According to the Textbook, the First Rule of Buying a Franchise

question 1

Multiple Choice

According to the textbook, the first rule of buying a franchise is ________.

• A) asking for a copy of the franchisor's annual report
• B) checking the profitability of similar franchises
• C) making sure the franchisor's industry is conductive to franchising
• D) making proper arrangements for financing
• E) not making a hasty decision

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Definitions:

Economies of Scale

The cost advantages that enterprises obtain due to their scale of operation, leading to a reduction in average costs with increased output.

Total Fixed Cost

Total Fixed Cost is the sum of all costs that remain constant regardless of the level of production or business activity.

Economies of Scale

Businesses gain cost benefits from increasing their scale of operations, leading to a decline in the cost per unit of output as the production size enlarges.