Fundamentals of Innovation and Entrepreneurship test bank barringer_ent5_tb_15 PDF

Preview

Summary

Fundamentals of Innovation and Entrepreneurship test bank barringer_ent5_tb_15...

Description

Entrepreneurship: Successfully Launching New Ventures, 5e (Barringer/Ireland) Chapter 15 Franchising 1) Uptown Cheapskate, the company profiled in the opening feature of Chapter 15, was started by Chelsea and Scott Sloan. According to the feature, Chelsea and Scott decided to grow Uptown Cheapskate via franchising because they wanted to ________. A) grow quickly without making a huge investments in real estate B) capture the prestige of being a franchise organization C) maintain maximum control of their business while at the same time maximizing profits D) grow quickly while at the same time maintaining maximum control of their business E) grow slowly while at the same time maximizing profits Answer: A Diff: 2 Page Ref: 507 LO: 15.1: Explain franchising and how this form of business ownership works. AACSB: Reflective Thinking 2) Which of the following statements is incorrect regarding franchising? A) In some industries, such as automotive and retail food, franchising is a dominant form of business ownership and growth. B) There are some instances in which franchising is not appropriate. C) Franchising is a relatively new form of business organization. D) Franchising, by its very nature, involves the sharing of knowledge between a franchisor and a franchisee. E) Franchising is a relatively poorly understood form of business ownership and growth. Answer: C Diff: 2 Page Ref: 509 LO: 15.1: Explain franchising and how this form of business ownership works. AACSB: Application of Knowledge 3) ________ is a form of business ownership in which a firm that already has a successful product or service licenses its trademark and method of doing business to other business in exchange for an initial franchise fee and an ongoing royalty. A) Licensing B) Joint Venturing C) Contracting D) Franchising E) Sub-Contracting Answer: D Diff: 1 Page Ref: 510 LO: 15.1: Explain franchising and how this form of business ownership works. AACSB: Analytical Thinking

1 Copyright © 2016 Pearson Education, Inc.

4) Franchising is a form of business ownership in which a firm that already has a successful product or service licenses its trademark and method of doing business to another business in exchange for ________. A) an initial franchise fee and an ongoing royalty B) a one-time franchise fee C) an equity position in the new business D) an ongoing royalty E) an initial franchise fee and an equity position in the new business Answer: A Diff: 2 Page Ref: 510 LO: 15.1: Explain franchising and how this form of business ownership works. AACSB: Analytical Thinking 5) According to the textbook, the Comfort Keepers business idea lends itself to franchising because the ________. A) company has the ability to grow profitably and has a good trademark B) company's business concept is easy to teach and individual Comfort Keeper outlets are inexpensive to open and operate C) company has new technology to introduce to the marketplace D) company has intellectual property and the ability to grow quickly E) company has a good trademark and a good business method Answer: E Diff: 3 Page Ref: 510 LO: 15.1: Explain franchising and how this form of business ownership works. AACSB: Reflective Thinking 6) The two distinctly different types of franchise systems are ________ franchise and ________ franchise. A) product trademark; business arrangement B) product plus; business format C) business design; product improvement D) product extension; business design E) product trademark; business format Answer: E Diff: 2 Page Ref: 511 LO: 15.1: Explain franchising and how this form of business ownership works. AACSB: Application of Knowledge

2 Copyright © 2016 Pearson Education, Inc.

7) A ________ franchise is an arrangement under which the franchisor grants to the franchisee the right to buy its products and use its trade name. A) product and trademark B) product extension C) business format D) production plus E) business design Answer: A Diff: 2 Page Ref: 511 LO: 15.1: Explain franchising and how this form of business ownership works. AACSB: Analytical Thinking 8) General Motors operates a ________ franchise system. A) product format and trademark B) product extension C) product and trademark D) business format E) business format and trademark Answer: C Diff: 2 Page Ref: 511 LO: 15.1: Explain franchising and how this form of business ownership works. AACSB: Reflective Thinking 9) James Ryan has been a Coors Beer distributor for the past 20 years. James owns a ________ franchise. A) business format B) product and trademark C) business design D) product plus E) product and business format Answer: B Diff: 2 Page Ref: 511 LO: 15.1: Explain franchising and how this form of business ownership works. AACSB: Reflective Thinking

