CFE CFE Franchisee Relations & Support 2

Question 1

What is the significance of 'royalty' in a franchise relationship?

Accepted Answer

An ongoing fee paid to the franchisor, typically a percentage of gross sales, for continued use of the system

Answer

A one-time payment for the franchise license

Answer

A fee charged only when the franchisee is in default

Answer

A payment made exclusively to the national marketing fund

Question 2

A franchise system's 'Brand Fund' or 'National Marketing Fund' is primarily used to:

Accepted Answer

Collectively pool franchisee contributions for system-wide marketing campaigns and brand-building

Answer

Pay field consultant salaries

Answer

Reimburse franchisees for local advertising

Answer

Offset franchisor administrative costs

Question 3

What is a 'default and cure' provision in a franchise agreement?

Accepted Answer

A process giving franchisees a specified period to correct a contract violation before termination

Answer

A clause allowing franchisees to exit without penalty

Answer

A refund mechanism for failing units

Answer

A mandatory arbitration trigger

Question 4

Which support activity is MOST effective at improving underperforming franchisee unit economics?

Accepted Answer

Targeted one-on-one business coaching with actionable performance improvement plans

Answer

Increasing national advertising spend

Answer

Reducing royalty rates temporarily

Answer

Offering new product launches

Question 5

What is a 'franchise renewal' and what must typically occur for it to be granted?

Accepted Answer

The franchisee meets performance standards, upgrades to current brand requirements, and signs the then-current agreement

Answer

The franchisee signs a new identical agreement automatically

Answer

The FDD is re-issued with no changes required from the franchisee

Answer

Renewal occurs only at the franchisor's discretion with no criteria

Question 6

In franchise relations, what does 'co-branding' refer to?

Accepted Answer

Operating two complementary franchise brands within the same location or under the same franchisee agreement

Answer

Two competing franchises merging operations

Answer

A franchisor partnering with a non-franchise business

Answer

The national marketing campaign shared between two brands