Rugged Adventures Inc. wants to terminate its franchise arrangement with Stillwater Kayaking. Their contract does not provide for notice of termination or set a time for winding up the business. This means that to wind up, Stillwater

Sandor wants to go into the business of construction contracting. Among the reasons that might convince Sandor to set up his business as a sole proprietorship would be

Sodas Inc. and Tom's Bottling Plant have a manufacturing franchise arrangement. This involves the transfer of

Instead of setting up a business to market her own products, Rita considers entering into a distributorship franchise with Sports Equipment Corporation. This involves the transfer of

Anton enters into an agreement with Burgers Inc. to operate a franchise in Centre City. Later, the franchisor grants franchises to others within the same territory, causing Anton to suffer a significant loss in profits. In Anton's suit against the franchisor, his best argument is that Burgers

Espresso Brew Inc. uses a Web site to provide downloadable information to prospective franchisees. This electronic information is the equivalent of an offer that must comply with

To protect a franchisor's reputation, a franchise contract may provide a degree of control over the franchisee's operation to the franchisor.

Teresa buys a franchise from Urgent Care Clinics LLC. If their agreement is like most franchise agreements, it will specify that Urgent can terminate the franchise

The law considers all new businesses to be sole proprietorships.

Mai-Lin's Martial Arts, Inc., grants a franchise to Naomi to operate a Mai-Lin's school. Mai-Lin's may require Naomi to pay the franchisor a percentage of her

In a sole proprietorship, the owner is not the business.

In a sole proprietorship, the proprietor bears the burden of any liabilities incurred by the business enterprise.

Pay-Most Convenience Stores, Inc., is a franchisor. Randy operates a Pay-Most franchise. Seth is one of Randy's employees. As a franchisor, if Pay-Most controls the day-to-day operations of the business to a significant degree, it may be liable for tortious acts by

Bayard organized, and owns and operates, Cypress Tours in the simplest form of business organization. This is

To protect franchisees against arbitrary or bad faith termination, a state law may require certain procedures be followed in terminating a franchise.