Q&A Hero

Q: Home Depot is an example of an organization that is perfectly suited for franchising.

Q: Franchising is a popular form of business growth.

Q: 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

Q: 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

Q: Which of the following companies is suitable for franchising? A) Home Depot B) Dropbox C) Qdoba Mexican Grill D) Walmart E) GoPro

Q: 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

Q: 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.

Q: 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?

Q: The people who buy franchises from master franchisees are typically called employee-franchisees.

Q: An area franchise agreement allows a franchisee to own and operate a specific number of outlets in a particular geographic area.

Q: Business format franchises typically allow franchisees substantial flexibility in how they run their individual franchise units.

Q: 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.

Q: A Pepsi Cola bottling dealership is an example of a business format franchise.

Q: A product and trademark franchise typically connects a single manufacturer with a network of dealers or distributors.

Q: 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.

Q: 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

Q: The people who buy franchises from master franchises are typically called ________ franchisees. A) minor B) secondary C) mini- D) subordinate E) sub

Q: 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

Q: 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

Q: 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

Q: 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

Q: 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.

Q: 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

Q: 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.

Q: 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

Q: 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

Q: 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

Q: 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

Q: 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

Q: 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

Q: ________ 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

Q: 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.

Q: 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

Q: ________ is the granting of permission by one company to another company to use a specific form of its intellectual property under clearly defined conditions. A) Verifying B) Confirming C) Endorsing D) Licensing E) Certifying

Q: The two primary steps involved in finding an appropriate acquisition candidate are (1) Make a "short list" of appropriate acquisition candidates and (2) ________. A) carefully screen each candidate to determine its suitability for acquisition B) interview the CEO of each candidate to determine his/her openness to an acquisition C) determine if acquiring each candidate is financially feasible D) meet with each candidate's top management team to discern if they are compatible with your top management team E) hire a consulting firm to determine the best acquisition candidate

Q: Which of the following is an advantage of growth by means of external growth strategies? A) Gaining access to new products and markets B) Increased business complexity C) Clash of corporate cultures D) Antitrust implications E) Loss of organizational flexibility

Q: Which of the following is a disadvantage of growth by means of external growth strategies? A) Diversification of business risk B) Economies of scale C) Getting access to proprietary products or services D) Reducing competition E) Loss of organizational flexibility

Q: Two years ago, Cameron Jones and Mary Scott each owned a small chain of smoothie restaurants in New York City. Just recently, they decided to pool their interests and combine their individual chains of restaurants into one chain. What Cameron and Mary did with their firms is called a(n) ________. A) licensing agreement B) strategic alliance C) acquisition D) joint venture E) merger

Q: In an acquisition, the surviving firm is called the ________, and the firm that is acquired is called the ________. A) target; acquirer B) goal; objective C) objective; aggressor D) acquirer; target E) aggressor; objective

Q: A(n) ________ is the pooling of interests to combine two or more firms into one. A(n) ________ is the outright purchase of one firm by another. A) acquisition; merger B) merger; acquisition C) licensing agreement; acquisition D) joint venture; strategic alliance E) strategic alliance; joint venture

Q: Rachel Watts owns a chain of office supply stores. Over the past three years, Rachel has significantly increased her sales through the outright purchase of additional office supply stores. Rachel is pursuing a(n) ________ strategy. A) acquisition B) merger C) strategic alliance D) joint venture E) licensing

Q: Which of the following is an example of an external growth strategy? A) New product development B) Mergers and acquisitions C) Market penetration D) Product line extension E) Geographic expansion

Q: Brian Ramsey owns a firm that develops and sells smartphone accessories. He is currently trying to grow his firm through strategic alliances and joint ventures. Brian is pursuing a(n) ________ growth strategy. A) domestic B) external C) subsidiary D) internal E) secondary

Q: ________ growth strategies rely on establishing relationships with third parties, such as mergers, acquisitions, strategic alliances, joint ventures, licensing, and franchising. A) Internal B) Domestic C) Outside D) External E) Peripheral

Q: The majority of entrepreneurial firms first enter foreign markets as exporters.

