Question 1

Ford is the sole proprietor of Go, a game subscription service. As a sole proprietor, on the business's profits, Ford pays

Accepted Answer

A)  no income taxes.
B)  only personal income taxes.
C)  only business income taxes.
D)  both personal and business income taxes.E) A) and C)
F) None of the above

Question 2

To prevent deception, all representations by a franchisor to a prospective franchisee must have a reasonable basis at the time they are made.

Accepted Answer

A) True 
 B)False

Question 3

A court may decide that a franchisor has wrongfully terminated a franchise if the franchisor's decision was arbitrary.

Accepted Answer

A) True 
 B)False

Question 4

A court may decide that a franchisor has wrongfully terminated a franchise if the franchisor's decision to do so was made in the normal course of business.

Accepted Answer

A) True 
 B)False

Question 5

eSports Inc. offers entrepreneurs the opportunity to operate a franchise under the eSports trade name as the owner of a game-playing venue. To possible franchisees, eSports makes earnings claims. For those claims, the franchisor

Accepted Answer

A)  can have a hypothetical basis.
B)  must have a reasonable basis.
C)  must have an actual basis.
D)  can have any or no basis.E) A) and B)
F) All of the above

Question 6

A proprietor's opportunity to raise capital for a sole proprietorship is limited.

Accepted Answer

A) True 
 B)False

Question 7

To avoid conflicts with the First Amendment, no state requires a franchisor to submit ads aimed at prospective franchisees to the state for approval.

Accepted Answer

A) True 
 B)False

Question 8

In determining whether a franchisor acted in good faith when terminating a franchise agreement, a court will attempt to balance the rights of both parties.

Accepted Answer

A) True 
 B)False

Question 9

Lara owns and operates Market Place, a venue for growers, crafters, and others to sell their goods, without creating a separate business organization. She receives all the profits from the vendors' fees and concession sales. This is most likely

Accepted Answer

A)  a partnership.
B)  a franchise.
C)  a sole proprietorship.
D)  none of the choices.E) None of the above
F) B) and C)

Question 10

Beeline Inc. offers entrepreneurs the opportunity to operate a franchise under the Beeline trade name as a dealer that sells and leases Beeline equipment. To potential franchisees, Beeline must provide

Accepted Answer

A)  actual earnings figures.
B)  hypothetical earnings figures.
C)  projected earnings figures.
D)  none of the choices.E) None of the above
F) B) and C)

Question 11

When the owner of a sole proprietorship dies, the business does not dissolve-it is automatically transferred to family members or other heirs.

Accepted Answer

A) True 
 B)False

Question 12

A franchisee can operate as an independent businessperson and choose any business form but still obtain the advantages of a regional or national organization.

Accepted Answer

A) True 
 B)False

Question 13

Ruby is interested in buying a franchise from Snax Stores Inc. This transaction, like other franchise deals, is regulated to protect

Accepted Answer

A)  certain types of anticompetitive agreements.
B)  franchisors from dishonest prospective franchisees.
C)  prospective franchisees from dishonest franchisors.
D)  the government's power to restrict freedom of contract.E) A) and B)
F) All of the above

Question 14

Donuts Whole Inc. offers an entrepreneur the opportunity to operate a franchise bakery under the Donuts Whole trade name. Before a franchise contract is signed, Donuts Whole must explain

Accepted Answer

A)  the contract's termination provisions.
B)  the nature and operation of a franchise.
C)  the laws governing franchising.
D)  all of the choices.E) C) and D)
F) A) and D)

Question 15

As a means of controlling quality, a franchise agreement can limit the franchisee's ability to sell the franchise to another party.

Accepted Answer

A) True 
 B)False

Question 16

Because a franchise can involve the license of a trademark, a trade name, or a copyright, the law governing intellectual property may apply in some situations.

Accepted Answer

A) True 
 B)False

Question 17

The duration of a franchise is a matter set by state law, not to be otherwise determined between the parties.

