Final answer:
Franchising is a business arrangement where one firm allows another to operate a retail outlet using its developed name and business model, often in exchange for fees and royalties.
Step-by-step explanation:
The contractual agreement mentioned in the question is known as franchising. In franchising, one firm grants another the right to operate a retail outlet using a name and business model the first firm developed. The firm that buys into the franchise, the franchisee, pays a fee and ongoing royalties in exchange for the established business model, brand recognition, and support from the franchisor.
Prominent examples include chains like McDonald's. Unlike exclusive agreements, which can sometimes limit competition or collusion among firms in an oligopoly, franchising is a unique business strategy enabling expansion and uniformity of service and products across diverse locations. Thus, it can bolster brand recognition and ensure consistency in customer experience.