CFE Franchise Development & Expansion Flashcards
6 cards from real CFE practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 CFE Franchise Development & Expansion flashcards as text
A franchisor is considering expanding internationally. What is the most common entry strategy that involves partnering with a local entity to develop multiple units in a country?
Answer: Master franchise agreement
A master franchise agreement grants a local master franchisee the right to sub-franchise within a defined territory, leveraging local market knowledge.
Which of the following best describes a 'franchise resale' or 'transfer'?
Answer: An existing franchisee selling their unit to a new owner with franchisor approval
A franchise transfer occurs when an existing franchisee sells their unit(s) to a new buyer, subject to the franchisor's approval and transfer fee requirements.
What is the key distinction between a 'single-unit franchise agreement' and an 'area development agreement'?
Answer: Area development grants rights to open multiple units on a schedule
An area development agreement commits the franchisee to open a predetermined number of units within a defined territory according to a development schedule.
When evaluating a candidate franchise market, which analysis method divides a trade area by demographic, psychographic, and competitive factors?
Answer: GIS-based trade area analysis
Geographic Information System (GIS) analysis overlays multiple data layers—demographics, traffic, competition, and income—to identify optimal franchise locations.
In franchise development, what does 'validation' refer to in the prospect's discovery process?
Answer: Prospects contacting existing franchisees to verify franchisor claims and culture
Validation is the step where prospects call or visit existing franchisees to get honest insights about the business, support, and profitability.
Which FDD item contains audited financial statements of the franchisor?
Answer: Item 21
Item 21 requires franchisors to include their most recent three years of audited financial statements, providing prospects insight into the franchisor's financial health.