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

A conversion franchise enrolls an existing independent operator into a franchise system, giving the brand immediate market presence with an already-operating business.

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

The initial franchise fee is the upfront payment granting the franchisee a license to use the brand, system, and intellectual property.

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

Item 19 allows franchisors to voluntarily disclose financial data about their units, giving prospects meaningful benchmarks—though results are not guaranteed.

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

Encroachment occurs when a franchisor's actions—such as opening another unit, allowing e-commerce, or permitting non-traditional venues—cannibalize an existing franchisee's revenue.

Question 5

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

Accepted Answer

International Franchise Association (IFA)

Answer

The CFE program is administered by the International Franchise Association's Educational Foundation, designed to advance professionalism in the franchise industry.

CFE - Certified Franchise Executive Practice Test

CFE - Certified Franchise Executive Practice Test

CFE CFE Franchise Development & Expansion 3