10 exam-style questions with answers and explanations, straight from our 1,030-question bank. Tap an answer to check yourself. When you're ready, take the scored version in the free practice test.
The CFE exam has 50 questions and runs 2 hours.
These 10 free CFE questions are organized by exam domain, so you can see how each part of the Certified Franchise Executive blueprint is tested. Reveal the answer and explanation under each question.
A franchise buyer notices that the network's outlet count has grown, but FDD Item 20 also shows frequent transfers to new franchisees. The sales director calls the transfers 'successful exits.' How should the buyer evaluate that explanation?
Correct answer: C - Ask departing and current operators about sale terms, support, and reasons for transfer.
A retail franchise agreement bars the franchisor from establishing or licensing another physical store within five miles. The same clause expressly reserves internet sales, including direct shipment to customers inside that area. The franchisee objects to the franchisor's online orders being delivered locally. Which reading is consistent with the clause?
Correct answer: B - Online sales are reserved; their destination does not itself breach the physical-store restriction.
An outlet's business plan targets $12,000 in monthly operating profit. Fixed operating costs are $36,000 per month. Variable operating costs, excluding franchise charges, are 52% of sales; a 6% royalty and a 2% advertising contribution are also assessed on sales. No other operating costs apply. Which monthly sales target covers the full cost structure and achieves the profit goal?
Correct answer: D - $120,000
A franchisee reports quarterly net profit of $42,000, including $8,000 of depreciation expense. During the quarter, receivables increased $19,000, inventory increased $7,000, and trade payables increased $4,000. These are the only operating-cash-flow adjustments. The business also bought equipment for $25,000 cash and repaid $6,000 of loan principal. How much cash did operations generate, separate from investing and financing activities?
Correct answer: D - $28,000; the equipment purchase and loan principal belong outside operating cash flow.
After a complaint-resolution workshop, employees give high relevance ratings and demonstrate the method correctly in a simulation. The franchisor now wants to determine whether employees use the method during actual customer disputes. Under the Kirkpatrick framework, which evidence answers that question most directly?
Correct answer: B - Structured observation of complaint handling during normal customer interactions.
At a multi-unit franchise, new-hire resignations are concentrated at one location. Starting pay matches sister units, and departing employees have demonstrated the required job skills. Exit interviews cite last-minute schedule changes, which roster records confirm. The manager proposes another service-skills course. Which intervention is most closely supported by these findings?
Correct answer: D - Pilot more predictable scheduling; monitor early departures and whether shifts remain adequately covered.
A franchise location receives 200 valid responses to the standard 0-10 Net Promoter Score question: 110 responses are 9-10, 30 are 7-8, and 60 are 0-6. The franchisee reports '70% satisfied' on the NPS dashboard. Which entry correctly replaces that description?
Correct answer: A - NPS +25: promoters exceed detractors by 25 percentage points across all valid responses.
A U.S. franchise buyer received a complete, current FDD 20 full calendar days ago. At the buyer's request, the franchisor has agreed to reduce the initial fee and delivered a revised agreement containing only that negotiated change. No stricter state requirement or other unresolved condition applies. Does the federal Franchise Rule require another waiting period before signing?
Correct answer: A - No; a change negotiated at the buyer's initiative does not trigger the additional seven-day period.
On the ninth full calendar day after receiving a current FDD, a prospect offers a refundable territory-reservation deposit directly to the franchisor. The franchise agreement would be signed three weeks later. The sale is not exempt from the federal Franchise Rule, and no stricter state requirement applies. Which payment arrangement is permissible?
Correct answer: C - Collect the deposit after the required 14-calendar-day disclosure period has elapsed.
During a discovery call, a commission-paid broker applies an unverified expense estimate to the franchisor's disclosed gross-sales figures and predicts the prospect's take-home profit. Item 19 contains no profit representation, and the franchisor has no written substantiation for that prediction. The broker argues that independent-contractor status places the estimate outside the franchisor's sales restrictions. How does the federal Franchise Rule apply?
Correct answer: C - The broker is a covered franchise seller making an unsupported profit representation.
The CFE exam also covers these domains. Drill them in the full free practice test:
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