Q&A Hero

Q: The seven rules for building a successful business include recognizing an opportunity, evaluating it with critical thinking, building a team, and financing with money from credit cards.

Q: Closing a business is nothing to be ashamed of if you ________. A) learn something from the experience B) are on vacation in Jamaica C) have a partner D) are a corporation

Q: ________ is the sign that an entrepreneur has added value to the resources he or she is using. A) Profit B) Sales C) Revenues D) Liabilities

Q: If a business is not making a profit, the entrepreneur knows that ________. A) no one wants to buy the product/service B) he/she is not making good use of scarce resources C) people are willing to buy the product/service at a high price D) competition is too great

Q: What are the four characteristics of a business opportunity?

Q: A(n) ________ is a plan for how a business intends to go about its own performance and outdo that of its competition. A) strategy B) model C) opportunity D) All of the above.

Q: Russell Simmons, founder of Def Jam Records, believes that if you know 10 people who will buy your product, ________ would be willing to buy it if they knew about it. A) 1,000 B) 10 more C) 10 million D) 10,000

Q: The best business opportunities often combine both ________ and ________. A) extreme luck/chance B) luck/sales skill C) sales/marketing D) internal/external factors

Q: In creating a new business, a(n) ________ is one that comes from inside you, a hobby or an interest. A) internal opportunity B) passionate choice C) compulsion D) external opportunity

Q: A business opportunity is an idea, plus ________. A) it is attractive to suppliers B) it may have marginal performance in your business environment C) it has a limitless window of time to work within D) it is attractive to customers and will work in your business environment

Q: The great economist Joel Schumpeter emphasized that innovation is the key to entrepreneurship. Which of the following is a basic way to create a new business? A) expand upon old technology B) develop current markets C) use new technology to produce a new product D) find a less expensive source of resources

Q: Entrepreneurs view problems as a(n)________. A) roadblock B) opportunity C) hurdle D) challenge

Q: Entrepreneurs look at five basic ways of opportunity for business ideas. Which is not one of those five? A) developing a new market for an existing product B) producing a product more cheaply C) finding new ways to use existing technology D) raising prices in an existing market

Q: Explain why it is important to consider opportunity cost when making a decision.

Q: Describe three potential rewards of becoming an entrepreneur that appeal to you.

Q: The economy of the United States is a free-enterprise system.

Q: Benefits of becoming an entrepreneur include independence, satisfaction, financial reward, self-esteem, and contributions to society.

Q: Entrepreneurs that participate in activities to avoid harm to the environment or help protect it in some ways are engaged in ________. A) venture philanthropy B) green entrepreneurship C) social entrepreneurship D) corporate responsibility

Q: A for-profit enterprise with the dual goals of achieving profitability and attaining beneficial returns for society is called ________. A) venture capitalism B) serial entrepreneurship C) social entrepreneurship D) portfolio entrepreneurship

Q: Why do consumers benefit from free trade and the resulting competition between businesses? A) Competition drives away the entrepreneurs who use resources most wisely. B) Competition tends to drive down prices and improve quality. C) Competition offers consumers fewer choices and makes the marketplace less confusing. D) Competition reduces the choices to consumers.

Q: How does the free-enterprise system discourage entrepreneurs who waste resources? A) The government penalizes them. B) They run into regulations that make it too difficult for them to operate. C) They can't make a profit and are forced out of business. D) They limit competition.

Q: Which of the following is not a characteristic that is helpful for an entrepreneur to have? A) self-confidence B) caution C) self-esteem D) drive

Q: The corporate equivalent of paying owners a portion of the business's profits is called a ________. A) bonus B) dividend C) capital D) revenues

Q: Some of the world's greatest entrepreneurs have overcome challenges from their childhood and youth, including all of these except one. A) learning disabilities B) abuse C) extreme poverty D) financial prosperity

Q: A company that has more than ________ employees and sales of more than $________ million per year is considered to be a "big" business. A) 100/$5 million B) 100/$10 million C) 500/$5 million D) 500/$10 million

Q: Most of the world's businesses are ________ businesses. A) small B) medium-sized C) large D) family-owned

Q: The free-market system is also called ________. A) volunteerism B) socialism C) capitalism D) dogmatism