3 Copyright © 2016 Pearson Education, Inc.

10) Which of the following statements is incorrect regarding product and trademark franchises? A) Rather than obtaining a royalty or franchise fee, the product and trademark franchisor obtains the majority of its income from selling its products to its dealers or distributors at a markup. B) Ford Motors establishes product trademark rather than business format franchises. C) Product trademark franchises are more popular than business format franchises. D) Product and trademark franchisees are typically permitted to operate in a fairly autonomous manner. E) A product trademark franchise typically connects a single manufacturer with a network of dealers or distributors. Answer: C Diff: 3 Page Ref: 511 LO: 15.1: Explain franchising and how this form of business ownership works. AACSB: Application of Knowledge 11) Melanie Jacobs recently opened a Papa John's franchise. So far, she is very satisfied with Papa John's because in exchange for an initial franchise fee and an ongoing royalty payment, Papa John's has provided Melanie a formula for doing business along with training, advertising, and other forms of assistance. Melanie purchased a ________ franchise. A) business extension B) formula driven C) sales extension D) product and trademark E) business format Answer: E Diff: 2 Page Ref: 511 LO: 15.1: Explain franchising and how this form of business ownership works. AACSB: Reflective Thinking 12) Which of the following statements is correct regarding business format franchises? A) Business format franchises are less popular than product and trademark franchises. B) A business format franchise can be very rigid and demanding. C) Agricultural machinery dealerships and soft-drink bottlers are well-known examples of business format franchises. D) Business format franchises are illegal in some states. E) The business format franchisor obtains the majority of its income from selling its products to its dealers at a markup. Answer: B Diff: 3 Page Ref: 511 LO: 15.1: Explain franchising and how this form of business ownership works. AACSB: Analytical Thinking

4 Copyright © 2016 Pearson Education, Inc.

13) Which of the following is not an industry in which business format franchises predominate? A) Soft drink bottlers B) Business services C) Hotels and motels D) Quick service restaurants E) Automotive service and repair Answer: A Diff: 1 Page Ref: 512 LO: 15.1: Explain franchising and how this form of business ownership works. AACSB: Application of Knowledge 14) A(n) ________ franchise agreement involves the sale of a single franchise for a specific location. A) individual B) one-of-a-kind C) sole D) defined E) general Answer: A Diff: 1 Page Ref: 512 LO: 15.1: Explain franchising and how this form of business ownership works. AACSB: Analytical Thinking 15) Jenna Page recently entered into an agreement with Anytime Fitness to open five Anytime Fitness franchises. According to the agreement that Jenna entered into, she has the right to open up to five Anytime Fitness franchises within the city limits of Lawrence, Kansas. Jenna has entered into a(n) ________ franchise agreement, A) individual B) district C) locality D) area E) city Answer: D Diff: 2 Page Ref: 512 LO: 15.1: Explain franchising and how this form of business ownership works. AACSB: Reflective Thinking

5 Copyright © 2016 Pearson Education, Inc.

16) A master franchisee, in addition to having the right to open and operate a specific number of locations in a particular area, also has the right to ________. A) stop making royalty payments if its sales decline B) sell products made by companies other than the franchisor C) offer and sell the franchise to other people in its area D) use its own operating manuals to run its franchise outlets E) stop making royalty payments if it is losing money Answer: C Diff: 3 Page Ref: 512 LO: 15.1: Explain franchising and how this form of business ownership works. AACSB: Analytical Thinking 17) The people who buy franchises from master franchises are typically called ________ franchisees. A) minor B) secondary C) miniD) subordinate E) sub Answer: E Diff: 2 Page Ref: 512 LO: 15.1: Explain franchising and how this form of business ownership works. AACSB: Application of Knowledge 18) A multiple-unit franchisee is a person who owns ________. A) franchise outlets from more than one franchisor B) both product and trademark franchise outlets and business format franchise outlets C) and operates more than one outlet of the same franchisor D) more than 10 franchise outlets E) franchise units from multiple franchisors Answer: C Diff: 2 Page Ref: 512 LO: 15.1: Explain franchising and how this form of business ownership works. AACSB: Analytical Thinking 19) Franchising is a form of business organization in which a firm that already has a successful product or service licenses its trademark and method of doing business to other businesses in exchange for an initial franchise fee and an ongoing royalty. Answer: TRUE Diff: 1 Page Ref: 510 LO: 15.1: Explain franchising and how this form of business ownership works. AACSB: Application of Knowledge

