CA CPT Exam > CA CPT Questions > Which of the following statements is false?a)...
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Which of the following statements is false?
- a)Franchising is very common.
- b)A franchise enables one to use a larger company's trade name.
- c)A franchisee never has to pay the franchiser a percentage of sales revenues.
- d)A franchise may constrain the franchisee's independence.
Correct answer is option 'C'. Can you explain this answer?
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Which of the following statements is false?a)Franchising is very commo...
Franchising is a popular business model where a company allows an individual or group to use their established brand name, products, and services in exchange for a fee. The following statements relate to franchising, but one of them is false.
False Statement: A franchisee never has to pay the franchiser a percentage of sales revenues.
Explanation: The franchise agreement typically includes a payment structure that specifies the fees the franchisee must pay the franchiser. This can include an initial franchise fee, royalties, and advertising fees. Royalties are usually a percentage of the franchisee's sales revenues that they pay to the franchiser. This helps the franchiser maintain their brand standards, provide ongoing support, and generate revenue. Therefore, option 'C' is false.
The other statements are true:
- Franchising is very common: Franchising is a popular business model used by many companies in various industries.
- A franchise enables one to use a larger company's trade name: The franchisee gains access to an established brand name, products, and services that have already been proven successful.
- A franchise may constrain the franchisee's independence: The franchiser sets out specific rules and standards that the franchisee must follow to maintain consistency across all franchise locations. This can limit the franchisee's ability to make independent decisions.
False Statement: A franchisee never has to pay the franchiser a percentage of sales revenues.
Explanation: The franchise agreement typically includes a payment structure that specifies the fees the franchisee must pay the franchiser. This can include an initial franchise fee, royalties, and advertising fees. Royalties are usually a percentage of the franchisee's sales revenues that they pay to the franchiser. This helps the franchiser maintain their brand standards, provide ongoing support, and generate revenue. Therefore, option 'C' is false.
The other statements are true:
- Franchising is very common: Franchising is a popular business model used by many companies in various industries.
- A franchise enables one to use a larger company's trade name: The franchisee gains access to an established brand name, products, and services that have already been proven successful.
- A franchise may constrain the franchisee's independence: The franchiser sets out specific rules and standards that the franchisee must follow to maintain consistency across all franchise locations. This can limit the franchisee's ability to make independent decisions.
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Which of the following statements is false?a)Franchising is very common.b)A franchise enables one to use a larger companys trade name.c)A franchisee never has to pay the franchiser a percentage of sales revenues.d)A franchise may constrain the franchisees independence.Correct answer is option 'C'. Can you explain this answer?
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