Final answer:
A franchise fee is the initial payment made to a franchisor for the rights to use their trademarks, brand name, and business model. Trademarks are legal designations represented by symbols or names that identify a brand's products, crucial for franchising success. Franchisees also pay royalty fees based on their earnings.
Step-by-step explanation:
A franchise fee refers to the upfront fee paid by an organization which gets the right to use another organization's brand name, products, and processes. This fee is part of the franchising agreement where a franchisee pays to start a business modeled after and using the branding of the franchisor. In addition to the franchise fee, the franchisee typically pays royalty fees over time, which are ongoing payments based on the success of the franchise.
Trademarks play a significant role in franchising as they are the distinguishing symbols, words, or names legally registered that represent a company or product. For example, trademarks like the Nike "swoosh" distinguish a particular brand's products and are a key element of the franchisor's brand identity, which the franchisee is permitted to use under the franchise agreement.