6 Copyright © 2016 Pearson Education, Inc.

20) A product and trademark franchise typically connects a single manufacturer with a network of dealers or distributors. Answer: TRUE Diff: 2 Page Ref: 511 LO: 15.1: Explain franchising and how this form of business ownership works. AACSB: Analytical Thinking 21) A Pepsi Cola bottling dealership is an example of a business format franchise. Answer: FALSE Diff: 2 Page Ref: 511 LO: 15.1: Explain franchising and how this form of business ownership works. AACSB: Analytical Thinking 22) In a business format franchise, the franchisor provides a formula for doing business to the franchisee along with training, advertising, and other forms of assistance. Answer: TRUE Diff: 2 Page Ref: 511 LO: 15.1: Explain franchising and how this form of business ownership works. AACSB: Reflective Thinking 23) Business format franchises typically allow franchisees substantial flexibility in how they run their individual franchise units. Answer: FALSE Diff: 2 Page Ref: 511 LO: 15.1: Explain franchising and how this form of business ownership works. AACSB: Reflective Thinking 24) An area franchise agreement allows a franchisee to own and operate a specific number of outlets in a particular geographic area. Answer: TRUE Diff: 2 Page Ref: 512 LO: 15.1: Explain franchising and how this form of business ownership works. AACSB: Reflective Thinking 25) The people who buy franchises from master franchisees are typically called employeefranchisees. Answer: FALSE Diff: 2 Page Ref: 512 LO: 15.1: Explain franchising and how this form of business ownership works. AACSB: Analytical Thinking

7 Copyright © 2016 Pearson Education, Inc.

26) What is the difference between a product and trademark franchise and a business format franchise? Which type of franchise is most common for entrepreneurial firms? Answer: A product and trademark franchise is an arrangement in which the franchisor grants to the franchisee the right to buy its products and use its trade name. This approach typically connects a single manufacturer with a network of dealers or distributors. For example, General Motors has established a network of dealers that sell GM cars and use the GM trademark in their advertising and promotions. Other examples of product and trademark franchise systems include agricultural machinery dealers, soft drink bottlers, and beer distributorships. In a business format franchise, which is by far the more popular approach to franchising for entrepreneurial firms, the franchisor provides a formula for doing business to the franchisee along with training, advertising, and other forms of assistance. Fast-food restaurants and convenience stores are wellknown examples of business format franchises. Diff: 2 Page Ref: 511 LO: 15.1: Explain franchising and how this form of business ownership works. AACSB: Analytical Thinking 27) From the franchisor's point of view, which of the following is incorrect regarding franchising? A) Establishing a franchise system should be approached carefully and deliberately. B) Franchising is a relatively simple business endeavor. C) Franchising involves managerially demanding tasks. D) Over the years a number of fraudulent franchise organizations have come and gone. E) Franchising is a fairly heavily regulated form of business ownership. Answer: B Diff: 3 Page Ref: 513 LO: 15.2: Describe steps entrepreneurs can take to establish a franchise system. AACSB: Application of Knowledge 28) Franchising is appropriate when a ________. A) firm's business methods are not polished, it has a desire to grow, and it is trying to commercialize a technology product B) firm has a strong trademark, a desire to grow, and a well-designed business method C) firm is trying to commercialize a technology product, it is well-funded, and it has a desire to grow D) firm has a weak trademark, it is well-funded, and it has a desire to grow E) firm has a desire to grow, it has a well-designed business method, and it is well funded Answer: B Diff: 2 Page Ref: 514 LO: 15.2: Describe steps entrepreneurs can take to establish a franchise system. AACSB: Analytical Thinking

8 Copyright © 2016 Pearson Education, Inc.

29) Which of the following companies is suitable for franchising? A) Home Depot B) Dropbox C) Qdoba Mexican Grill D) Walmart E) GoPro Answer: C Diff: 2 Page Ref: 514 LO: 15.2: Describe steps entrepreneurs can take to establish a franchise system. AACSB: Analytical Thinking 30) The Savvy Entrepreneurial Firm feature in Chapter 15 focuses on Wahoo's Fish Taco, a franchise organization that offers Mexican food mixed with Brazilian and Asian flavors. According to the feature, one of the things the founders of Wahoo did that has contributed to its success is elect to make Wahoo's ________. A) a relatively slow growth system, focusing on branding and service quality rather than rapid growth B) a nationwide system, operating in all 50 states C) an extremely affordable system to buy into, with a $9,000 original franchise fee and an ongoing royalty of only 2-1/2 percent D) a niche franchise that is only available in theme parks and food courts of malls E) a fast growth system to establish a clear first-mover advantage in its niche Answer: A Diff: 2 Page Ref: 515 LO: 15.2: Describe steps entrepreneurs can take to establish a franchise system. AACSB: Reflective Thinking 31) 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 Diff: 2 Page Ref: 517 LO: 15.2: Describe steps entrepreneurs can take to establish a franchise system. AACSB: Interpersonal Relations and Teamwork 32) Franchising is a popular form of business growth. Answer: TRUE Diff: 1 Page Ref: 513 LO: 15.2: Describe steps entrepreneurs can take to establish a franchise system. AACSB: Application of Knowledge

