Question about franchise

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marko573

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Hello everyone,

Can anyone explain to me about franchise? so I have example: Southwestern Railway

Right now there are two owners First group and MTR, how they work ? Like both of them are sharing one office?

Lets say First Group own a few train companies, are they all together? like same HR for GWR and SWR or they are completely different businesses and people ? or MTR part is this separate business from MTR elizabeth line ?

If I was working for GWR and I want to move to SWR would be completely new process or more like a transfer ?

in this example MTR own 30% are they managing this businesses or is only about money, if shares go up they make money if down they will lose?

Thank you
 
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ANDREW_D_WEBB

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First and MTR have formed a Joint Venture which runs the company, the % holding reflecting the investment made by each party. Expect each company brings their particular expertise to the table. For example IIRC Virgin’s LNER franchise was a joint venture between Stagecoach and Virgin, with the former being the majority stake holder. The Virgin brand was used as it had stronger public recognition.
 
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pdeaves

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As a good rule of thumb, all TOCs are totally separate companies. There is scope for some synergies but not a lot in practice. Everything's done to the contract agreed with DfT that treats each company individually.
 

LNW-GW Joint

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All the TOCs are presently under short-term contracts with the DfT, called ERMA (Emergency Recovery Management Agreements), set up to cope with the Covid crisis.
They are all in negotiation with the DfT for transition to a new type of contract, which will give them less flexibility (and risk).
So it's likely that the terms of the original franchise agreements will not apply.
Some TOC owners may choose to leave the industry instead.
It is hoped that the details will become clear in the next month or two, along with a new structure for the UK railway.
 

DelW

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I worked in an industry (not railways) where JVs (Joint Ventures) were very common.

Most senior staff (both managerial and technical) were seconded from the various parent companies of the JV. They were expected to devote their day to day efforts to the JV company, but retained links to the parent organisation, went back regularly for meetings and conferences, and often returned to jobs there later.

Most junior staff were taken on directly by the JV, and had little or no contact with the parent companies. If the JV came to an end, they would either be TUPE'd* into a successor, or made redundant.

*TUPE - Transfer of Undertakings Protection of Employment - legislation providing for continuation of employment for staff when (for instance) a new TOC takes over from a predecessor. Employment terms and conditions are protected for a limited period (about 2 years IIRC).
 

thelem

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Right now there are two owners First group and MTR, how they work ? Like both of them are sharing one office?
It's not two companies operating separate parts of the network. It's two companies who get together and set up a third company, called "First MTR South Western Trains Limited". The only job of that third company (the "Joint Venture") is to run SWR.

Lets say First Group own a few train companies, are they all together? like same HR for GWR and SWR or they are completely different businesses and people?
The default position is that each company will have their own HR departments.

However, they may choose to outsource parts of their business, which may be to their parent company or may be to totally independent companies.

Hypothetically:
  • Drivers may be employed directly by First MTR South Western Trains Limited
  • Their website might be built by First Websites Limited. SWR would pay a fee to First Websites, and First Websites would employ the web developers.
  • Their trains might be maintained by MTR Train Maintenance Limited. SWR would pay a fee to MTR Train Maintenance Limited, who would ensure the trains were maintained according to contracted standards.
  • Their trains might be cleaned by Serco. SWR would pay a fee to Serco, who would ensure the trains were cleaned to a contracted standard.
For each part of their business they can decide who they want to operate it, whether that's directly inside the joint venture (the drivers), outsourced to a sister company (website and engineering) or outsourced to an independent company (cleaning).

If I was working for GWR and I want to move to SWR would be completely new process or more like a transfer ?

Probably a completely new process. Even if both companies have outsourced HR to another company, they would still have separate staff databases and contracts. As others have mentioned they may share senior staff, and if something has worked for GWR then they might try to do the same on SWR, but the starting point is that they are separate companies.


in this example MTR own 30% are they managing this businesses or is only about money, if shares go up they make money if down they will lose?

Sort of.

First MTR South Western Trains Limited isn't listed on the stock market, so neither company can choose to sell shares to general investors. Even if it did, the company only have a contract to run the trains until April 2023, at which point you have a load of staff employed, but no trains for them to work on. That's not a company that many people would be interested in buying - so it's not about the price that you can sell the shares / company.

