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Exam 36: Sole Proprietorships and Franchises

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Question 1

True/False

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If a franchisee is induced to enter into a franchise contract by the franchisor's fraudulent misrepresentation, the franchisor may be liable for damages.

A) True
B) False

Correct Answer

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Question 2

Multiple Choice

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Rooster Red LLC grants a franchise to Qiana to open and operate a Rooster Red restaurant. Rooster Red will likely charge Qiana

A) an initial fee or lump sum price for the franchise license.
B) a percentage of Qiana's weekly payroll expense.
C) an amount of Qiana's monthly overhead savings, if any.
D) none of the choices.

E) None of the above
F) All of the above

Correct Answer

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A

Question 3

True/False

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A franchisor can suggest retail prices for the goods that a franchisee sells but cannot mandate them.

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

A franchisee ordinarily does not pay a fee for a franchise license (the privilege of being granted a franchise).

The franchise is not strictly speaking a business organizational form.

A franchise agreement between Grid Tools Company and Hometown Hardware, Inc., is silent on a time for termination of the franchise. Grid Tools may

Silvano owns Textbooks Plus, a sole proprietorship that sells textbooks and other school supplies. When Silvano dies, Textbooks Plus will automatically

A franchisee is generally economically independent of the franchisor's integrated business system.

Mix n' Match Clothing Corporation gives notice to Neely that Mix n' Match is terminating their franchise arrangement. Winding up the business requires

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

A sole proprietor does not own the entire business.

A franchisee is generally legally independent of the franchisor.

Haute Dogs, Inc., sells a franchise to Ilene's Cuisine, a lunch truck. Ilene's Cuisine is

The laws governing franchising are primarily designed to protect fran?chisors from dishonest franchisees.

Eudora is interested in buying a franchise from First Home Realty Company. In this transaction, the Federal Trade Commission's Franchise Rule

Sasha contracts to buy a franchise from TrustMe Financial Consultants Inc. The contract is silent on the issue of territorial rights. When TrustMe allows a competing franchise to be established near Sasha's office, she suffers a significant loss in profits. This is most likely a violation of

In a manufacturing arrangement, a franchisor transmits to a franchisee the essential ingredients or formula to make a particular product.

Fletcher buys a Great Big Burgers, Inc., franchise. Great Big Burgers requires that its fran?chi?sees buy its products exclusively for every phase of their op?erations. Be?cause Fletcher wishes to buy less expensive products, he challenges the re?quirement. His best argument is probably that the re?quirement violates

Any lawsuit against the business or its employees does not lead to unlimited personal liability for the owner of a sole proprietorship.