1. Which of the following statements about the risk involved in buying a franchi

Question

1. Which of the following statements about the risk involved in buying a franchise is correct?

Buying a franchise can dramatically increase the risk of failure.

Buying a franchise can dramatically decrease the risk of failure.

There is no difference in the risk of buying a franchise compared to buying an existing business.

2.Which of the following statements is correct about the level of risk involved in purchasing an existing business?

Buying a franchise can dramatically increase the risk of failure.

Buying a franchise can dramatically decrease the risk of failure.

Buying an existing business is less risky than buying a franchise.

There is no difference in the risk of buying a franchise compared to starting a business from nothing but an idea.

There is no difference in the risk of buying a franchise compared to starting a business from nothing but an idea.

3. During the period when the previous owner of an existing business is transitioning ownership to the new owner, a number of tasks should be completed. Which of the following statements is correct about these tasks?

If there are too many employees enact a layoff plan immediately.

Make all significant changes slowly over a long period of time.

Insure the former owner comes to the business every day for at least 30 days following the sale.

Wait at least six months before informing customers and suppliers of the sale of the business.

Buying a franchise can dramatically increase the risk of failure.

Buying a franchise can dramatically decrease the risk of failure.

Buying an existing business is less risky than buying a franchise.

There is no difference in the risk of buying a franchise compared to starting a business from nothing but an idea.

Explanation / Answer

Buying a franchise can dramatically decrease the risk of failure. The reason is because it helps in minimizing the risk of the franchisor and the major burden is on the franchisee. Buying a franchise can dramatically decrease the risk of failure. The reason is because as compared to an existing business in a franchise the risk of the franchisor is minimized and the major burden is on the franchisee whereas in an existing business the whole risk belongs to the owner of the business. Make all significant changes slowly over a long period of time. The reason is making any drastic change in a short notice might prove to be difficult to adjust in the market since the business was already functioning and any major changes may not be easily acceptable.

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