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A method of distributing products or services involving a franchisor, who establishes the brand's trademark or trade name and a business system or franchisee.
The longer the time required in transferring the knowledge pertaining to carrying out the business, the more the acceptability of the system
In the US, the information a franchisor is required to provide to the potential franchisees, in order to enable them to make an informed decision, is governed by
_____ also known as owners equity and indicates the value of a business after providing for all the financial obligations.
A franchise need not have immediate economic benefits for it to be valuable
A potential franchisee should carry out self-assessment and determine whether he/she has the qualities to run a franchise successfully.
Wholesalers may also be referred to as distribution distributors or dealers
· Market and Marketing Related Questions includes;
In Japan, the franchising is regulated under:
A potential franchisee should ask legal contract related questions to assess the potential of a franchise. The question include;
Termination is generally resulted from breach of the franchising agreement. I
Risk Premium is the ended amount of return that investors demand for the assumption of risk
Which of the following statements is true in a situation when a retailer attempts to pursue a format development strategy?
It takes into account costs of doing business as well as additional capital investment needed to sustain the cash flow
While setting appropriate fees to be charged from the franchisees, a franchisor should
Overall a new Franchise is low risk of doing the business with an ease to obtain finance.
A franchisee should have an internal locus of control
Potential franchisors should set aside the impact of technological development on the growth potential of the business and should not consider the vulnerability of their business to technological advancements.
The key attractions for a franchisor to grow through franchising are
By meeting existing franchisees, a potential franchisee can obtain a fairly good idea about
NASSA stands for:
A franchisor is a one
. Liquidity represents the difficulty with which an investment can quickly be converted into cash.
_____ these are the financial obligations of a franchisee that arise during the conduct of the business.
Management organic growth of an organization with the development of new products, or new markets or both are much harder to manage than to manage an inorganic growth of an organization.
Westside – one of the largest and fastest growing chains of retails stores of trent Ltd. – a Tata group of company, pursues a growth strategy called
Under joint ventures, foreign franchisor forms a joint venture with the local partner and creates a separate legal entity in that country
In the United Kingdom, the franchisor-franchisee relationship is governed by:
________________________under this agreement, the franchisor grants the franchisee the right to operate several or multiple franchised businesses within the geographical area.
The management of the firm willing to grow through franchising should develop distinct management competence
· General Questions includes;
The standardization of the product/service offerings and other related areas helps the franchisors maintain uniformity of operation across the system and consistency in the quality of service being provided by the franchisees.
A franchisor should not consider the impact of investments, cash flows and profits will have on the franchisor and the franchisees
It is often a common practice among all the franchisors to standardize their product offering, pricing strategies and policies, promotional efforts across the market, store ambiance, frontage, location and site selection criteria and several other aspects
Some of the modes of international franchising include
A franchise should have a long-term _____ rather than a short-term profit orientation
Product distribution franchise, franchisee simply sells the franchisor’s products without using the franchisor’s method of conducting business.
Multiple-unit franchising refers to
What business qualification does McDonald’s seek in its potential franchisees?
Starting a new business offers a high degree of freedom to the entrepreneur, as compared to doing a business as a franchisee
UFOC stands for _____
_____ sources of the fund include bank and financial institutions and provide finance based on their appraisal of the project feasibility submitted by the franchisee.
A potential franchisee should ask general related questions to assess the potential of a franchise. The question include;
This is the ended amount of return that investors demand the assumption of risk.
Franchising, if viewed from the perspective of vertical marketing system
A franchisor should identify the core locations and peripheral locations in order to set the priority of market entry.
Which of the following is true in the context of standardization of a franchise?
If the master franchisor is foreign company, it will be taxed only on income that arises from operations carried out in Indie or certain cases, on income that is deemed to have arisen in India. T
A franchisee has nobody to supervise in day-to-day running of business. One should be able to cope with such isolation and be able to perform better
It is always advisable to solicit expert advice of competent legal advisors for different types of legal compliance.
The problem starts when a person gets into franchising only because he has an entrepreneurial instinct but the instant he becomes a franchisee, the true entrepreneur in him starts resenting the shackles that are imposed by the franchising system.
