A well-known franchise food chain was brought to its knees when several customers got sick from tainted beef. Although the food chain recovered due to its quick and consistent action, several franchisees sued the parent company for loss of sales. The franchisees experienced the coattail effects of the bad publicity this event received.

a. True
b. False

True

Explanation:

The coattail effect is the financial losses to other franchises due to the bad publicity of a fellow franchise. As franchises are interconnected and act as a single company which means all of the franchises represents the organization and if one franchise is the reason of defaming to the company then the result is that other franchises also get affected. This negative affect of a single franchise on the other franchises and organization is known as coattail effect.

In the question the scenario is that a single franchise is a result of bad publicity due to inappropriate practice. This bad publicity resulted in decrease in profits and sales which affected all of the franchises. So the effect is Coattail effect.