FREE CFC Franchise Industry Fundamentals & Regulations Questions and Answers

Question 1

What is the primary legal document that governs a franchise relationship?

Accepted Answer

Franchise Disclosure Document (FDD)

Answer

Non-disclosure Agreement

Answer

Employment Contract

Answer

Operating Agreement

Question 2

Which government agency oversees franchising regulations in the United States?

Accepted Answer

Federal Trade Commission (FTC)

Answer

Internal Revenue Service (IRS)

Answer

Small Business Administration (SBA)

Answer

U.S. Department of Commerce

Question 3

What is typically included in Item 19 of the Franchise Disclosure Document (FDD)?

Accepted Answer

Earnings claims or financial performance representations

Answer

Litigation history

Answer

Franchisee contact list

Answer

Initial investment range

Question 4

What is the purpose of a Franchise Consultant in the franchise industry?

Accepted Answer

To guide and educate clients through the franchise selection process

Answer

To provide legal representation

Answer

To handle day-to-day operations of franchises

Answer

To perform accounting audits

Question 5

Which of the following is a key benefit of franchising for entrepreneurs?

Accepted Answer

Established brand recognition and proven systems

Answer

Complete independence from all regulations

Answer

Lower franchise fees than independent startup costs

Answer

Guaranteed profit in the first year