FGW Franchise

[jules]

Someone from the Institute of Directors on the news tonight suggested that railways should be run on a concession basis rather than franchises. Sorry, my business nous is not sufficient to understand the difference. Can anyone explain?

There is some difference and some similarity between the two words, but especially confused as American English often swaps the meanings between UK and US.

In my understanding, a "concession" (UK) is the right to operate a business at the concessionor's behest - think of like selling ice cream at a festival. A concession identifies a need or opportunity to supply a service and either be paid, or pay, for the opportunity to satisfy that need. The concessionee will either pay the concessionor to take advantage of the opportunity, either up front or on a regular and pre-agreed basis, or both - or the concessionor will pay the concessionee to provide the service (and maybe take a cut of the income) depending on the relevant circumstances.

A franchise (UK) is where a large business confers the right to use their name and brand to a small business that is privately owned and operated on an ongojng basis - think McDonalds, KFC or any number of similar set-ups. The franchisee usually pays handsomely upfront and considerable ongoing license fees in order to "profit" from the use of the big brand.

A concession is usually time limited and has a "break clause" where the grantor reviews the performance of the business / seeks better offers etc. Bristol example: the coffee houses in various city council owned parks were operated by a private company (until it went bust!) under a concession from the City Council.

A franchise would usually not terminate unless the franchisee does something horribly wrong and upsets the franchisor (e.g. misusing McDonalds branding / selling somebody else's products etc.) or decides simply to quit.

The UK railway use of the term "franchise" therefore doesn't fit either model exactly (telling that!) Firstly, the likes of First Group and Virgin have their own brands and identities, which they powerfully promote because the franchisor (the DfT) does not have a "brand". The franchises are also, as we painfully know, time-limited, which most true franchises would not be.

So really, the UK rail franchises are already more like concessions than franchises in their current nature. Confusing, innit?

[the green mile]

Definitely, but I begin to understand. News this morning says that 15 franchises are up for grabs before the next election and the whole process is now on hold pending review. I think that translates into stagnation in the railway industry for the forseeable future.

[jules]

The whole thing is an utter farce that could only have been designed by politicians and civil servants. And like all farces, it begins to unwind ... they should be lynched for what they have done to our railway.

I feel sorry for Virgin for losing out and I also feel sorry for First Group who put in a perfectly valid bid and are being hurt tremendously by the fallout. They did absolutely nothing wrong. Both are top notch UK companies and look at how this incompetent government treats them.

These kind of events are one of the reasons I now prefer to spend my time in the USA.

[Robin Summerhill]

The whole thing is an utter farce that could only have been designed by politicians and civil servants. And like all farces, it begins to unwind ... they should be lynched for what they have done to our railway.

We had a "Sir Humphrey" (well, an ex-one - former head of the civil service Gus O'Donnell) on the Radio 4 Today programme this morning, the crux of whose argumet ran as follows:

"We have a problem in that all the best people who put tenders and bids together get poached by private industry. Therefore we should pay them more to make them stay"

There might be the odd person out there who thinks this is plausible. I tend to look at it this way:

Defence contracts - staggeringly over budget and late on delivery, and rarely work properly when they are implemented
Major government IT projects - staggeringly over budget and late on delivery, and rarely work properly when they are implemented
Railway franchaises - cocked up now and in the past, especially when GNER walked away from a contract they couldn't make any money on.

There is a common thread here. Civil servants. I was always told "a little knowledge can be a dangerous thing." It strikes me that this is the problem we have - Whitehall cocking up, the opposition (whoever it is) calling for the Minister's head and getting it eventually, whilst Whitehall is left alone to cock it up again and again and again.

Apparently, or so we were told this morning, we can cure civil servants of incompetence by paying them more money. I've got two potentially better ideas:

1. Outsource tender preparation - if Whitehall can't do it properly, give it to the private sector who can - their jobs and companies and livelihoods depend on getting it right.

2. Leave the railway management to run the railway.

I was in favour of privatisation in principle because I thought that it would remove government interference from the railway industry. How naive I was

[the green mile]

I hated the principle of privatisation during the build up phase. For purely selfish reasons of course because I, like many of my colleagues, was worried about job security.

I came to like privatisation over the following decade again for selfish reasons. Wages and conditions of service improved and as a shareholder, I made much more money than I could have saved. It motivated me to be loyal, work hard and feel good about the process.

One benefit of privatisation I saw was that we became more accountable for safety and training. Sadly, this literally came about by accident as a result of several high profile incidents.

A decade and a half later, I still believe that privatisation led to much needed investment which probably would not have happened with the then status quo. But with events of the past few days I an starting think again. Or maybe it is just down to the fact that we aren't paying our civil servants enough.