Q: When making an investment, always consider the ________, which is the cost of your next-best investment. A) next-investment cost B) cost of goods sold C) opportunity cost D) marginal cost

Q: Entrepreneurship can be very challenging. Which is not a typical challenge of being an entrepreneur? A) loneliness B) financial reward C) long hours D) financial insecurity

Q: The United States economy is a free enterprise system. It is also referred to as a "free trade system" because it is based on ________. A) voluntary exchange B) gambling and chance C) involuntary exchange D) government cooperation

Q: Cash or goods invested to generate income and wealth is called ________. A) profit B) capital C) debt D) liability

Q: Entrepreneurs have more control over more aspects of their working lives than employees. Of which aspect of their working lives do employees have more control? A) financial uncertainty B) working conditions C) time D) encroachment on personal time

Q: A(n) ________ is the wealth and resources of a country or region, including its financial structure. A) economy B) government C) justice system D) free enterprise

Q: In the United States nearly half of the private workforce is represented by ________. A) small business owners and their employees B) entrepreneurs C) corporations and their employees D) women and minorities

Q: Explain how entrepreneurs can add value to scarce resources, and what signal they use to determine whether or not they are succeeding in doing so.

Q: An entrepreneur is a person who assumes the risks of organizing and managing a business for the sake of reducing stress from the "rat race."

Q: Entrepreneurs are often both owners and ________. A) creditors B) employees C) customers D) suppliers

Q: Products are tangible, meaning ________. A) you can't actually touch them B) you can sell them C) you can touch them D) you can see them

Q: The majority of franchisors are highly ethical individuals who are interested only in making a fair return on their investment.

Q: In the context of international franchising, under a ________ franchise arrangement, the U.S. firm grants the rights to an individual or company (the master franchisee) to develop one or more franchise businesses and to license others to develop one or more franchise businesses within the country. A) master B) direct C) subordinate D) concurrent E) multinational

Q: Jim Pierce just purchased the rights to develop multiple School of Rock franchises in Germany. Jim just purchased a(n) ________ franchise arrangement. A) concurrent B) indirect C) lateral D) direct E) subordinate

Q: In regard to international franchising, under a(n) ________ franchise agreement, the U.S. franchisor grants the rights to an individual or company (the developer) to develop multiple franchised businesses within a country or territory. A) indirect B) global C) concurrent D) direct E) express

Q: International opportunities for franchising are becoming ________. A) less prevalent B) neither more nor less prevalent C) more prevalent for product and trademark franchise systems and less prevalent for business format franchise systems D) more prevalent E) less prevalent for product and trademark franchise systems and more prevalent for business format franchise systems

Q: According to a recent FTC report, instances of problems between franchisors and their franchisees tend to be ________. A) prevalent practices B) isolated occurrences C) nonexistent D) prevalent practices for product and trademark franchise systems and isolated occurrences for business format franchise systems E) isolated occurrences for product and trademark franchise systems and prevalent practices for business format franchise systems

Q: The Franchise Disclosure Document is the document that consummates the sale of a franchise.

Q: A prospective franchisee should fully understand all the information contained in the Franchise Disclosure Document before a franchise agreement is signed.

Q: The Franchise Disclosure Document contains a total of 23 categories of information that give a prospective franchisee a broad base of information about the background and financial health of the franchisor.

Q: In addition to FTC disclosure requirements, ________ states have laws providing additional protection to franchisees. A) 6 B) 10 C) 15 D) 33 E) 47

Q: While franchise agreements vary, each agreement typically contains the purchase agreement and the ________ agreement. A) legal B) procurement C) conversion D) sell E) franchise

Q: While franchise agreements vary, each agreement typically contains these sections: the ________ agreement and the ________ agreement. A) statutory; purchase B) franchise; buy C) buy; membership D) procurement; statutory E) purchase; franchise

Q: The document that consummates the sale of a franchise is called the ________. A) franchise disclosure document B) franchise agreement C) license agreement D) uniform franchise contract E) franchise circular

Q: The Franchise Disclosure Document contains ________ categories of information. A) 8 B) 14 C) 23 D) 35 E) 44

Q: The Franchise Disclosure Document is accepted in (or by) ________. A) 11 states B) all 50 states, all of Canada, and parts of Mexico C) 39 states and all of Canada D) all 50 states and parts of Canada E) all nations participating in the North America Free Trade Agreement