The right combination of four R's potential franchisee's must-have, Realism, Resources, Research, and Resolve.
UFOC stands for:
Master franchising is typically employed by foreign franchisors so that a resident of the territory can expand the system in areas which the franchisor may not be familiar with.
Traditional or product format franchising is all about
It is important that following termination, the franchisor takes steps to protect its trademarks and other intellectual property rights from the abuse by the master franchisee / developer/franchisee
under the direct franchising, the franchisor grants franchisees to individual franchisees in the foreign country through the execution of an international contract
A complex business model requiring a considerable amount of time for learning might be considered unfavorable by the potential franchisees
Franchisors must satisfy themselves of having the presence of flexibility in its business and franchise system so as to enable both the franchisor and franchisee to customize their product offering to suit the taste and preference of the local market
_____ measures the franchisee’s abilities to meet short term liabilities of the business.
There are no specific laws that govern franchising in India
A franchisor should be aware of the competition both at the franchise level and also at the consumer level.
During an interview with a franchisor, a potential franchisee should ask several relevant questions. Some of the marketing related questions include
_______________________ this represents the component of return from an investment with sacrificing alternative use of the invested funds.
A firm that intends to implement growth strategy through franchising route should be able to ensure whether the business model is transferable to the franchisee.
_____ the net worth of a franchisee is an arithmetic difference between total assets held by a franchise and total liabilities of a franchisee.
An Existing Franchise available on Resale could be costly to buy an existing franchise
_____ all those costs a franchisee has to incur in operating a franchise business
_____ is the revenue earned by franchisee during a financial year. An amount of net sales is derived after deducting cash discounts employee discounts, markdowns, and free samples.
The standardization of the product/service offerings and other related areas help the franchisees maintain uniformity of operation across the system and consistency in the quality of service being provided by the franchisors.
A franchisor should anticipate probable source of conflicts between the franchisor and the franchisees and devise strategies to resolve them
The ______________________ represents the economic benefits derived from the ownership of the franchise.
A master franchisee is granted the rights to a substantial territory usually a whole country. It will then grant unit franchises to unit franchisees throughout the territory.
The Peoples Republic of China governs franchising under
Market development as a strategic option involves
Potential franchisors should also assess the impact of technological development on the growth potential of the business and should consider the vulnerability of their business to technological advancements.
Business is a very complex system and clarity may not prevail at all the aspects of business
A master franchisee
The net cash flow represents the economic benefits derived from the ownership of the franchise.
Research on the franchisor is a must for the success
________________under this arrangement, a chain of retailers organized by wholesaler unite into a voluntary chain of stores, who together would offer a well orchestrated programme of merchandising and retailing to achieve an efficiency.
Franchise system allows an easy entry in to a business with established products services having a widespread brand reputation and a proven business model
Market penetration is a strategy of achieving growth with the help of existing products in the existing market
Potential franchisors should also understand their true competitive position, not only against other franchise systems but also against everyone who offers similar products or services.
· Legal Contract Related Questions includes;
____________________ is a contractual arrangement of franchisor, a parent company and an individual, it allows the franchisee to run the business under the firms banner.
The firm willing to franchise out its business must develop a successful prototype in order to train the potential franchisees the way of carrying out its business
The firms willing to expand and grow through franchising must ensure that
A franchisor should ensure whether the existing management has adequate capabilities and staff to manage the growth of the franchise system. Growth of franchise system depends largely on the synergistic performance of the franchisees that are appointed to become the integral part of the franchise system
A firm that has a proven track record or running a chain of stores using the same name, more or less the same look at the same methods of operation is a sure shot franchisable business.
Direct Franchising the franchisor grants the franchisee the right to open one franchised business at one location with a specified geographic range that will be protected from other franchised businesses of the same system
Recently, Sankalp – a chain of restaurant serving South Indian dishes is planning to grow through franchising. It has more chances of being a successful franchisor because
Technological changes significantly affect the way people buy products
The legal written contract between the franchisor and franchisee which tells each party what each is supposed to do
_____ is the amount paid to the franchisor to purchase goods for sale. Freight charges and other taxes are added while trade discount obtained on purchase is deducted in order to arrive at this figure
Franchising through a subsidiary or a branch office are two different methdos.
