Questions: Entrepreneurs should weigh the possibility of purchasing a franchise against the alternatives of buying an existing business or launching their own venture from scratch. Which of the following typically outlines the costs associated with buying and operating a franchise? a Direct selling agreement b Franchise agreement c Licensing agreement d Harvesting agreement e Royalty agreement

Entrepreneurs should weigh the possibility of purchasing a franchise against the alternatives of buying an existing business or launching their own venture from scratch. Which of the following typically outlines the costs associated with buying and operating a franchise? a Direct selling agreement b Franchise agreement c Licensing agreement d Harvesting agreement e Royalty agreement
Transcript text: Entrepreneurs should weigh the possibility of purchasing a franchise against the alternatives of buying an existing business or launching their own venture from scratch. Which of the following typically outlines the costs associated with buying and operating a franchise? a Direct selling agreement b Franchise agreement c Licensing agreement d Harvesting agreement e Royalty agreement
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Solution

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Answer

The answer is b Franchise agreement

Explanation
Option 1: Direct selling agreement

A direct selling agreement typically involves the sale of products directly to consumers outside of a traditional retail environment. This is not related to the costs associated with buying and operating a franchise.

Option 2: Franchise agreement

A franchise agreement is a legal document that outlines the terms and conditions between a franchisor and a franchisee. It typically includes details about the initial franchise fee, ongoing royalties, advertising fees, and other costs associated with buying and operating a franchise. This is the correct option as it directly pertains to the costs involved in franchising.

Option 3: Licensing agreement

A licensing agreement allows one party to use the intellectual property, brand, or product of another party. While it may involve some costs, it does not specifically outline the comprehensive costs associated with buying and operating a franchise.

Option 4: Harvesting agreement

A harvesting agreement is related to the agricultural sector and involves the terms for harvesting crops. It is not relevant to franchising.

Option 5: Royalty agreement

A royalty agreement specifies the payments made for the ongoing use of intellectual property, such as trademarks or patents. While royalties are a part of franchise costs, a royalty agreement alone does not cover all the costs associated with buying and operating a franchise.

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