Q: Which of the following is the primary advantage of a wholly owned subsidiary as a foreign market entry strategy? A) Provides a firm total control over its operations B) Easier to raise capital to implement than other foreign market entry strategies C) Gaining an appreciation of local customs and market preferences D) Low transportation costs E) The ability to give employees foreign market experience

Q: Which of the following is the primary disadvantage of licensing as a foreign market entry strategy? A) A firm in effect "teaches" a foreign company how to produce its proprietary products. B) High transportation costs C) It is usually a one-time activity. D) A firm loses partial control of its business operations. E) Quality control

Q: Which of the following is the primary advantage of exporting as a foreign market entry strategy? A) Provides a firm total control over its foreign operations B) Ability to generate revenue C) Exporting is a relatively inexpensive way for a firm to become involved in foreign markets. D) The exporting company's customers put up most of the capital needed to establish the export operation. E) Exporting involves very little effort on the part of a firm.

Q: The What Went Wrong feature in Chapter 14 focuses on the failure of Crumbs Bake Shop, a specialty-restaurant chain that sold gourmet cupcakes. According to the feature, Crumbs failed due to ________. A) lack of funding to facilitate expansion, high real estate costs, management turnover, poor operating margins B) no pivot or change in strategy, lack of international expansion, trademark dispute with a competitor, failure to franchise C) increasingly crowded market, consumers started losing interest in cupcakes, high real estate costs, and no pivot or change in strategy D) lack of funding to facilitate expansion, management turnover, increasingly crowded market, and high fixed costs E) high operating costs, trademark dispute with a competitor, consumers started losing interest in cupcakes, and failure to franchise

Q: International new ventures are ________. A) businesses that have employees located in two or more countries B) businesses that sell products in two or more countries C) businesses that, from inception, seek to derive significant competitive advantage by using their resources to sell products or services in multiple countries D) businesses that are headquartered in a foreign country and export their products to the United States E) new ventures that export at least one-third of their products to foreign countries

Q: According to a survey of rapid growth firms conducted by the Small Business & Entrepreneurship Council and the Financial Services Roundtable, ________ percent of the firms in the survey said that expanding into overseas markets factored into their business plans over the next five years. A) 9 B) 21 C) 40 D) 53 E) 66

Q: Describe what a product line extension strategy is. What are the advantages of this strategy? Describe a company you are familiar with that utilizes a product line extension growth strategy.

Q: Geographic expansion is most common in manufacturing settings.

Q: A product line extension strategy involves making additional versions of a product so that it will appeal to a different clientele or making related products to sell to the same clientele.

Q: A market penetration strategy involves actions taken to increase the sales of a product or service through greater marketing efforts or through increased product capacity and efficiency.

Q: Shelly Watters owns a chain of fashion boutiques that started in Washington, DC and has expanded into Maryland, Virginia, and West Virginia. Shelly is growing her company via a strategy of ________. A) geographic expansion B) market penetration C) product line extension D) outsourcing E) licensing

Q: Entrepreneurial businesses that grow by expanding from their original location to additional geographic sites are pursuing a ________ strategy. A) common expansion B) market penetration C) universal networking D) geographic expansion E) product line extension

Q: Chris Smith owns a store that sells all-terrain vehicles (ATVs). In the past, Chris just sold one version of each of the ATVs he sold in his showroom, but to increase sales, Chris now sells a low-end, a medium-priced, and a high-end version of each of the ATVs he sells. Chris's new strategy is called a(n) ________ strategy. A) improving an existing product or service B) market penetration C) product line extension D) geographic expansion E) joint venture

Q: A(n) ________ strategy involves making additional versions of a product so that it will appeal to different clientele. A) market penetration B) geographic expansion C) improving an existing product or service D) strategic alliance E) product line extension

