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An investor who is considering investing in Diane's Burger Bar would not likely want to see her business plan.

A) True
B) False

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Small firms have traditionally added more than their proportional share of new jobs to the economy.

A) True
B) False

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Service industries make up about 48 percent of all small businesses.

A) True
B) False

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Which statement best characterizes the relationship between franchisor and franchisee in recent years?


A) Disagreements between the two parties have increased, and contract disputes are the cause of many lawsuits.
B) The relationship between franchisor and franchisee has become so hostile that it is threatening the continued existence of franchised businesses.
C) Occasional disputes arise between franchisor and franchisee, but legal action is rarely taken.
D) The relationship between these two parties is good because both parties benefit when the franchisee is successful.
E) Once the franchise agreement is finalized, these two parties have very little to do with one another.

F) B) and E)
G) D) and E)

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Penicillin, airplanes, and air conditioning were all


A) invented in the nineteenth century.
B) invented by Russians.
C) created through government-sponsored research.
D) created by individual inventors and small companies.
E) created by large corporations.

F) B) and E)
G) A) and B)

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Give examples to support the statement, "There must be some motivation to start a business."

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Answers will vary. Motivation to start a...

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A license to operate an individually owned business as though it were part of a chain is a franchise.

A) True
B) False

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Tim owns a McDonald's franchise that is having some troubles. Where is Tim most likely to go for advice and guidance?


A) The franchisor
B) The SBA
C) SCORE
D) Restaurant consultants
E) Chamber of Commerce

F) D) and E)
G) C) and D)

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Which of the following organizations would be considered a small business?


A) Producer of semiconductors with 2,000 employees
B) Wholesaler with 50 employees
C) Retail clothing store chain with annual sales of $26 million
D) Construction company with average annual receipts of $32 million
E) Farmer with annual receipts of $10 million

F) A) and E)
G) A) and D)

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Sarah owns a 7-Eleven franchise. What is the primary disadvantage of owning a franchise for Sarah?


A) She has to pay royalties to the franchisor.
B) She cannot use her name as the restaurant name.
C) The franchisor still retains a great deal of control.
D) Sarah is not allowed to hire her own employees.
E) Sarah may not find ways to improve operations.

F) B) and D)
G) None of the above

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Kevin has considered selling franchises of his very successful hardware store. However, he is concerned that the franchises will destroy the reputation of the company and end up hurting his business. What advice would you give Kevin?


A) He should not sell franchises because he will have no control over how the franchisees operate their businesses.
B) He should instead raise the capital to build and operate the new stores himself because this is a cheaper way to expand.
C) He should hire the managers of the new franchises so that he has control over their operations.
D) Through the franchise agreement, he can ensure that the new stores are operated according to his own standards.
E) Although he will have a little control over how the franchises operate, he will not be able to influence their advertising or level of service.

F) All of the above
G) A) and C)

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All of the following are advantages to the franchisor except


A) fast and selective distribution of products.
B) no involvement in national advertising campaigns.
C) assurance of how the outlets will be maintained and operated.
D) gains from the franchisee's high motivation.
E) a freeing up of capital for expansion of goods and services.

F) B) and E)
G) A) and B)

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You have just opened a new small business. You're really happy to learn that studies show that small-business workers


A) don't really like bill collectors much.
B) are more innovative than workers in large businesses.
C) are especially good at handling inventories in the warehouse to avoid damage and spoilage.
D) design ad campaigns that work especially well on network television.
E) pay little attention to their salary levels compared to similar workers in small businesses.

F) B) and E)
G) A) and C)

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Which form of franchising is the most common today?


A) Franchising has become a very unpopular option and is used infrequently today.
B) A manufacturer authorizes a number of retail stores to sell a certain brand-name item.
C) A producer licenses distributors to sell a given product to retailers.
D) A distributor authorizes a producer to make and sell a given product to the ultimate consumer.
E) A franchisor supplies brand names, techniques, or other services instead of a complete product.

F) B) and E)
G) C) and D)

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Mc-King Chicken Brian decided to open a local franchise of the well-known Mc-King Chicken, a fast-food restaurant. Before he took the initiative to open the franchise, he tried to weigh all the advantages and disadvantages. He decided, based on his research and understanding, that it would be beneficial to open a local fast-food restaurant. -Refer to Mc-King Chicken. Which of the following would be an advantage for Brian?


A) Guidance from the franchisor
B) Franchise holders paying for their security
C) Disagreements increasing
D) Contract disputes
E) The franchisor maintaining a great deal of control

F) A) and E)
G) D) and E)

Correct Answer

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The industry concerned with the movement of goods from producer to consumer is


A) service.
B) distribution.
C) production.
D) agriculture.
E) wholesaling.

F) A) and B)
G) B) and D)

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All franchisors give geographical protection to their franchise holders.

A) True
B) False

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The average life for an SBA-guaranteed business loan is ____ years.


A) twenty-five
B) eighteen
C) fifteen
D) twelve
E) eight

F) B) and E)
G) B) and C)

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To qualify as a small business, a manufacturing plant can employ no more than ____ people.


A) 500
B) 1,000
C) 2,000
D) 3,000
E) 3,500

F) A) and E)
G) D) and E)

Correct Answer

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What is the Service Corps of Retired Executives (SCORE)? How does it assist small-business owners?

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Small-business development centers (SBDC...

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