Franchise system allows franchisors to perform only the critical value chain activities and that improve their overall performance
_________________ the regular payment made by the franchisee to the franchisor, usually based on a percentage of the franchisee’s gross sales
A potential franchisee should ask market and marketing related questions to assess the potential of a franchise. The question include;
Comparable Value Method market value can be transaction based or security price based.
A potential franchisee should meet existing franchisees, if possible, in order to know the intricacies of the business from the most authentic source.
Some important changes in the business environment that cause retailers to become multi-format retailers include
The firm must have a set procedure and a well-defined way of carrying out its business.
_____ is the portion of gross profit remaining after providing for sales-related expenses, depreciation and tax
An Existing Franchise available on Resale offers an assurance that a business is up and running
It is not important for the potential franchisor to ascertain whether the product or service that is offered has sustainable growth potential.
The right combination of four R's potential franchisee's must have;
Advance ruling on Taxation - if a foreign Master Franchisor has any apprehensions or uncertainties regarding the tax implications of any venture or transaction.
A new franchise the franchisors offers assistance in the pre-start up stage
Which of the following is true about related-area diversification followed by retailers?
According to international Franchise Association, franchising is defined as
Some of the specific approaches to market development strategy are
It is important to know the local sale tax, property tax, and withholding tax applicable in certain area.
_____ measures profitability of a franchise business.
________________________retailers come together to organize a wholesaling business also known as retailer cooperative owned and organized by members and offer variety of services to the members (retailers) to help them compete with corporate chain of stores by harnessing competitiveness through scale economies
Product development – also known as format development – adopted by the retailers as a strategy to grow involves
In order to measure financial performance, four dimensions such as:
Select one:
Pizza Hut requires all of its franchisees to own at least three franchised units within a span of three years of a franchisee’s entry into the system. This strstegy is known as
The North American Security Administration Association (NASSA) has adopted a Uniform Franchise Offering Circular (UFOC) which defines the type of information to be disclosed to prospective franchisee. UFOC stands for:
Starbucks penetrated market for coffee beverages in the US using a concept called
The management of the firm willing to grow through franchising should develop distinct management competence,
A potential franchisee should carry out an industry analysis and should also know the players in that industrythat are going through the franchising route
A fully integrated vertical marketing system develops when
The less the time required in transferring the knowledge pertaining to carrying out the business, the more the acceptability of the system
Franchisee’s Obligations: Supply Products & Services to Customers, Recruit, Train and Supervise Employees, Locate Premises (and take the lease of the premises, if appropriate), Vehicles (buy/lease suitable vehicle), Intellectual Property, Internet and Social Media (comply with brand guidelines), Accounting and reporting Requirements
Which of the following is true in the context of fees charged by franchisors to its franchisees?
_____ or gross profit the amount of net sales minus cost of goods sold gives a figure of margin. This is an important component of financial analysis. The amount of margin should be capable of covering the operating expenses and leave sufficient scope for net profit.
Franchisees prefer a franchise system that
Whatever be the methodology, the prospective franchisee has to build comprehensive information on the franchisor, the, products or service of the offer, competing and substitute products and services before he makes any move committing his financial resources on a long-term basis.
It is essential to design a prototype of the, business that is to be franchised because
It is essential to design a prototype of the ,business that is to be franchised because
A franchisor should not have a well-defined marketing strategy that includes market segmentation approach, targeting strategies, positioning approach, qualifications of a franchisee, franchisee profile, franchisee selection criteria, franchisee relation management approach, sales procedures, etc
Product development is an option that retailers may adopt in order to claim more share of wallet of their shoppers.
Non-payment of declared sums is a somewhat easier matter to deal with as the franchisor can weigh up the pros of entering into litigation
The cost of entering a new franchisee includes expenses right from start-up expenses. i. Location and site selection ii. Interior and decoration iii. Furniture and fixtures iv. Licensing and permission v. Franchise fee
Financial requirements for a franchise business include:
Retail format components are; the range of merchandise, pricing, location of the store, communication, customer service, design and display
Advance tax has to be paid by both, indian and foreign corporate assesses, whose taxable income exceeds Rs. 5000/-p.a
_____ measures the operational efficiency of a business. It usually measures performance of fixed assets and current assets of a firm.
