A form of operation in which an initial purchase fee plus a monthly service charge is paid to the parent corporation is called a(n):

• A. Entity
• B. Franchise
• C. Corporation
• D. Partnership

Answer: (B)

Franchising is a system where the franchisor grants the right to operate under its brand and business system in exchange for an upfront franchise fee and ongoing royalties or service charges. The initial purchase fee gives the right to use the brand, methods, and support, while the monthly service charge covers continued assistance, training, and access to operating resources. This payment structure is specific to franchising, differentiating it from generic business forms. An entity, corporation, or partnership describe legal or ownership forms, not the operating model that involves paying a parent company for the right to use its brand and system.