Final answer:
True, a franchise is a license that allows an entrepreneur to trade using the name of an established business, requiring the payment of a franchise fee and royalty fees for the brand's support and name recognition.
Step-by-step explanation:
A franchise is indeed a type of license that an entrepreneur can purchase. This allows the entrepreneur to operate and trade under the name of an existing business, such as a well-known fast food chain or retail brand. The individual who buys into the franchise is known as a franchisee. The franchisee gains the advantage of starting a business with an established brand and often receives support in the form of training, supply chain management, and assistance with setting up operations from the franchisor. In exchange, the franchisee is typically required to pay an initial franchise fee as well as ongoing royalty fees. These fees contribute to the franchisor's profits and help maintain the quality and consistency of the brand across all locations.
Franchising represents not only a path to business ownership but also a strategic growth model for businesses looking to expand their brand and reach without directly managing new locations themselves. It stands as a popular option in industries such as fast food, retail, and services, with famous examples including franchises like McDonald's, which allow entrepreneurs to benefit from a recognized brand while the original business grows its market presence.