how do rail franchises work

What is a rail franchising system?

Under the rail franchising system, private companies bid for multi-year contracts which allow them to operate on specific routes. Once the bids are submitted, the government selects the winner taking into consideration factors such as the overall service for the franchise and passenger benefits as well as the best value for money.

Can the public sector bid for rail franchises in the UK?

According to the Railways Act 1993, the public sector cannot bid for rail franchises in Great Britain, although some rail franchises in the past have been taken on temporarily by a state-owned operation following an unsuccessful private franchise.

What does the DFT do for rail franchising?

In 2014, the DfT was re-organised, with responsibility for rail franchising becoming part of the new Office of Rail Passenger Services's remit under an externally recruited chief, the ORPS itself being part of a new Rail Executive within the DfT.

What is a franchisee and how does it work?

As the franchisee, you lock yourself into an agreement with the franchisor, the company allowing you to open a branch of its business. A franchisor also provides the materials you need to run your business. Once you’ve paid, you receive a license to own, operate, and profit from the franchise.

How does rail franchising work UK?

Rail franchising is where contracts to operate passenger railway services in Great Britain are awarded to private train operating companies for a limited period of time following a detailed bidding and competition process.

Who owns the rail franchises in the UK?

Current franchisesFranchiseTOCOwnerGreater WesternGreat Western RailwayFirstGroupInterCity East CoastLondon North Eastern RailwayDepartment for TransportWest Coast PartnershipAvanti West CoastFirstGroup (70%) Trenitalia (30%)New CrossCountryCrossCountryArriva13 more rows

How are TOCs funded?

Under EMAs , ERMAs and NRCs , DfT receives revenue collected and pays most operating costs incurred by TOCs through a regular franchise payment, made roughly every 4 weeks.

Do UK railways make a profit?

Compare that to costs: in the same year TOCs spent £5.9 billion, mainly on staff, rolling stock and charges to Network Rail, leaving a surplus of £2 billion. But that surplus isn't profit. That's where the government comes in....Do train operating companies earn 'massive' profits?Northern RailOperating profit (£million)3.89.735.218 more columns•Nov 14, 2013

Are rail franchises ending?

New system will end franchising model and deliver a simpler, effective model through high performance targets and simplified journeys. Ministers today ended rail franchising after 24 years as the first step in bringing Britain's fragmented network back together.

What will replace rail franchising?

Passenger service contracts. Passenger service contracts will replace rail passenger franchising.

How do rail companies make money?

How much profit do train companies make? On average train operating companies make two percent of profit, however not all train operators make a profit, and they only make a profit if they run their franchises successfully, which means attracting more passengers to travel and by offering a good service.

Where does Network Rail get its money?

Our income is a mix of direct grants from the UK and Scottish Governments, charges levied on train operators that use our network, and income, mainly from our commercial property estate.

Are rail companies Subsidised?

Rail subsidies vary in both size and how they are distributed, with some countries funding the infrastructure and others funding trains and their operators, while others have a mixture of both. Subsidies can be used for either investment in upgrades and new lines, or to keep lines running that create economic growth.

Is passenger Rail profitable?

There has not been a profitable passenger railroad in the United States. Amtrak and commuter lines like Metro-North operate at a loss as a public service, their deficits borne by tax dollars.

Who owns national Rail?

Rail Delivery GroupNational RailProduct typePublic transportOwnerRail Delivery GroupCountryUnited KingdomIntroduced1999Related brandsNational Rail Enquiries British Rail Network Rail3 more rows

Is railway government or private?

Indian Railways (IR) is a statutory body under the ownership of Ministry of Railways, Government of India that operates India's national railway system. It manages the fourth largest national railway system in the world by size, with a total route length of 67,956 km (42,226 mi) as of 31 March 2022.

Do the government own the railways UK?

most rail infrastructure is owned, maintained and operated by Network Rail, a publicly-owned company (with some limited exceptions). most passenger services have been run by privately-owned train operating companies (TOCs) under multi-year franchises let by the UK, Scottish and Welsh governments.

Who holds the franchise for rail operation in a route?