Q: Work that is done for a company by people other than the company's full-time employees is referred to as ________. A) insourcing B) farming-out C) personnel extension D) outsourcing E) capacity enhancement

Q: Pam Ryan owns a store that sells running shoes and related products. Pam is currently trying to increase sales through endorsements by famous runners and former Olympic athletes. Pam is pursuing a(n) ________ strategy. A) strategic alliance B) licensing C) market penetration D) geographic expansion E) improving an existing product or service

Q: A ________ strategy seeks to increase the sales of a product or service through greater marketing efforts or through increased production capacity and efficiency. A) product line extension B) product line sharpening C) product line widening D) market penetration E) market expansion

Q: If a business enhances the quality of a product, makes it more convenient to use, improves its durability, or makes it more up-to-date, any one of those initiatives fall under the category of ________. A) increasing the market penetration of an existing product or service B) extending product lines C) geographic expansion D) licensing E) improving an existing product or service

Q: Describe the internal growth strategy of new product development. Why is it a competitive necessity in some industries that entrepreneurial firms focus on this form of growth?

Q: Explain the difference between internal and external growth strategies. Provide examples of each.

Q: New product development is a low-risk growth strategy.

Q: An advantage of internal growth is that it is a rapid form of growth.

Q: In many fast-paced industries, new product development is a competitive necessity.

Q: Internally generated growth is often called organic growth because it does not rely on outside intervention.

Q: External growth strategies involve efforts taken within the firm itself, such as new product development, other product-related strategies, and international expansion.

Q: Which of the following was not identified in Chapter 14 as one of the top five reasons new products fail? A) The potential market was overestimated. B) Customers saw the product as too expensive. C) Lack of passion for the product D) The product was no different than the competition's. E) The costs of developing the product line were too high.

Q: Which of the following was not identified in the textbook as a key to effective new product development? A) Develop products that add value. B) Get quality and pricing right. C) Find a need and fill it. D) Conduct ongoing feasibility analysis. E) Focus on broad target markets.

Q: The Savvy Entrepreneurial Firm feature in Chapter 14 focuses on SwitchFlops, a company that produces sandals with interchangeable straps. The primary takeaway from the feature is that savvy growth-minded startups ________. A) utilize both internal and external growth strategies B) emphasize internal rather than external growth strategies C) emphasize international growth strategies from their inception D) configure their products and services in ways that have built-in growth potential E) compete on the basis of quality rather than price

Q: Which of the following statements is not true regarding new product development? A) New product development involves designing, producing, and selling new products as a means of increasing firm revenues and profits. B) When new product development is properly executed, there is tremendous upside potential. C) The key to successful new product development strategy is to develop products that aren't simply "me-too" products. D) In general, developing new products is a low-risk strategy. E) In many fast-paced industries, new product development is a competitive necessity.

Q: Which of the following is an advantage of internal growth strategies? A) Need to develop new resources B) Get quality and pricing right C) Investment in a failed internal effort can be difficult to recoup D) Provides maximum control E) Adds to industry capacity

Q: Which mechanism for firm growth involves the creation and sale of new products or services? A) Strategic alliances B) New product development C) Licensing D) Franchising E) Joint ventures

Q: Modcloth, Zappos and Sir Kensington's are examples of firms that are growing via ________ growth strategies. A) in-house B) external C) internal D) central E) derivative

Q: Which of the following is an example of an external growth strategy? A) Geographic expansion B) Improving an existing product or service C) Increasing the market penetration of an existing product or service D) Extending product lines E) Strategic alliances

Q: Internally generated growth is often called organic growth because it does not rely on ________. A) outside intervention B) its own skills and capabilities C) external funding D) internal leadership E) internal design expertise

Q: New product development, other product-related strategies, and international expansion are examples of ________ growth strategies. A) external B) domestic C) primary D) internal E) in-house