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Exam 2: Small Businesses and Franchises

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Question 31

Multiple Choice

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Made in the USA Clothing Inc. gives notice to Neely that it is terminating their franchise arrangement. Winding up the business requires

A) ​a new franchise agreement.
B) ​nothing more than closing immediately.
C) ​Neely's death, disability, or insolvency.
D) ​the return of the franchisor's property.

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

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Question 32

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The law considers all new businesses to be sole proprietorships regardless of the number of owners.

A) True
B) False

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Question 33

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State regulation of franchising is often aimed at protecting franchisees from unfair practices.

A sole proprietorship offers less flexibility than does a partnership or a corporation.

A franchise agreement may allow the franchisee to cure a breach of the franchise agreement within a certain time so as to avoid termination.

Champions Corporation licenses the trademarks to its products to Direct Marketing, Inc., to reproduce on caps, sweatshirts, and similar goods for sale. This is

Anyone who does business must create a separate business organization.

Fact Pattern 2-1 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 2-1.To potential investors, Jumbo Juice must disclose

Diane organized, and owns and operates, Reliable Roofing, a construction outfit, in the simplest form of business organization. This is

A franchisor's decision to terminate a franchise is always considered wrongful.

Any suit against the business or its employees can lead to unlimited personal liability for the owner of a sole proprietorship.

Most franchise contracts provide that notice of termination must be given.

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

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

Lee wants to go into the business of architectural design. Among the reasons that might convince Lee to set up his business as a sole proprietorship would be

Spicy Sauces, Inc., and Tom's Bottling Plant have a manufacturing franchise arrangement. This involves the transfer of

The franchise agreement is likely to set out standards for the franchise.

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

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

Digital Wizards, Inc., a franchisor of computer technicians, wishes to standardize the pricing practices of its franchisees because they have engaged in price-cutting to increase their respective shares of the market. The most prudent action might be for Digital Wizards to