MGMT 470 TEST 3 NDSU EXAM
QUESTIONS AND ANSWERS GRADED A+
2025/2026
What should you check before signing a franchise - ANS Attorney and accountant advice; if
they object you walk away
Franchisor asking you to cut corners means - ANS Major red flag; anyone who cheats for you
will cheat against you
Why exclusive territory matters - ANS Prevents another franchisee selling the same brand
nearby
Risk of franchisor competing with you - ANS They may open nearby or run a similar business
if contract allows
Why you need a termination clause - ANS Without it you are trapped in the franchise
Why selling a franchise is difficult - ANS Franchisor often imposes conditions or tries to take it
over
Meaning of franchisor track record - ANS Long history means stable but costly; short history
means risky
1 @COPYRIGHT 2026 ALLRIGHTS RESERVED.
, Why audited financials matter - ANS Verify real performance; check tax returns because
nobody overreports taxes
Key question about franchisor value - ANS What they provide that you cannot such as
recognition; bulk buying; marketing
Gag rule in a franchise contract - ANS Prevents talking to other owners; used to hide
problems
Arbitration in franchisor's home state means - ANS You lose home advantage in disputes
Unequal cure periods mean - ANS Franchisor gets long time to fix issues; franchisee gets little
time
Non reciprocal non compete means - ANS You cannot compete but franchisor can compete
with you
Sole sourcing requirement means - ANS You must buy everything from franchisor and are
trapped if prices rise
Mandatory sublease clause means - ANS You must lease your location to franchisor after
contract ends
No marketing fund accountability means - ANS Franchisor collects your fee but refuses to
show spending
Paying franchisor's legal fees means - ANS You cannot afford disputes; huge red flag
Unilateral amendment clause means - ANS Franchisor can change contract anytime; you
cannot
2 @COPYRIGHT 2026 ALLRIGHTS RESERVED.
QUESTIONS AND ANSWERS GRADED A+
2025/2026
What should you check before signing a franchise - ANS Attorney and accountant advice; if
they object you walk away
Franchisor asking you to cut corners means - ANS Major red flag; anyone who cheats for you
will cheat against you
Why exclusive territory matters - ANS Prevents another franchisee selling the same brand
nearby
Risk of franchisor competing with you - ANS They may open nearby or run a similar business
if contract allows
Why you need a termination clause - ANS Without it you are trapped in the franchise
Why selling a franchise is difficult - ANS Franchisor often imposes conditions or tries to take it
over
Meaning of franchisor track record - ANS Long history means stable but costly; short history
means risky
1 @COPYRIGHT 2026 ALLRIGHTS RESERVED.
, Why audited financials matter - ANS Verify real performance; check tax returns because
nobody overreports taxes
Key question about franchisor value - ANS What they provide that you cannot such as
recognition; bulk buying; marketing
Gag rule in a franchise contract - ANS Prevents talking to other owners; used to hide
problems
Arbitration in franchisor's home state means - ANS You lose home advantage in disputes
Unequal cure periods mean - ANS Franchisor gets long time to fix issues; franchisee gets little
time
Non reciprocal non compete means - ANS You cannot compete but franchisor can compete
with you
Sole sourcing requirement means - ANS You must buy everything from franchisor and are
trapped if prices rise
Mandatory sublease clause means - ANS You must lease your location to franchisor after
contract ends
No marketing fund accountability means - ANS Franchisor collects your fee but refuses to
show spending
Paying franchisor's legal fees means - ANS You cannot afford disputes; huge red flag
Unilateral amendment clause means - ANS Franchisor can change contract anytime; you
cannot
2 @COPYRIGHT 2026 ALLRIGHTS RESERVED.
