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Exam 29: Sole Proprietorships and Franchises

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Question 1

Multiple Choice

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FreezE Yogurt Corporation provides its prospective franchisees with projected earnings figures based on actual data.FreezE Yogurt must also disclose

A) the number and percentage of franchisees that achieved the figures.
B) hypothetical examples of potential earnings.
C) an answer to the entrepreneur's question,"How much will I make?"
D) none of the choices.

E) A) and D)
F) A) and C)

Correct Answer

verified

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Question 2

True/False

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

A) True
B) False

Correct Answer

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False

Question 3

True/False

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

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

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

The franchise agreement is not likely to set out standards such as sales quotas and record-keeping requirements.

Cookie Shops,Inc.,sells a franchise to Donuts & Desserts,a mall food-court vendor.Cookie Shops is

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

The franchisor may require that the business use a particular organizational form and capital structure.

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

George buys from Haul-U Corporation the exclusive right to use the Haul-U trademark and sell and lease Haul-U-brand products in a certain area.Their franchise agreement requires George to pay certain administrative expenses.Their agreement may also require George to pay a percentage of the franchisor's

A sole proprietor does not own the entire business.

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

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

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

Fact Pattern 29-1 (Questions B10-B11 apply) Jumbo Juice Inc.offers entrepreneurs the opportunity to operate a franchise under the Jumbo Juice trade name as a member of a select group of dealers that engage in retail juice sales. -Refer to Fact Pattern 29-1.To potential investors,Jumbo Juice must provide

Ralph is interested in buying a franchise from Sparkle Beverages Inc.For Ralph to make an informed decision concerning this purchase,Sparkle Beverages must disclose in writing or online

Some states require that a franchisor submit advertising aimed at prospective franchisees to the state for approval.

The laws governing franchising are primarily designed to protect franchisors from dishonest franchisees.

Fletcher buys a Great Big Burgers,Inc.,franchise.Great Big Burgers requires that its franchisees buy its products exclusively for every phase of their operations.Because Fletcher wishes to buy less expensive products,he challenges the requirement.His best argument is probably that the requirement violates