Final answer:
A franchise involves a franchisor providing a franchisee with a full brand and operating system, which is distinct from contract manufacturing. Intellectual property laws protect the franchisor's brand and its components such as patents and trademarks.
Step-by-step explanation:
The arrangement described in the question is not contract manufacturing; instead, it is referring to a franchise. In franchising, a franchisor provides the franchisee with not just a product, but an entire brand and operating system. This includes the trademarks, business model, marketing strategies, and the necessary training to operate the business effectively. Franchising is a comprehensive approach to business expansion that enables a brand to grow more rapidly while distributing the risk and burden of that growth.
Moreover, intellectual property laws are critical in franchising as they ensure that the franchisor's brand, which includes patents, copyrights, and trademarks, is legally protected. It is through these laws that innovative firms can recoup their R&D investments and maintain a competitive edge within the marketplace before their patents expire and more affordable production by other firms is possible.
In contrast, contract manufacturing involves a hiring company contracting out the production of parts or the entire product to a third-party manufacturer, which does not include brand or entire business system provisioning.