TOCs are the consumer face of the rail industry, and generally apply for franchises to run specific routes from the Department for Transport.

Who is Network Rail owned by?

We're a public sector company that operates as a regulated monopoly. Our income is a mix of direct grants from the UK and Scottish Governments, charges levied on train operators that use our network, and income, mainly from our commercial property estate.

Is British Rail Privatised?

The privatisation of British Rail was the process by which ownership and operation of the railways of Great Britain passed from government control into private hands. Begun in 1994, it had been completed by 1997.

What is passenger rail franchising?

Passenger rail franchising in Great Britain is the system of contracting the operation of the passenger services on the railways of Great Britain to private companies, which has been in effect since 1996 and was greatly altered in 2020. The system was created as part of the privatisation of British Rail, the former state-owned railway operator, ...

How long is the European rail franchise?

In October 2007, the European Union set the maximum length of a rail franchise at 22.5 years: 15 years initially, with a 50% extension in certain circumstances.

When did the SRA re-franchize?

In 2000 the shadow SRA announced plans to use the re-franchising of the 18 shorter term (7-year) franchises expiring by 2004 to make various changes aimed at improving service grouping and lengthening franchises, with the aim of making them more robust and better able to invest in services. It aimed to have these proposals agreed by Autumn 2001, and published a timetable for the letting of 9 franchises in three tranches. These long-term plans were disrupted in 2001/2 by the impact of the Hatfield rail crash, which led to the nationalisation of Railtrack, the owner of the railway infrastructure, to create Network Rail. On 1 February 2001, the position of Franchising Director was abolished by the Transport Act 2000 and the passenger rail franchising functions were formally transferred to the SRA.

What happened to the Hatfield rail crash?

These long-term plans were disrupted in 2001/2 by the impact of the Hatfield rail crash, which led to the nationalisation of Railtrack, the owner of the railway infrastructure, to create Network Rail. On 1 February 2001, the position of Franchising Director was abolished by the Transport Act 2000 and the passenger rail franchising functions were ...

Why are some commentators criticising the re-franchising deals?

Some commentators have criticised the re-franchising deals by comparing the performance of the private-sector franchisees unfavourably with the public-sector operators. Advocates of the franchising system contrast public-sector operations with commercial operators, citing their ability to invest private capital into the franchises, financial returns to the Treasury and customer incentives such as free on-board Wi-Fi and loyalty card schemes.

How long are franchises?

The Treasury had initially envisaged franchises to be around 3 years long, to promote sustained competition, however as it became clear that potential buyers were not interested in such short terms, it was announced in 1995 that franchises would be around 5 to 7 years long, or longer if major investment was required. The first franchise agreements to be signed were for the South West and Great Western franchises, on 19 and 20 December 1995 respectively. The first passenger train service operated by a privatised franchise was the South West Trains 05;10 Twickenham to Waterloo on 4 February 1996, although this came after the first privately run service, which ironically was a rail replacement bus service covering the early morning Fishguard to Cardiff journey in South Wales, due to engineering works.

When did Genesis start franchising?

The franchising system was created by the Railways Act 1993 as part of the privatisation of British Rail by the Government of John Major, and the first franchises came into effect in 1996.

What is regional franchise?

A regional franchise consisting of a range of inter-urban, commuter and rural services throughout the north of England.

Where is the commuter franchise?

A commuter franchise that operates passenger services in the south-east London suburbs, the whole of Kent and part of Sussex, which are primarily commuter services to and from central London.

What is DFT in rail?

DfT is the franchising authority for the rail network.

What is Thameslink franchise?

A commuter interurban and regional franchise bringing together Thameslink and Great Northern services with Southern services.

Who signed the Northern and Transpennine Express contracts?

News story published announcing that DfT has officially signed the Northern and TransPennine Express contracts.

How does the franchising process work?

In order to "prequalify" for a franchise, would-be bidders have to prove their credentials as rail operators by submitting evidence of a reliable track record. A shortlist – normally of four names – emerges from this process and they are asked to bid for the contract through an invitation to tender. This bid will include assumptions on passenger numbers and, most importantly, payments to the government on bids for more lucrative routes, such as west coast. The highest bid usually wins, although ministers deny this.

