Franchise as Method of Distribution

Question 1

One location in a specific market.

Answer 1

Single-unit franchise

Question 2

Several locations in a region over time

Answer 2

Multi-unit franchise

Question 3

Franchisee controls operations within a defined geographic region.

Answer 3

Area franchise

Question 4

A middle party grants franchises to others.

Answer 4

Subfranchise system

Question 5

The franchisor sells products alongside franchisees.

Answer 5

Dual distribution system

Question 6

What are the main distribution options for a business?

Answer 6

1. Vertically integrated system (company-owned stores)
2. Independent dealers (sell products independently)
3. Franchising (licensed business model)

Question 7

When is franchising a good choice?

Answer 7

1. When a company wants rapid expansion
2. If strong brand identity is important
3. When capital resources are limited

Question 8

What are the different types of franchise structures?

Answer 8

1. Single Unit Franchise
2. Multi-Unit Franchise
3. Area Franchise
4. Subfranchise system
5. Dual Distribution System

Question 9

What legal risks do franchisors face?

Answer 9

1. Lawsuits from franchisees
2. Trademark misuse and brand damage
3. Regulatory fines for non-compliance
4. Difficulty closing under protective state laws