18 Questions
What is the purpose of the Franchise Disclosure Document (FDD)?
To protect franchisees by requiring disclosure of certain information
What type of expenses might a state law require a franchisor to disclose?
Recurring expenses
What happens if either party fails to perform their contractual duties in a franchise contract?
A lawsuit for breach of contract may be filed
What is the typical payment arrangement for a franchise license?
An initial fee or lump-sum price
What is the primary role of the franchise contract?
To outline the terms of the franchise agreement
What is the primary purpose of state laws regulating franchises?
To protect franchisees from potential risks
What is a common reason why franchise agreements limit the franchisee's ability to sell the franchise?
To control the quality of the franchise
What is a potential risk for a franchisor that exercises too much control over its franchisees?
Potential liability
What determines the duration of a franchise?
The terms agreed upon by the parties
What is a common practice in the early stages of a franchise relationship?
Establishing a short trial period
Why might the duration of a franchise contract be correlated with the term of the lease for the business premises?
To coincide with the renewal of the business lease
What is a purpose of periodic inspections by the franchisor?
To control the quality of the franchise
What is the primary purpose of a franchise agreement?
To outline the responsibilities and obligations of the franchisee
What is typically determined by the franchisor?
The location of the franchise
What may be required by the franchise agreement in addition to the initial fee?
A percentage of the franchisor's advertising costs
What is received by the franchisor under the franchise agreement?
A percentage of the franchisee's sales
What may be specified in the franchise agreement regarding business premises?
Whether the premises must be leased or purchased
What may be given to the franchisee in some franchise contracts?
Exclusive territorial rights
Test your understanding of franchise agreements, including the role of franchisors and franchisees, quality control measures, and potential liabilities. Evaluate your knowledge of business law principles as they apply to franchise relationships.
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