Sam purchased a popular fast-food franchise but did not make a profit

QUESTION

Sam purchased a popular fast-food franchise but did not make a profit in his first quarter of operation. Still, Sam was probably required to pay royalties to his franchisor.

Indicate whether the statement is true or false.

ANSWER

Answer: TRUE
Explanation: Franchisors collect royalties—a percentage of sales before taxes and other expenses—on all sales regardless of whether the business makes a profit.