Which of the Following Best Describes a Business Format Franchise

question 21

Multiple Choice

Which of the following best describes a business format franchise?

• A)It is a broad franchise agreement in which a franchisee pays for the right to use the name, trademark, and production methods of a franchisor.
• B)It is a type of franchising arrangement in which a franchisor makes a product and licenses a franchisee to sell it.
• C)It is a type of franchising arrangement in which a franchisor shares ownership with a franchisee by selling a number of its shares.
• D)It is a broad franchising agreement in which a franchisee pays a franchisor for the right to use the production methods of the franchisor and functions under a different name and identity.

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Definitions:

Systematic Risk

The risk inherent to the entire market or entire market segment, which cannot be eliminated through diversification.

Index Model

A model that describes the relationship between the returns of a stock and the returns of a market index.

Covariance

A measure of the degree to which two variables move in relation to each other, with a positive covariance indicating that they tend to move in the same direction.

Standard Deviation

A statistical measure that represents the dispersion or variability of a set of data points, often used in finance to gauge the volatility of an investment's return.