Instead it's about the money that you have make while you are running the company. If First MTR South Western Trains Limited make a profit, then they can choose to pass that profit on to their owners in the form of a dividend. First own 70% so they'll get 70% of the dividend. MTR will get the other 30%.

If different owners win the contract after 2023 then assets and staff will transfer to those new owners. I'm not sure exactly how that process works, but I don't think it's a big way of making money for the former owners.
 

43096

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If different owners win the contract after 2023 then assets and staff will transfer to those new owners. I'm not sure exactly how that process works, but I don't think it's a big way of making money for the former owners.
Staff transfer under the TUPE regulations (Transfer of Undertakings Protection of Employment).
 

357

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When I was working for National Express, we could apply for jobs at other National Express franchises and got free travel on other National Express franchises.

When I worked for Abellio, we could not apply for jobs at other Abellio franchises (didn't even get free travel on them)

When I worked for MTR, we could not apply for jobs at other MTR franchises, but London Overground could apply for jobs with us until their franchise change. No free travel.
 

dk1

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When I was working for National Express, we could apply for jobs at other National Express franchises and got free travel on other National Express franchises.

When I worked for Abellio, we could not apply for jobs at other Abellio franchises (didn't even get free travel on them)

When I worked for MTR, we could not apply for jobs at other MTR franchises, but London Overground could apply for jobs with us until their franchise change. No free travel.
Abellio provide free travel for rail employees at all rail franchises they are involved in.
 

357

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Abellio provide free travel for rail employees at all rail franchises they are involved in.
Ah, I just remembered - that was introduced as part of the 2012 Olympics bonus (at least for GA staff)
 

thelem

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Staff transfer under the TUPE regulations (Transfer of Undertakings Protection of Employment).
I was more thinking that the old operators could sell the operating company ("First MTR South Western Trains Limited") to the new owners, who would add their own name to it but otherwise continue running it as-is, with existing contracts continuing.

It sounds like instead, the new operators will set up a brand new company, and arrange all their own contracts. The old company would then be would up. For directly employed staff, that means being TUPEd between the two companies. It also means they can choose their own structure for the other contracts - maybe bringing engineering in house, or choosing a different outsourcing partner for cleaning.
 

Domh245

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I was more thinking that the old operators could sell the operating company ("First MTR South Western Trains Limited") to the new owners, who would add their own name to it but otherwise continue running it as-is, with existing contracts continuing.

It sounds like instead, the new operators will set up a brand new company, and arrange all their own contracts. The old company would then be would up. For directly employed staff, that means being TUPEd between the two companies. It also means they can choose their own structure for the other contracts - maybe bringing engineering in house, or choosing a different outsourcing partner for cleaning.

Where a new franchisee takes over the franchise, these work as described with TUPE. The new company bidding to take on the work will have usually been set up during the bidding process (or rather, one of several dormant companies that the owning group runs will be renamed to the relevant franchise) so that agreements can be signed and arrangements made with the incoming TOC whilst the outgoing TOC continues to see out their term.

However, selling a TOC to a different owning group has happened recently (2017) with c2c, Trenitalia simply bought the existing company (NXET trains ltd), renamed it and carried on as before - before that, there was a bunch of similar acquisitions shortly post-privatisation as management groups (and prism) were bought out by bigger owning groups (First, NatEx). It makes little sense to buy out existing TOCs as they've usually agreed to things that you haven't.
 

43096

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However, selling a TOC to a different owning group has happened recently (2017) with c2c, Trenitalia simply bought the existing company (NXET trains ltd), renamed it and carried on as before - before that, there was a bunch of similar acquisitions shortly post-privatisation as management groups (and prism) were bought out by bigger owning groups (First, NatEx). It makes little sense to buy out existing TOCs as they've usually agreed to things that you haven't.
That's a different scenario, as it's not a change of franchisee, but of the parent company changing (i.e. the existing franchise holder has been sold).

One exception to this, that I can think of. When Stagecoach/Virgin took over the East Coast, they actually acquired the East Coast business ("East Coast Main Line Company") rather than setting up a new company.
 
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