9 Copyright © 2016 Pearson Education, Inc.

33) Home Depot is an example of an organization that is perfectly suited for franchising. Answer: FALSE Diff: 2 Page Ref: 514 LO: 15.2: Describe steps entrepreneurs can take to establish a franchise system. AACSB: Reflective Thinking 34) An individual who is team oriented and has experience in the industry in which the franchise competes is a good candidate to be a franchisee. Answer: TRUE Diff: 2 Page Ref: 517 LO: 15.2: Describe steps entrepreneurs can take to establish a franchise system. AACSB: Reflective Thinking 35) When is franchising appropriate (from the business owner's point of view)? Provide an example of when franchising is appropriate and when it is inappropriate. Answer: Franchising is appropriate when a firm has a strong or a potentially strong trademark, a well-designed business method, and a desire to grow. An example is Panera Bread. The company has a strong trademark (in the fast-casual dining segment), a well-designed business method, and a desire to grow. In some instances, franchising is not appropriate. For example, franchising would not work for Wal-Mart. While Panera Bread has a large number of franchised outlets, each individual outlet is relatively small and has a limited menu, and policies and procedures can be written to cover almost any contingency. In contrast, although Wal-Mart is similar to Burger King in that it too has a strong trademark and thousands of outlets, Wal-Mart stores are much larger, more expensive to build, and more complex to run than Panera Bread restaurants. It would also be nearly impossible for Wal-Mart to find an adequate number of qualified people who would have the financial capital and expertise to open Wal-Mart stores on their own. Diff: 2 Page Ref: 514 LO: 15.2: Describe steps entrepreneurs can take to establish a franchise system. AACSB: Analytical Thinking 36) According to a concept called ________ theory, it is more effective for the units of a growing chain to be run by franchisees than by managers because managers are usually paid a salary and may not be as committed to the success of their individual units as franchisees, who are in effect the owners of the units they manage. A) incentive B) stimulus C) agency D) stewardship E) motivation Answer: C Diff: 1 Page Ref: 518 LO: 15.3: Become familiar with the advantages and disadvantages of establishing a franchise system. AACSB: Analytical Thinking

10 Copyright © 2016 Pearson Education, Inc.

37) According to the textbook, from the franchisor's point of view, the primary disadvantage of franchising is that ________. A) it is a poorly understood form of business ownership B) an organization allows others to profit from its trademark and business method C) franchise organizations consistently make less money than alternative forms of business ownership D) it typically takes longer to grow an organization via franchising than company-owned stores E) it is not legal in seven states and the District of Columbia Answer: B Diff: 3 Page Ref: 518 LO: 15.3: Become familiar with the advantages and disadvantages of establishing a franchise system. AACSB: Analytical Thinking 38) Which of the following is a company that is suitable for franchising but has a relatively small number of franchise outlets? A) Anytime Fitness B) Hampton Inn Hotels C) McDonalds D) Starbucks E) The UPS Store Answer: D Diff: 3 Page Ref: 518 LO: 15.3: Become familiar with the advantages and disadvantages of establishing a franchise system. AACSB: Application of Knowledge 39) Which of the following was not identified in the textbook as one of the disadvantages of franchising a business? A) Loss of control B) Friction with franchisees C) Franchisee motivation D) Differences in required business skills E) Legal expenses Answer: C Diff: 2 Page Ref: 519 LO: 15.3: Become familiar with the advantages and disadvantages of establishing a franchise system. AACSB: Application of Knowledge 40) An advantage of franchising, from the franchisors point of view, is that franchising helps a venture grow because the franchisees provide the majority of the capital. Answer: TRUE Diff: 2 Page Ref: 518 LO: 15.3: Become familiar with the advantages and disadvantages of establishing a f...