Question

Which of the following statements is incorrect regarding product and trademark franchises?

a) A product trademark franchise typically connects a single manufacturer with a network of dealers or distributors.
b) Product trademark franchises are more popular than business format franchises.
c) Ford Motors establishes product trademark rather than business format franchises.
d) Product and trademark franchisees are typically permitted to operate in a fairly autonomous manner.
e) Rather than obtaining a royalty or franchise fee, the product and trademark franchisor obtains the majority of its income from selling its products to its dealers or distributors at a markup.

Answer 1

The incorrect statement is that product trademark franchises are more popular than business format franchises. In fact, business format franchises are typically the more popular choice, offering a comprehensive business model beyond just the distribution of products.

Step-by-step explanation:

The statement that is incorrect regarding product and trademark franchises is that product trademark franchises are more popular than business format franchises. This type of franchise typically involves a single manufacturer partnering with a network of dealers or distributors, such as Ford Motors, which establishes product trademark rather than business format franchises. Instead of paying a royalty or franchise fee, franchisees purchase the products from the franchisor at a markup, which is how the franchisor primarily generates income.

Business format franchises, on the other hand, are generally more popular and offer a comprehensive business model, including branding, business systems, and ongoing support, whereas product trademark franchises focus on distributing products through a dealer network.

Answer 2

The incorrect statement is that product trademark franchises are more popular than business format franchises. Business format franchises, offering comprehensive business systems, are typically more popular. Product trademark franchises focus on selling goods to dealers, who sell them to consumers.

Step-by-step explanation:

The incorrect statement regarding product and trademark franchises is (b) Product trademark franchises are more popular than business format franchises. In reality, business format franchises, such as fast food chains like McDonald's, are often more prevalent and recognizable. They provide not just a product but a complete system for operating a business, including training, operational support, and brand standards that franchisees must follow.

A product trademark franchise typically involves an agreement where dealers are authorized to sell a manufacturer's product (e.g., Ford Motors with its network of Ford dealers). This form of franchise focuses on the product itself, and the franchisor's primary income comes from selling products to dealers at a markup, rather than franchise fees or royalties, as stated in (e). As in (d), product and trademark franchisees are given a degree of autonomy, particularly concerning how they manage the daily operations of their individual businesses. Finally, exclusive dealing agreements like those mentioned for Ford Motor Company (c) are legal and commonly observed in product trademark franchising.