Human Resources Certification Institute (HRCI) Practice Exam

A local gym selling rights to use their name and processes in another city is an example of what type of business structure?

1. Subsidiary

2. Merger

3. Joint venture

4. Franchising

The correct answer is: Franchising

Franchising is a business structure in which one company (the franchisor) grants another company (the franchisee) the right to use its name, processes, and products in exchange for a fee or other payment. This option is the correct answer because it involves a local gym selling the rights to use its name and processes to another city, which is exactly what franchising entails. A subsidiary is a company owned or controlled by another company, often referred to as a parent or holding company. This would not be the correct answer in this scenario because the local gym is not being owned or controlled by another company. A merger is when two separate companies merge into one. This is not the correct answer because it does not involve the selling of rights or processes to another entity. A joint venture is a business arrangement in which two or more companies agree to share resources and risks to achieve a common goal. This is not the correct answer because it does not involve the selling of rights or processes, but rather a collaboration between companies. Therefore, the correct answer is D Franchising.