Final answer:
The correct option is 2). The party who pays royalties in a franchise agreement for the right to use the franchisor's brand is the franchisee. They pay both an initial franchise fee and ongoing royalty fees for the franchisor's support and brand rights.
Step-by-step explanation:
The recipient party to a franchise who pays royalties in return for the right to use the franchisor's brand name and related trademarks is known as the franchisee. This is part of a business model where the franchisee purchases the rights to open and operate a business based on the franchisor's established brand and system. In exchange for these rights, and the training, supply chain support, and operational assistance they receive, the franchisee agrees to pay ongoing royalty fees, as well as an initial franchise fee, to the franchisor. These fees compensate the franchisor for the use of their name, brand, and support. As such, the correct answer to the given question is option 2) Franchisee.