Final answer:
The student's question describes a franchise business model, where a franchisee pays for the rights to operate under a franchisor's brand and receives support in return while paying ongoing royalty fees.
Step-by-step explanation:
The scenario described by the student is an example of a franchise. In a franchise, a franchisee is granted the right to use a company's brand name and sell its products or services in return for a franchise fee and ongoing royalty payments. This arrangement allows the franchisee to start a business using an established business model and receive support from the franchisor, which can include training, supply chain assistance, and operational setup guidance.
It is important to distinguish between different business structures. A sole proprietorship is owned and run by an individual, without any formal business structure. A partnership involves a group of individuals who run the business together. A private company can be a corporation without publicly issued stock, and can be either small or large in scale, as seen with corporations like Cargill or Mars.
In the case of the clothing line company with outlets managed by private individuals paying to use the brand, we are indeed seeing a franchise model at work, which is distinct from a sole proprietorship, partnership, or corporation.