Lesson 1.4.1

1.4.1 Franchises and franchisees Quiz: OCR Business, Unit 1

20 questions

Written by Revision Ninja · Last reviewed 11 October 2026

In partnership with Revision Ninja

Lesson 1.4.1, Franchises and franchisees: 20 multiple choice questions for the OCR Business (H431), Unit 1: Introduction to Business, written with Revision Ninja.

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The 20 questions

  1. What term describes a business that buys the rights to operate under an established brand name?

    • Franchisor
    • Licensor
    • Franchisee
    • Sole trader

  2. What is the business called that sells the rights to its brand and operating model?

    • Licensee
    • Franchisee
    • Franchisor
    • Subsidiary

  3. What upfront payment does a franchisee make to buy into an established business system?

    • Initial franchise fee
    • Royalty fee
    • Retained profit
    • Corporation tax

  4. What ongoing fee is typically paid by a franchisee as a percentage of their turnover?

    • Interest payment
    • Royalty fee
    • Initial fee
    • Dividend

  5. Which of these is a major advantage for a business operating as a franchisee?

    • Total operational freedom
    • 100% profit retention
    • Zero capital needed
    • Lower failure risk

  6. Which drawback is most likely experienced by an individual operating a franchise?

    • Unlimited liability
    • High interest rates
    • No brand awareness
    • Lack of autonomy

  7. What is a key benefit to a franchisor of expanding through franchising?

    • Rapid market expansion
    • Zero brand risk
    • Lower sales revenue
    • Full profit retention

  8. What major risk does a franchisor face if a franchisee delivers poor customer service?

    • Loss of copyright
    • Brand image damage
    • Higher interest costs
    • Unlimited liability

  9. What legally binding document sets out the rights and duties of both franchise parties?

    • Partnership deed
    • Memorandum of association
    • Articles of association
    • Franchise agreement

  10. Who provides the primary capital required to set up a new franchise outlet?

    • The government
    • The franchisor
    • The bank landlord
    • The franchisee

  11. Royalty payments from a franchisee are usually calculated as a percentage of what?

    • Share capital
    • Net profit
    • Gross revenue
    • Fixed assets

  12. How does a franchisor often generate additional income besides initial and royalty fees?

    • Paying dividends
    • Selling central property
    • Supplying inventory
    • Issuing shares

  13. What clause protects a franchisee from another unit opening too close to them?

    • Restrictive covenant
    • Exclusive territory
    • Patent protection
    • Limited liability

  14. Who is responsible for providing initial training and operational support to the outlet owner?

    • Local council
    • The franchisee
    • The franchisor
    • Trade unions

  15. What term describes an investor who operates multiple outlets of the same franchise brand?

    • Multi-unit franchisee
    • Sleeping partner
    • Conglomerate
    • Private limited company

  16. Which recurring payment fund is often pooled by franchisees for national promotion campaigns?

    • Marketing fee
    • Corporation tax
    • Redundancy fund
    • Capital reserve

  17. A setup cost includes £20,000 franchise fee and £50,000 equipment. What is total initial cost?

    • £70,000
    • £50,000
    • £100,000
    • £30,000

  18. If sales are £100,000 and the royalty rate is 5%, how much royalty is paid?

    • £500
    • £50,000
    • £5,000
    • £95,000

  19. Why might a bank be more willing to lend money to a franchisee than a startup?

    • Guaranteed profit
    • Proven business model
    • Lower tax rate
    • Government backing

  20. What happens to a franchise agreement when its specified time period expires?

    • It requires renewal
    • Becomes a partnership
    • Instant liquidation
    • Automatic sale

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