Buying an Existing Business

When buying an existing business, for how many years of past financial operations should you ask the owner to provide?

• At least 1 year

• At least 2 years

• At least 3 years

• At least 5 years

What is a franchise?

• A type of business ownership where multiple branches are independently operated

• A legal agreement that gives an individual the right to market a company's products or services in a particular area

• A government license that allows one to operate an independent business

• A business model where products are sold directly to consumers without a physical storefront

What is the initial franchise fee?

• A monthly payment to the franchisor for operational support

• A one-time payment for the franchise license

• The amount the local franchise owner pays in return for the right to run the franchise

• The yearly royalty fees paid to the franchisor

What are startup costs in the context of franchise ownership?

• Monthly payments made to the franchise company

• Costs associated with beginning a business

• Payments for using the franchise name

• Fees paid to support advertising of the franchise

What are royalty fees in a franchise system?

• Initial fees to start the franchise

• Payments for employee training

• Weekly or monthly payments made by the local owner to the franchise company

• One-time payment for franchise rights

What is the purpose of advertising fees in a franchise?

• To cover the costs of the franchise's real estate

• To pay for the franchise's utilities

• To support advertising of the franchise as a whole

• To fund the production of the products sold by the franchise

What is a Franchise Disclosure Document (FDD)?

• A legal agreement between a franchisor and franchisee

• A regulatory document describing a franchise opportunity

• A financial statement of the franchisor

• A marketing brochure for potential franchisees

How many days in advance must prospective franchisees receive the FDD before signing the contract?

• 7 days

• 10 days

• 14 days

• 21 days

What is one of the advantages of owning a franchise?

• Higher risk compared to starting a new business

• Limited support in management and technical aspects

• More expensive equipment and supplies

• An entrepreneur is provided with an established product or service

What is one of the disadvantages of owning a franchise?

• Franchise fees are refundable and increase profits

• Owners of franchises have more freedom to make decisions than other entrepreneurs

• Franchisees are not affected by the performance of other franchisees in the chain

• Franchise fees can be costly and cut down on profits