What was the difference between the FirstGroup and Virgin Trains bids?

FirstGroup was offering the government payments of £13.3bn through to 2027/2028, while Virgin bid £11bn. Passenger numbers were different, too. For instance, FirstGroup was predicting it would carry 66 million passengers a year by 2026, while Virgin forecast 49 million. Clearly FirstGroup was taking a bigger risk and the government has now acknowledged that it miscalculated the reliability of that bet when it awarded the franchise.

Why has the Department for Transport scrapped the award of the west coast franchise to FirstGroup?

While gathering evidence to fight Virgin Trains' legal challenge against the decision, the DfT realised it had miscalculated the riskiness of FirstGroup's bid, which included ambitious revenue assumptions towards the end of the 15-year contract. It meant there was a flaw in "how much money bidders were then asked to guarantee as a result". FirstGroup had put up a loan of £190m to underwrite the contract, which would pay out if the franchise had failed. Virgin argued that it should have been about £600m given the ambition of FirstGroup's offer.

Who will operate the trains when Virgin's contract expires?

The government has two options and it must choose one of them quickly. It either risks public ire by handing the route to its state rail arm, Directly Operated Railways, which also runs east coast, or it takes the easier route of letting Virgin Trains run the route until the franchise is retendered. Sir Richard Branson had offered to do it for free, but there is little chance of that now. The same fate is likely for major franchises due for renewal in 2013, including east coast, Great Western and Thameslink. The government can negotiate extensions from the current operators or take a substantial chunk of the rail network in-house. The west coast fiasco has provided an unexpected fillip for nationalisation advocates.

What happens when a franchise opens?

Simply stated, even before a franchise business opens in an area, several things are set in motion that contribute to the local economy. And once someone signs a franchise agreement and opens the business, some of the benefits to the local area remain in place.

What to expect when buying into a franchise?

Another thing you’re getting when you buy into a franchise system is their business experience. That’s a huge thing to have behind you as you start your business. The franchisor has already ( hopefully) made the mistakes. They’re the mistakes you don’t ever have to make. It’s a nice way to get into business. Making no mistakes-or at least less mistakes-because they’ve been made already, saves a lot of time and a lot of money. It’s why a lot of people who want to be the boss look into investing in a franchise.

How much does a Chil Fil franchise cost?

The franchise fee for one Chil fil A franchise is only $10,000. That’s unheard of in franchising. The average franchise fee hovers around $30,000 these days-which is not a lot of money for what you get. ( See above)

What is franchising world?

Franchising is a world full of ideas, determination, grand plans and big dreams. On the flip side, it’s also a world that includes disappointments and failures ( unfortunately ). Simultaneously, franchising it’s a world of fresh starts. A forward-looking world where people fire their bosses in order to be the boss.

How does franchising affect the economy?

Franchising: Economic Impact. Franchising-as an industry, makes a huge impact on the U.S. economy. ( Other countries like England, The Philippines, South Africa, New Zealand, and even the continent of Australia, benefit tremendously, economically, from franchising.) From The International Franchise Association:

How to get a team together?

One way to get an entire “ team ” together ( if you feel you have a good shot at success with your idea) is to hire a franchise development firm. But, not all of them are created equal.

What happens if you own a food franchise?

If you own a food franchise, and you purchase let’s say, milk, you will have purchasing power. The power that comes with being part of a network. A franchise network. Independent businesses in your area won’t be able to touch the price you pay for milk. That’s because they’re buying a case of milk a month, while you ( the franchise network) is buying 100 cases. Big difference. It’s a powerful advantage of franchise ownership.

Overview

Process

Railway franchises are decided by the UK Government's Department for Transport (DfT), who design the boundaries and terms of service, and award contracts to the train operating companies. Under the devolved administration arrangements, franchises for ScotRail and Caledonian Sleeper are awarded by Transport Scotland and the Wales & Borders franchise is awarded by Transport for Wales.

Franchises and concessions

History

Competition inquiries

Controversies

See also

External links