Advantage of of the franchise system to the franchsors; allows retailer to expand into different geographical market in a cost effective way.
Setting up a franchise involves complying with multiple legal requirements.
Cost Method approach focuses upon the cost creating an economically equivalent substitute, i;e replacement value.
A potential franchise should think of appointing consultants who can guide through the entire process of market potential assessment to location planning, acquisition and establishment of a franchise.
A further issue which can arise is the Master franchisee /developer /franchisee desiring to retain at least some of the goodwill established in the franchise and carry on the business int he territory under a different name.
A franchisor should determine whether the kind of investment the franchise system requires shall be fulfilled by the potential franchisee
Sometimes franchisee's are not sufficiently motivated to perform up to mark and thus do not allow the franchisor's to achieved desired results.
The franchise should have better prospects for future expansion in order to make it offer more attractive and marketable. In order to do so, the franchisor should
Which of the following is true in case of franchising?
Franchisor should develop a list of criteria to evaluate the potential franchisees. This should include
It is said that something that cannot be measured cannot be managed
A well-developed franchise system also provides for managerial approach to accounting, and use of information technology to support an organizational MIS.
The franchisor’s identifying marks, brand names, and a logo that are licensed to the franchisee.
Higher financial leverage indicates that the franchisee has more liabilities compared to franchisee’s own capital, it also indicates that probably the franchise business is recently started.
Business format franchising involves
Product development known as Format Development strategy adopted by the retailers as a strategy to grow involves
The existing Franchise could inherit problems such as employees with low commitment, pricing issues, poor procedures, an sometimes legal liabilities.
Some of the benefits of starting a new entrepreneurial venture over doing doing business through franchsing include:
A potential franchisee can begin with an industry analysis in order to assess the attractiveness of a franchise. The industry analysis should include;
In the US, the information a franchisor is required to provide to the potential franchisee's, in order to enable them to make an informed decision, is governed by:
A recent development in the system of franchising known as conversion involves
A potential franchisee should ask finance related questions to assess the potential of a franchise. The question include;
A new franchise has proven methods of doing business and a well-established brand reputation
_____ measures the financial power of a franchisee and shows a relationship between debt and equity as well as between total assets and net worth of a franchisee.
· Finance Related Questions includes;
Some retailers prefer to achieve growth with the help of existing products offerings in the existing market. This strategy is known as
In order to grow through the franchise route, it is essential that the management should be competent enough to identify the right entrepreneurial talents at various places, convert them as territory business franchisees and established a strong relationship with them in order to ensure a system-wide success.
A franchisee, as a part of the franchise development process, has to develop criteria for the assessment of a potential franchisor.
_____ these are the items owned by a franchisee that has the same monetary value.
A franchisee is a one
It is difficult to manage relationship with the franchisee's
The franchisee is not completely independent. Franchisees are required to operate their businesses according to the procedures and restrictions set forth by the franchisor in the franchise agreement.
Under area development agreement, a franchisor gives the developer the right to open a multiple number of outlets according to a predetermined schedule and within a given geographical area
It is essential to make sure whether the one who is interested in buying a franchise has adequate financial resources to finance the fixed assets, acquisition of the business, and maintenance of the business. attempting to stretch beyond one's financial strength could lead to disaster.
Franchise system allows better control over their franchisees in the conduct of the business
According to International Franchise Association, franchising defined as;
At least part of any real estate owned by the master franchisee / developer / franchisee used in the business may also have to be transferred.
Recently, Sankalp – a chain of restaurant serving South Indian dishes is planning to grow through franchising. It has more chances of being a successful franchisor because,
Franchisee is granted by the franchisor the right to carry on business using the franchisors know how under the franchisors brand.
Major liability of a franchisee is the long term loan obtained from bank or financial institution or sometimes from the franchisor.
The franchising agreement, in most cases, clearly indicate system, procedures, and methods of managing the resources.
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