Final answer:
A franchise is a type of contractual vertical marketing system where the franchisee purchases the rights to operate under the franchisor's model and receives support in return for fees.
Step-by-step explanation:
Franchising is the most common type of contractual vertical marketing system. A franchise allows an individual to start a business by purchasing the rights to operate under the franchisor's business model. In a franchising agreement, the franchisee gains the support from the franchisor in areas such as training, supply chain, and operational setup. In return, the franchisee is obliged to pay initial franchise fees along with ongoing royalty fees.
This type of business allows widespread availability of similar products or services across different locations, as evidenced by early franchises like McDonald's restaurants. Compared to sole proprietorships or partnerships, a franchise offers the advantage of a proven business model and brand recognition, which can mitigate some of the risks typically associated with starting a new business.