CFE CFE Franchise Development & Expansion

Question 1

What document provides a prospective franchisee with all legally required disclosures about a franchise opportunity in the US?

Accepted Answer

Franchise Disclosure Document (FDD)

Answer

Franchise Agreement

Answer

Operations Manual

Answer

Offering Circular

Question 2

Which FDD item discloses the estimated initial investment range a new franchisee should expect?

Accepted Answer

Item 7

Answer

Item 5

Answer

Item 10

Answer

Item 19

Question 3

In US franchise law, how many calendar days before signing must a franchisor deliver the FDD to a prospect?

Accepted Answer

14 days

Answer

7 days

Answer

10 days

Answer

30 days

Question 4

What is the primary purpose of awarding protected or exclusive territories in a franchise agreement?

Accepted Answer

To prevent encroachment and protect franchisee investment

Answer

To limit the franchisor's expansion plans

Answer

To comply with FTC regulations

Answer

To establish royalty rates

Question 5

Which metric is most commonly used to evaluate the success of a franchisor's franchise development efforts?

Accepted Answer

Number of qualified franchisee leads converted to signed agreements

Answer

Total royalty revenue

Answer

Franchisee satisfaction score

Answer

System-wide gross sales

Question 6

What is 'churning' in the context of franchise development and why is it problematic?

Accepted Answer

Re-selling failed franchise units repeatedly without addressing root causes

Answer

Rapid menu changes that confuse customers

Answer

High employee turnover at the franchisor level

Answer

Excessive royalty increases