Future Business Leaders of America (FBLA) Hospitality Management Practice Test

What is a franchise?

1. A type of business established through a franchise agreement

2. A company solely owned by one individual

3. A government-owned business entity

4. A temporary partnership between two businesses

The correct answer is: A type of business established through a franchise agreement

A franchise is defined as a type of business established through a franchise agreement. This agreement allows an individual or group (the franchisee) to operate a business using the brand, systems, and support of an established company (the franchisor). The franchisee pays certain fees and agrees to adhere to the franchisor's established practices and standards, which can include everything from marketing materials to operational processes. This relationship creates a way for the franchisee to leverage the success and recognition of an established brand while providing the franchisor with a method of expanding their business footprint without the need to manage each individual location directly. Other options do not fit the definition of a franchise. A company solely owned by one individual pertains to sole proprietorships, while a government-owned business entity refers to public enterprises, which are not franchises. A temporary partnership between two businesses does not capture the structured and contractual nature of a franchise agreement, which is usually long-term and involves specific guidelines and rights for both parties involved.