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Exam 2: Small Businesses and Franchises

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Question 41

True/False

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The day-to-day operation of the franchise business normally is under the control of the franchisor.

A) True
B) False

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Question 42

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When lending capital to a small business, a bank may require a personal guaranty of its repayment from the owner.

A) True
B) False

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Question 43

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A franchisee is not generally legally independent of the franchisor.

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

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

Limited legal liability generally is necessary for small businesses that wish to raise outside capital.

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

Mucho Tacos, Inc., sells franchises. Mucho Tacos imposes on its franchisees standards of operation and personnel training methods. What is the potential pitfall to Mucho Tacos if it exercises too much control over its franchisees?

Savory Sandwiches LLC wants to present information in "disclosure documents" via the Internet to prospective franchisees. Among other legal requirements with which the franchisor must comply, prospective franchisees must

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

The duration of a franchise is determined by federal or state statutes.

Rico, the owner of Simply Sushi, is a sole proprietor. What are the chief characteristics, advantages, and disadvantages of this form of business organization? Rico wants to obtain additional capital to expand Simply Sushi, but she does not want to lose control of the firm. As a sole proprietor, what is her best option to attain these goals?