Accepted Answer

A) True 
 B)False

Question 18

Limited legal liability can be an advantage for a small business wishing to raise capital.

Accepted Answer

A) True 
 B)False

Question 19

Because a franchisor's termination of a franchise can adversely affect a franchisee, much franchise litigation involves claims of wrongful termination.

Accepted Answer

A) True 
 B)False

Question 20

A franchisor does not have good cause to terminate a franchise for a franchisee's failure to meet specified sales quotas.

Accepted Answer

A) True 
 B)False

Exam 34: Small Businesses and Franchapterises

Because a franchise can involve the license of a trademark, a trade name, or a copyright, the law governing intellectual property may apply in some situations.

Correct AnswerverifiedShow Answer

Lara owns and operates Market Place, a venue for growers, crafters, and others to sell their goods, without creating a separate business organization. She receives all the profits from the vendors' fees and concession sales. This is most likely

Correct AnswerverifiedShow Answer

Ford is the sole proprietor of Go, a game subscription service. As a sole proprietor, on the business's profits, Ford pays

Correct AnswerverifiedShow Answer

A franchisee can operate as an independent businessperson and choose any business form but still obtain the advantages of a regional or national organization.

Correct AnswerverifiedShow Answer

When the owner of a sole proprietorship dies, the business does not dissolve-it is automatically transferred to family members or other heirs.

Correct AnswerverifiedShow Answer

eSports Inc. offers entrepreneurs the opportunity to operate a franchise under the eSports trade name as the owner of a game-playing venue. To possible franchisees, eSports makes earnings claims. For those claims, the franchisor

Correct AnswerverifiedShow Answer

A franchisor does not have good cause to terminate a franchise for a franchisee's failure to meet specified sales quotas.

Correct AnswerverifiedShow Answer

A court may decide that a franchisor has wrongfully terminated a franchise if the franchisor's decision was arbitrary.

Correct AnswerverifiedShow Answer

As a means of controlling quality, a franchise agreement can limit the franchisee's ability to sell the franchise to another party.

Correct AnswerverifiedShow Answer

The duration of a franchise is a matter set by state law, not to be otherwise determined between the parties.

Correct AnswerverifiedShow Answer

Because a franchisor's termination of a franchise can adversely affect a franchisee, much franchise litigation involves claims of wrongful termination.

Correct AnswerverifiedShow Answer

To avoid conflicts with the First Amendment, no state requires a franchisor to submit ads aimed at prospective franchisees to the state for approval.

Correct AnswerverifiedShow Answer

Ruby is interested in buying a franchise from Snax Stores Inc. This transaction, like other franchise deals, is regulated to protect

Correct AnswerverifiedShow Answer

Donuts Whole Inc. offers an entrepreneur the opportunity to operate a franchise bakery under the Donuts Whole trade name. Before a franchise contract is signed, Donuts Whole must explain

Correct AnswerverifiedShow Answer

A court may decide that a franchisor has wrongfully terminated a franchise if the franchisor's decision to do so was made in the normal course of business.

Correct AnswerverifiedShow Answer

In determining whether a franchisor acted in good faith when terminating a franchise agreement, a court will attempt to balance the rights of both parties.

Correct AnswerverifiedShow Answer

A proprietor's opportunity to raise capital for a sole proprietorship is limited.

Correct AnswerverifiedShow Answer

To prevent deception, all representations by a franchisor to a prospective franchisee must have a reasonable basis at the time they are made.

Correct AnswerverifiedShow Answer

Limited legal liability can be an advantage for a small business wishing to raise capital.

Correct AnswerverifiedShow Answer

Beeline Inc. offers entrepreneurs the opportunity to operate a franchise under the Beeline trade name as a dealer that sells and leases Beeline equipment. To potential franchisees, Beeline must provide

Correct AnswerverifiedShow Answer

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