Franchise Buying Quiz

Before buying a franchise, a person should _______.

• rent office space

• take out a loan

• conduct in-depth franchise research

• create some ideas for new products

Why might the initial purchase price of an existing business be higher than the immediate up-front costs associated with a start-up?

• An existing business provides less risk than a franchise.

• It is easier to determine the value of the physical business and its assets.

• The previous owner's goodwill and customer service increase the business's value.

• All of the above are reasons for the higher purchase price.

What is an advantage of buying an existing business compared to starting from scratch?

• Lower costs than franchises.

• Suppliers, staff, and supplies are already in place.

• More control over business planning.

• Easier to change business structure.

What is one advantage of buying an existing business?

• New owners need to establish a customer base from scratch.

• New owners have to deal with the historical debts of the business.

• Existing suppliers, staff, and management help facilitate the transition.

• New owners must give previous owners a management position.

What is a potential disadvantage when purchasing an existing business?

• The new owner inherits a ready-to-use infrastructure.

• The new owner has to deal with the business's past issues, like debts or unhappy customers.

• The new owner can rely on the existing reputation of the business.

• The new owner benefits from the existing management without changes.

What might be a reason to consider before buying an existing business regarding the previous owner's management training incentives?

• They might be expensive.

• They might be outdated.

• They might be insufficient.

• They might be overly comprehensive.

Why might the previous owner be selling the business?

• The business is not profitable.

• The business is too challenging to manage.

• The owner doesn't have a family member to pass the business onto.

• The business is relocating.

Aside from getting an independent evaluation of inventory and equipment, what is another due diligence activity to perform before buying an existing business?

• Discussing future plans with current employees.

• Checking the business's credit score.

• Talking to suppliers to see if they will continue to supply the business.

• Reviewing the business's advertising strategies.

What was the MOST likely reason for Gilbert's business failure after the holiday season?

• He accumulated too much debt.

• He spent too much money on entertainment when the economy was not doing well.

• He had inadequate management of employees.

• He anticipated personal sacrifices.

Most people begin a new business by __________.

• borrowing funds from financial institutions or family and friends

• promoting new products to test their potential marketplace and customers

• investing heavily in marketing and promotions

• outsourcing management tasks