Greg Plans to Open Up Three Hottie Pata′tee Franchises in the Greater

question 181

Multiple Choice

Greg plans to open up three Hottie Pata′tee franchises in the greater Denver area. He just informed you that he plans to negotiate with the franchisor to eliminate the Big Potato Head that graces the roof of these restaurants. Greg is likely to learn that:

• A)The parent company will give him a start-up cost break for the same amount that it would have to pay for three of these signs.
• B) He is making a smart decision because it is not the sign that will bring customers to his potato bar. It is the wide-selection of toppings and six different ways he will cook potatoes.
• C)It is non-negotiable due to company rules.
• D)His failure rate will not increase or decrease because franchises traditionally have low failure rates.

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Definitions:

Perfectly Elastic

A situation in economics where the demand or supply for a good is completely responsive to changes in price, resulting in an infinite elasticity.

Mutual Interdependence

A situation in which a change in price strategy (or in some other strategy) by one firm will affect the sales and profits of another firm (or other firms). Any firm that makes such a change can expect its rivals to react to the change.

Trademarks

Symbols, names, or phrases legally registered or established by use as representing a company or product.

Product Differentiation

A strategy in which one firm’s product is distinguished from competing products by means of its design, related services, quality, location, or other attributes (except price).