what is the difference between franchising, concession model, and nationalisation?


With the UK government announcing the UK railways will switch to a concession model, I was wondering what the difference between franchising (which the UK railways have used for almost 30 years), a concession model, and nationalisation. I think I know the basics but all the online explanations are super complex and detailed, and I just want a good, simple, overview.

Thank you to anyone who answers this!

In: Economics

Nationalization: the government owns and operates the railway.

Franchise: the government sells the rights to operate part of the railway to a private company. The company then tries to make a profit as an independent business, subject to whatever restrictions (service level, schedule, etc.) that the government put in the contract. If the company does well, they keep the profit. If they don’t, they go out of business.

Concession: the government pays a private company to operate some part of the railway. The private company doesn’t have any commercial risk, they’re *getting paid* to run the railway, not paying to have a franchise.

Restaurants are a good analogy.

I could own and operate my own restaurant. That’s nationalization.

I could pay some giant company (McDonalds, KFC, etc.) for their recipes, marketing, business plan, supplies, etc. and own and operate my restaurant to their plan. That’s franchising.

I could be hired by someone to run their restaurant for them (companies like Eurest or Sisco do this for corporate cafeterias, conference centers, etc.). That’s a concession.