Question

Marty's, a clothing company, has a number of outlets which are owned and managed by private individuals. These outlets are allowed to use the brand name and products of Marty's after paying a fee to the company. They also pay a part of their revenues to the clothing line. The part of the revenues paid by the outlets to Marty's is referred to as____________.

Answer 1

The outlets owned by private individuals under Marty’s brand are engaged in a franchise business model, where they pay royalty fees as part of their revenue to the company.

Step-by-step explanation:

The part of the revenues paid by the outlets to Marty's clothing company is referred to as royalty fees. In a franchise business model, private individuals own and manage outlets under the company's brand name. They initially pay a franchise fee and continue to pay royalty fees, which are a percentage of their revenue, making it possible for Marty's to earn from these franchised outlets without direct management.

Franchising allows for rapid expansion and a wider geographic reach of a brand like Marty's, while ensuring consistency in products and services offered. This business model has led to the success of many national brands, as it creates a predictable and uniform experience for consumers.