CFE CFE Franchise Development & Expansion 3

Question 1

What is a 'conversion franchise'?

Accepted Answer

Bringing an existing independent business under a franchise brand

Answer

Converting a company store into a franchise

Answer

Converting a single-unit to a multi-unit agreement

Answer

Transitioning from one franchise system to another

Question 2

Which term describes the total one-time payment a new franchisee makes to the franchisor for the right to operate under the brand?

Accepted Answer

Initial franchise fee

Answer

Royalty fee

Answer

Marketing fund contribution

Answer

Transfer fee

Question 3

A franchisor's Item 19 Financial Performance Representation (FPR) is considered valuable because it:

Accepted Answer

Provides actual or average financial data about franchise performance

Answer

Is required by the FTC for all franchisors

Answer

Guarantees the franchisee will achieve the stated results

Answer

Replaces the need for an independent accountant

Question 4

What is 'encroachment' in franchising?

Accepted Answer

A franchisor granting nearby units or alternative channels that harm an existing franchisee's sales

Answer

A franchisee violating brand standards

Answer

Competitors opening adjacent locations

Answer

Unauthorized use of the franchise trademark

Question 5

Which organization administers the Certified Franchise Executive (CFE) designation in the United States?

Accepted Answer

International Franchise Association (IFA)

Answer

American Franchisee Association (AFA)

Answer

Federal Trade Commission (FTC)

Answer

Franchise Finance Corporation of America

Question 6

When a franchisor grants a development agreement, what is the primary risk if the franchisee fails to meet the development schedule?

Accepted Answer

The franchisee loses exclusive territorial rights and may default on the agreement

Answer

The franchisor must refund the development fee

Answer

The royalty rate automatically increases

Answer

The FDD must be reissued