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CFE Franchise Development & Expansion Flashcards

6 cards from real CFE practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 6 CFE Franchise Development & Expansion flashcards as text

  1. What is a 'conversion franchise'?

    Answer: Bringing an existing independent business under a franchise brand

    A conversion franchise enrolls an existing independent operator into a franchise system, giving the brand immediate market presence with an already-operating business.

  2. Which term describes the total one-time payment a new franchisee makes to the franchisor for the right to operate under the brand?

    Answer: Initial franchise fee

    The initial franchise fee is the upfront payment granting the franchisee a license to use the brand, system, and intellectual property.

  3. A franchisor's Item 19 Financial Performance Representation (FPR) is considered valuable because it:

    Answer: Provides actual or average financial data about franchise performance

    Item 19 allows franchisors to voluntarily disclose financial data about their units, giving prospects meaningful benchmarks—though results are not guaranteed.

  4. What is 'encroachment' in franchising?

    Answer: A franchisor granting nearby units or alternative channels that harm an existing franchisee's sales

    Encroachment occurs when a franchisor's actions—such as opening another unit, allowing e-commerce, or permitting non-traditional venues—cannibalize an existing franchisee's revenue.

  5. Which organization administers the Certified Franchise Executive (CFE) designation in the United States?

    Answer: International Franchise Association (IFA)

    The CFE program is administered by the International Franchise Association's Educational Foundation, designed to advance professionalism in the franchise industry.

  6. When a franchisor grants a development agreement, what is the primary risk if the franchisee fails to meet the development schedule?

    Answer: The franchisee loses exclusive territorial rights and may default on the agreement

    Failure to meet development schedule milestones typically results in the loss of exclusivity rights and can constitute a material breach of the area development agreement.