Show
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. What is a Franchise Agreement?The franchise agreement is the legal agreement that creates a franchise relationship between a franchisor and a franchisee. Within a franchise agreement the franchisee is granted the legal right to establish a franchised outlet and operation wherein the franchisee, among other things, obtains the license and right to utilize the franchisors trademarks, trade dress, business systems, operations manual and sources of supply in offering and selling the products and/or services designated by the franchisor. The Franchise Agreement must be legally disclosed as an exhibit to a franchisor’s Franchise Disclosure Document which must be disclosed to prospective franchisee’s prior to offering or selling any franchises. What You Need to Know about the Franchise Agreement as a FranchisorAs a franchisor your franchise agreement will serve as the primary and most important legal document that will govern and define the legal relationship with your franchisees. Within your franchise agreement you will be granting your franchisees the legal right to establish and develop their franchised locations and, in turn, the franchisees will be undertaking the obligation to establish and maintain their franchised operations in accordance with the mandates of your system and to pay to you certain on-going fees. What You Need to Know about the Franchise Agreement as a FranchiseeAs a franchisee or prospective franchisee, the franchise agreement is the most critical document to your franchise investment. If you are promised something from a franchisor and you are relying on this promise, it must be contained in the franchise agreement or an amendment to the franchise agreement. To learn more about buying a franchise and due diligence steps to evaluate, click here. Typical Provisions in a Franchise AgreementWithin your franchise agreement, some of the substantive legal rights and obligations that will be established include:
Franchise Agreements Are NegotiableAn issue that comes up extremely often relates to whether or not franchise agreements are negotiable. The answer is that they are negotiable provided that the negotiated changes are based on a request of the franchisee and to provide the franchisee with more favorable terms and rights but not less favorable terms or rights. While franchise agreements are typically negotiated and are frequently modified, the modifications are most commonly of a limited nature as franchisors do and must insist on uniformity within its franchise systems. Franchisors should never negotiate or modify structural items like initial franchise fees and royalty obligations. More Information
What is included in a franchise agreement?A franchise agreement will usually contain the franchisee's obligations relating to performance criteria, payment of fees (royalties, marketing fees, training fees, transfer fees, termination fees, utility levies etc.), marketing, reporting, training, supply of products and services, territory etc.
What is a single franchise agreement?A single-unit franchise agreement is when a franchisee is given the right to open and operate a single franchise unit at one location. This is one of the most common agreements between franchisors and franchisees.
What type of agreement is a franchise?A legal, binding contract between the Franchisor and Franchisee is legally known as Franchise agreement. The function of a franchise agreement is to give franchisee an authority to use the franchisor's system and proprietary marks to manage a franchised business.
What is included in a franchise agreement quizlet?Legal contract which sets out the commercial deal between franchisor and franchisee, including investments requirements, ongoing fees & costs, and protections for both parties.
|