15.Which of the following statements about a franchise is correct?
A-A franchise provides a business model, a brand and a proven product to the franchisee.
B-A franchise allows an individual to run a local business owned by a large corporation.
C-A franchise gives individuals the opportunity to experiment with an existing business’s products.
D-There is no risk involved in starting and running a franchise business because of the proven business model
- What types of fees or payments are you expected to pay as a franchisee of a business?
A-An annual fixed fee to the franchisor to be allowed to remain in business.
B-The royalty fees for the support from the franchiser.
C-A percentage of your profits as a subsidy for future franchisees start-up costs.
D-A percentage of corporate employee costs to support the franchise.
17.A Motel 6 franchisee does not do a good job managing the housekeeping staff and is slow at addressing repairs. Customers check-in to their rooms and are frequently cut or injured on broken fixtures. They often ask to be moved to another room or to check out of the hotel completely. This customer experience reflects poorly on the brand and exposes the company to potential liability. This is an example of:
A-A disadvantage to the franchisee – they are not trained well enough to know how to properly run their business.
B-A disadvantage for the franchisee – the cost associated with these incidents will be a burden only to the franchise owner.
C-A disadvantage for the franchisor – a lack of control over the franchisee resulting in damage to the brand.
D-An advantage for the franchisee – the franchisee can expect that the franchisor will cover any legal fees associated with these incidents.
18.In 2002, Ebay, the online auction site, and PayPal, the online electronic payment service came together. This was a match that seemed to fit well together for both parties. People using Ebay to either sell or buy found PayPal to work splendidly for their Ebay transactions. This is a successful example of:
A-horizontal merger.
B-an acquisition.
C-a partnership.
D-a licensing agreement.
The Correct Answer and Explanation is :
Here are the correct answers with detailed explanations:
15. Which of the following statements about a franchise is correct?
Answer: A – A franchise provides a business model, a brand, and a proven product to the franchisee.
Explanation: A franchise is a business model in which the franchisor (the company that owns the brand) allows the franchisee (the individual who operates the franchise) to use their brand name, products, services, and business methods. This enables the franchisee to open a business with an established model, making it easier to operate because the business strategy and branding are already proven. The franchisee gets a blueprint for success and doesn’t have to create a new business from scratch.
16. What types of fees or payments are you expected to pay as a franchisee of a business?
Answer: B – The royalty fees for the support from the franchisor.
Explanation: Franchisees typically pay ongoing royalty fees to the franchisor. These fees are usually a percentage of the franchisee’s revenue or profits and cover the cost of support, brand usage, and continuous development of the franchise system. In addition to royalties, there may be other fees, such as an initial franchise fee (the cost of entering the franchise system), marketing fees, and costs related to training and support. However, royalty fees are the most common and essential payments made by franchisees.
17. A Motel 6 franchisee does not do a good job managing the housekeeping staff and is slow at addressing repairs. Customers check-in to their rooms and are frequently cut or injured on broken fixtures. They often ask to be moved to another room or to check out of the hotel completely. This customer experience reflects poorly on the brand and exposes the company to potential liability. This is an example of:
Answer: C – A disadvantage for the franchisor – a lack of control over the franchisee resulting in damage to the brand.
Explanation: In this case, the franchisor is exposed to negative consequences because the franchisee is not adhering to the brand’s standards. A franchise relies heavily on maintaining brand consistency across all locations, and if one franchisee fails to meet those standards, it can hurt the overall reputation of the brand. Customers associate the poor experience with Motel 6 as a whole, not just the individual franchise, which is a risk to the franchisor’s reputation and business.
18. In 2002, Ebay, the online auction site, and PayPal, the online electronic payment service, came together. This was a match that seemed to fit well together for both parties. People using Ebay to either sell or buy found PayPal to work splendidly for their Ebay transactions. This is a successful example of:
Answer: A – Horizontal merger.
Explanation: A horizontal merger occurs when two companies operating in the same industry and offering similar products or services merge. In this case, eBay (an auction site) and PayPal (an online payment service) were in similar online transaction-related industries, and their merger created synergies, allowing eBay customers to use PayPal seamlessly for payments. This horizontal merger strengthened both companies’ market positions by combining their complementary services.