Question 1

A sole proprietor does not own the entire business.

Accepted Answer

A) True 
 B)False  False

Question 2

The federal government regulates franchising in part through the Franchise Rule.

Accepted Answer

A) True 
 B)False

Question 3

In a sole proprietorship, the proprietor shares the burden of any losses or liabilities incurred by the business enterprise with the government.

Accepted Answer

A) True 
 B)False

Question 4

Oberon buys a Pro Club Health & Fitness, Inc., franchise, which the franchisor later terminates. In determining whether the termination was proper, a court will generally

Accepted Answer

A)   ​balance the rights of both parties.
B)   ​emphasize the right of Pro Club to its business operation.
C)   ​focus on the right of Oberon to be dealt with fairly.
D)   ​underscore the interest of consumers in affordability.E) A) and B)
F) A) and C)

Question 5

Faye is interested in buying a franchise from Gas n' 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) All of the above
F) B) and C)

Question 6

A franchisor can mandate retail prices for the goods that a franchisee sells.

Accepted Answer

A) True 
 B)False

Question 7

Any business-except a sole proprietorship-must comply with business registration and licensing requirements.

Accepted Answer

A) True 
 B)False

Question 8

Laura owns and operates Meditation Center without creating a separate business organization. She receives all the profits from the fees for the classes and the sales of the center's merchandise. This is most likely

Accepted Answer

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

Question 9

Franchise agreements typically limit the franchisee's ability to sell the franchise to another party.

Accepted Answer

A) True 
 B)False

Question 10

State deceptive trade practices acts apply to actions by franchisors.

Accepted Answer

A) True 
 B)False

Question 11

Paradise Footwear buys a franchise from Quad Shoes Inc. This relationship, like all other franchise relationships, is governed by

Accepted Answer

A)   ​contract law.
B)   ​no law.
C)   ​the Franchise Disclosure Document, or FDD.
D)   ​the Automobile Dealers' Day in Court Act.E) None of the above
F) A) and B) A

Question 12

The franchise agreement may specify whether the premises for the business must be leased or purchased outright.

Accepted Answer

A) True 
 B)False

Question 13

Cathy buys an exclusive territory in which she is authorized to set up a plant to make Delite Dairy products. After receiving the recipes, Cathy begins making Evie's-brand yogurt and other Delite products. This is

Accepted Answer

A)   ​a chain-style franchise.
B)   ​a distributorship franchise.
C)   ​a manufacturing franchise.
D)   ​not a franchise.E) None of the above
F) All of the above

Question 14

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 15

Fong contracts to buy a franchise from Genuine Asian Sushi House Company. In this contract, as in most franchise contracts, the determination of the territory to be served is made by

Accepted Answer

A)   ​other Genuine Asian franchisees within the same state.
B)   ​Fong.
C)   ​Genuine Asian Sushi House.
D)   ​the Federal Trade Commission.E) B) and C)
F) A) and B)

Question 16

Nina, the owner of Organic Farm, a sole proprietorship, wants to obtain additional capital to operate. This can be accomplished by

Accepted Answer

A)   ​a bank loan.
B)   ​a Small Business Administration Loan.
C)   ​a state grant.
D)   ​any of the choices.E) A) and B)
F) All of the above

Question 17

Some states require the termination of a franchise when there is no "good cause" for it to continue.

Accepted Answer

A) True 
 B)False

Question 18

Ken owns and operates Living Earth Garden Shop as a sole proprietorship. When Ken dies, Living Earth will automatically

Accepted Answer

A)   ​dissolve.
B)   ​pass to Ken's heirs.
C)   ​pass to the state.
D)   ​be offered for sale to its creditors and competitors.E) None of the above
F) All of the above

Question 19

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

Accepted Answer

A)   ​a license.
B)   ​a trade name.
C)   ​the formula to make a certain product.
D)   ​the ownership of the business.E) A) and C)
F) All of the above

Question 20

Typically, the franchisee determines the territory to be served by the franchise.

Accepted Answer

A) True 
 B)False  False

Exam 2: Small Businesses and Franchises

A sole proprietor does not own the entire business.

Correct AnswerverifiedFalse

The federal government regulates franchising in part through the Franchise Rule.

Correct AnswerverifiedShow Answer

In a sole proprietorship, the proprietor shares the burden of any losses or liabilities incurred by the business enterprise with the government.

Correct AnswerverifiedShow Answer

Oberon buys a Pro Club Health & Fitness, Inc., franchise, which the franchisor later terminates. In determining whether the termination was proper, a court will generally

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A franchisor can mandate retail prices for the goods that a franchisee sells.

Correct AnswerverifiedShow Answer

Any business-except a sole proprietorship-must comply with business registration and licensing requirements.

Correct AnswerverifiedShow Answer

Laura owns and operates Meditation Center without creating a separate business organization. She receives all the profits from the fees for the classes and the sales of the center's merchandise. This is most likely

Correct AnswerverifiedShow Answer

Franchise agreements typically limit the franchisee's ability to sell the franchise to another party.

Correct AnswerverifiedShow Answer

State deceptive trade practices acts apply to actions by franchisors.

Correct AnswerverifiedShow Answer

Paradise Footwear buys a franchise from Quad Shoes Inc. This relationship, like all other franchise relationships, is governed by

Correct AnswerverifiedA

The franchise agreement may specify whether the premises for the business must be leased or purchased outright.

Correct AnswerverifiedShow Answer

Cathy buys an exclusive territory in which she is authorized to set up a plant to make Delite Dairy products. After receiving the recipes, Cathy begins making Evie's-brand yogurt and other Delite products. This is

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

Fong contracts to buy a franchise from Genuine Asian Sushi House Company. In this contract, as in most franchise contracts, the determination of the territory to be served is made by

Correct AnswerverifiedShow Answer

Nina, the owner of Organic Farm, a sole proprietorship, wants to obtain additional capital to operate. This can be accomplished by

Correct AnswerverifiedShow Answer

Some states require the termination of a franchise when there is no "good cause" for it to continue.

Correct AnswerverifiedShow Answer

Ken owns and operates Living Earth Garden Shop as a sole proprietorship. When Ken dies, Living Earth will automatically

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Typically, the franchisee determines the territory to be served by the franchise.

Correct AnswerverifiedFalse

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