Q: The ________ contains 23 categories of information that give a prospective franchisee a broad base of information about the background and financial health of the franchisor. A) Franchise Due Diligence Certificate B) Franchise Offering Contract C) Standardized Franchise Contract D) Franchise Disclosure Document E) Franchise Code of Conduct

Q: To avoid making a hasty judgment, a franchisee may not purchase a franchise for ________ days from the time the Franchise Disclosure Document is received. A) 3 B) 5 C) 10 D) 14 E) 30

Q: List and explain three of the common misconceptions about franchising.

Q: According to the textbook, the first rule of buying a franchise is ________. A) asking for a copy of the franchisor's annual report B) checking the profitability of similar franchises C) making sure the franchisor's industry is conductive to franchising D) making proper arrangements for financing E) not making a hasty decision

Q: How can a person tell if franchising is right for them?

Q: One of the most important questions a prospective franchisor should consider is whether the fees and royalties charged by a franchisor are consistent with the franchise's value or worth.

Q: The royalty fees a franchisee pays are usually around four to five percent of gross income.

Q: Franchisees are often required to pay into a national or regional advertising fund, even if the advertisements are directed at goals other than promoting the franchisor's product or service.

Q: In the majority of cases, a franchisee pays a royalty based on a percentage of weekly or monthly net income.

Q: All of the following are advantages to buying a franchise except ________. A) restrictions on creativity B) potential for business growth C) availability of financing D) a proven product or service within an established market E) franchisor's ongoing support

Q: Which of the following is not an advantage of buying a franchise? A) A proven product or service within an established system B) Franchisor ongoing support C) Availability of financing D) Potential for business growth E) Duration and nature of the commitment

Q: According to the textbook, the main disadvantage of buying a franchise is ________. A) franchise organizations typically grow slower than non-franchise organizations in the same industry B) franchisors typically provide poor levels of support C) the cost involved D) the service sector of the U.S. economy is waning in importance E) franchising is waning in its popularity

Q: There are two primary advantages to buying a franchise over other forms of business ownership. First, the franchisor typically provides training, technical expertise, and other forms of support, and second, ________. A) franchising is almost a sure way of making a profit B) a franchise agreement is typically easy to exit if expectations aren't met C) franchisors typically encourage creativity on the part of franchisees D) the franchisor provides an entrepreneur the ability to own a business using a tested and refined business method E) franchise organizations are consistently more profitable than non- franchise organizations in the same industry

Q: The Partnering for Success feature in Chapter 15 focuses on how franchise organizations can boost their sales while at the same time reduce their expenses. The technique that the feature recommends to achieve these dual objectives is ________. A) strategic alliances B) joint ventures C) outsourcing D) licensing E) co-branding

Q: In the majority of cases, a franchisee pays the franchisor a royalty based on ________. A) a predetermined fixed weekly or monthly amount B) weekly or monthly net income C) the size of the franchise outlet D) weekly or monthly gross income E) the age of the franchise outlet

Q: According to the textbook, a franchisee's weekly or monthly royalty fees are typically around ________ to ________ percent of gross income. A) 1; 2 B) 2; 3 C) 3; 4 D) 4; 5 E) 5; 6

Q: According to the textbook, which of the following is not a cost that is typically associated with buying a franchise? A) Advertising fees B) Continuing royalty payments C) Trademark acquisition fee D) Initial franchise fee E) Capital requirements

Q: The What Went Wrong feature in Chapter 15 focuses on Curves International, the fitness center for women. Since 2006 Curves has closed more than 4,000 locations. Which of the following reasons was not identified in the feature as one of the possible explanations for why so many Curves centers have closed? A) An inability to find enough potential franchisees B) The poor economy C) Cheaper competition D) The company failed to keep up with changing trends, including more flexible hours for busy working women. E) The company sold too many franchises that are located too close together.

Q: What are the primary advantages and disadvantages to establishing a franchise system (from the franchisor's point of view)?

Q: A management concept called agency theory refutes the value of franchising for organizations with multiple units, like restaurant chains.

Q: 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.

Q: 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

Q: 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

Q: 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

Q: 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

Q: 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.

Q: 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.