Tutorial 12 (Week 7)

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Tutorial 12 (week 7)

Topic 5: Franchising


1. | According to our textbook, which of the following is not a quality to look for in prospective franchisees? | | a. | individual, rather than team-oriented | | b. | ability to follow instructions | | c. | experience in the industry in which the franchisee operates | | d. | ability to operate with minimal supervision | | e. | adequate financial resources and a good credit history |
Answer: A

2. | According to a concept called ________ theory, it is more effective for the units of a growing chain to be run by franchises than by managers, because managers are usually paid a salary, and may not be as committed to the success of their individual units as
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| | b. | Some franchisors require a new franchisee to pay a "grand opening" fee. | | c. | Franchisees are often required to pay into a national or regional advertising fund. | | d. | Weekly or monthly royalty fees are usually around 2% of net income. | | e. | Franchisees may have to pay a monthly royalty even if the business is losing money. |
Answer: D

11. | There are two primary advantages to buying a franchise over other forms of business ownership. First, franchising provides an entrepreneur the ability to own a business using tested and refined business methods, and second: | | a. | franchising is almost a sure way of making a profit | | b. | a franchise agreement is typically easy to exit if expectations aren 't met | | c. | franchisors typically encourage creativity on the part of franchisees | | d. | the franchisor typically provides training, technical expertise, and other forms of support | | e. | franchise organizations are consistently more profitable than non- franchise organizations in the same industry |
Answer: D

12. | According to the textbook, the main disadvantage of buying a franchise is: | | a. | franchise organizations typically grow slower than non-franchise organizations in the same industry | | b. | franchisors typically provide poor levels of support | | c. | the cost involved | | d. | the service sector of the U.S. economy is

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