QUESTION 1

A franchisor is the purchaser of a franchise.
 True

 False

3.3333 points

QUESTION 2

A franchise contract may use only one type of business organization¾the sole proprietorship.
 True

 False

3.3333 points

QUESTION 3

Jody owns KuppaJava Kiosks, a sole proprietorship. Jody's liability is

limited by state statute and varies from state to state.

limited to the extent of capital expenditures.

limited to the extent of his or her original investment.

unlimited.
3.3333 points

QUESTION 4

Real Events Promotion Corporation licenses trademarks to Stadium Souvenirs, Inc., to use in selling caps, sweatshirts, and similar goods. This is

a franchise.

an entrepreneur.

a principal-agent relationship.

a sole proprietorship.
3.3333 points

QUESTION 5

Otis is interested in buying a franchise from Plentiful Markets Inc. This transaction, like other franchise deals, is regulated to protect

certain types of anticompetitive agreements.

franchisors from dishonest prospective franchisees.

prospective franchisees from dishonest franchisors.

the government's power to restrict freedom of contract.
3.3333 points

QUESTION 6

A franchisor's decision to terminate a franchise may be made in the normal course of business operations.
 True

 False

3.3333 points

QUESTION 7

Star Resorts Corporation wants to terminate its franchise arrangement with Tony. Their contract does not provide for notice of termination or set a time for winding up the business. This means that to wind up, Tony

has a reasonable time, with notice.

has whatever time A determines, with or without notice.

is entitled to notice, but nothing more.

must close immediately.
3.3333 points

QUESTION 8

Pilar is interested in buying a franchise from Quixotic Bike Corporation. Quixotic must disclose material facts that Pilar needs to make an informed decision concerning this purchase, according to

no law.

the Petroleum Marketing Practices Act of 1979.

the Federal Trade Commission's Franchise Rule.

the Uniform Commercial Code.
3.3333 points

QUESTION 9

Flip Gymnastics & Karate, Inc., grants a franchise to Gibby to operate a Flip gym. Flip may require Gibby to pay the franchisor a percentage of his

annual sales or volume of business.

weekly payroll expense.

monthly overhead savings.

none of the choices.
3.3333 points

QUESTION 10

Mika buys a Nuance Cabinets, Inc., franchise, which the franchisor later terminates. In determining whether the termination was proper, a court will generally

balance the rights of both parties.

emphasize the right of Nuance to its business operation.

focus on the right of Mika to be dealt with fairly.

underscore the interest of consumers in affordability.
3.3333 points

QUESTION 11

Hermione starts up, and assumes the financial risk of, Graphic Ads, a new enterprise. Hermione is

a franchisee.

a franchisor.

an agent.

a sole proprietor.
3.3333 points

QUESTION 12

Dominique buys a franchise from Cheyenne Artisans, Inc. This provides Cheyenne with an outlet for the firm's goods, some of which Dominique is required to buy at an established price. In their agreement, Cheyenne may also specify

the franchisor's non-culpability for any breach of the agreement.

the franchise's business organizational form.

the retail prices at which Dominique must resell the goods she buys.

none of the choices.
3.3333 points

QUESTION 13

Sweet Styles, Inc., a franchisor of clothing stores, wishes to standardize the pricing practices of its franchisees that have engaged in price-cutting to increase their respective shares of the market. The most prudent action might be for Sweet to

mandate the prices at which its franchisees sell their products.

suggest the prices at which its franchisees sell their products.

require its franchisees to buy inventory exclusively from Sweet.

threaten its franchisees with a material breach of contract.
3.3333 points

QUESTION 14

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

 False

3.3333 points

QUESTION 15

Laws governing franchising are designed in part to prevent franchisors from terminating franchises without good cause.
 True

 False

3.3333 points

QUESTION 16

Some states require franchisors to provide presale disclosures to prospective franchisees.
 True

 False

3.3333 points

QUESTION 17

Carl sells Direct Marketing Enterprises, a sole proprietorship, to Eve. This is a transfer of

a license.

a trade name.

the formula to make a product.

the ownership of the business.
3.3333 points

QUESTION 18

A franchisee ordinarily pays an initial fee or lump sum price for a franchise license.
 True

 False

3.3333 points

QUESTION 19

Inger is a franchisee of Honey Bear Restaurants, LLC Their contract gives Honey Bear the right to control virtually all aspects of Inger's operation, including the hiring of employees. One of the employees, Joris commits a tort against Kiley, one of Inger's customers. Kiley files a suit against Honey Bear. Honey Bear is most likely

liable because Honey Bear exercises control over Inger's operation.

liable because Kiley was Honey Bear's customer.

not liable because Inger is responsible for the employees.

not liable because Kiley was Inger's customer.
3.3333 points

QUESTION 20

Good faith and fair dealing are not important in terminating a franchise relationship.
 True

 False

3.3333 points

QUESTION 21

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

 False

3.3333 points

QUESTION 22

Leo buys an exclusive territory in which he is authorized to set up a plant to make Midwest Dairy, Inc., products. After receiving the formula, Leo begins making Nice Ice-brand ice cream and other Midwest products. This is

a chain-style franchise.

a distributorship franchise.

a manufacturing franchise.

no franchise.
3.3333 points

QUESTION 23

Burger Heaven, Inc., conducts a chain-style franchise. This involves the transfer to Chester, one of its franchisees, of

a license.

a trade name.

the formula to make a product.

the ownership of the business.
3.3333 points

QUESTION 24

The duration of a franchise is a matter to be determined between the parties.
 True

 False

3.3333 points

QUESTION 25

Jim organized, and owns and operates, Jim's Landscaping Service in the simplest form of business organization. This is

a corporation.

a limited liability company.

a partnership.

a sole proprietorship.
3.3333 points

QUESTION 26

Stacy contracts to buy a franchise from Tender Steak House Company. In this contract, as in most franchise contracts, the determination of the territory to be served is made by

a court.

Stacy.

Tender Steak House.

the Federal Trade Commission.
3.3333 points

QUESTION 27

The simplest form of business is a sole proprietorship.
 True

 False

3.3333 points

QUESTION 28

If a party to a franchise contract fails to perform its contractual duties, the other party may be subject to a lawsuit for breach of contract.
 True

 False

3.3333 points

QUESTION 29

A franchisor can require a franchisee to purchase certain supplies from the franchisor at an established price.
 True

 False

3.3333 points

QUESTION 30

A franchise is a contractual arrangement.
 True

 False