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Exam 5: How to Form a Business

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Question 41

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Greg plans to open up three Hottie Pata′tee franchises in the greater Denver area.He just informed you that he plans to negotiate with the franchisor to eliminate the Big Potato Head that graces the roof of these restaurants.Greg is likely to learn that:

A) The parent company will give him a start-up cost break for the same amount that it would have to pay for three of these signs.
B) He is making a smart decision because it is not the sign that will bring customers to his potato bar.It is the wide-selection of toppings and six different ways he will cook potatoes.
C) It is non-negotiable due to company rules.
D) His failure rate will not increase or decrease because franchises traditionally have low failure rates.

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

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Question 42

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What is the difference between a general partner and a limited partner? Give an example of a situation in which a person would want to be a limited partner.

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A general partner is an owner (partner)w...

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Question 43

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A separation between ownership and management is most likely to occur in a:

Franchising has certainly become a key component of the U.S.economy.What are the major advantages and disadvantages of franchising?

The most popular businesses for franchising are restaurants.

Alex's uncle recently passed away and left him an American Dream Real Estate franchise business.Alex is not a licensed agent or broker,nor does he know anything about the real estate business.He plans to sell his American Dream franchise to his friend,Derek who recently got his real estate license.One of the advantages of owning a franchise is that you can decide to sell-out to anyone you believe is suitable for the business.

A franchise can be formed:

Franchisors may send reverse royalties to franchisees who:

It is correct to say that if a franchisor expects a 6% royalty fee on revenue,the franchisor earns 6 cents on each dollar of revenue the franchisee generates.

Zach and Mac own an auto repair business which they operate as co-owners.Both take an active role in the management of the business,and each accepts unlimited liability.Zach and Mac operate as a _________.

Few people today start their own business.

The purpose of a conglomerate merger is to diversify operations and investments.

All partners in a general partnership have limited liability for the debts of their firm.

According to the Uniform Partnership Act,the three key elements of any general partnership are (1)shares of stock to represent ownership, (2)limited liability,and (3)ease of ownership transfer.

Tech Solutions,Inc. ,a manufacturer of laptops,is considering a merger with Outtel,a leading producer of microprocessors and other computer chips.Tech Solutions believes such a merger would give them a guaranteed source of needed components,and enable them to have better control over quality.If this merger occurs,it would be an example of a horizontal merger.

Modern Screen Entertainment,Inc. ,recently bought Star Power Pictures,Inc. ,for an undisclosed amount of money.It now owns all of Star Power Picture's properties and obligations.This is an example of a(n) :

People who form cooperatives:

A good reason why partners should spell-out the details of their partnership arrangements in writing is:

Ted and Mark are partners in a dry cleaning business.They would like their brother Todd to join them.Unfortunately,partnership law states that only two partners can participate in a partnership.

If an established franchisor agrees to provide you the opportunity to become a franchisee in its franchise system,the franchisor may also be willing to serve as a source of financing for your operation.