Corporate franchise

“ It is, says he, 'a franchise for a number of persons, to be incorporated and exist as a body politic, with a power to maintain perpetual succession, and to do corporate acts, and each individual of such corporation is also said to have a franchise or freedom.' This franchise, like other franchises, is an incorporeal hereditament, issuing out of something real or personal, or concerning or annexed to, and exercisable within a thing corporate. ”

“ These franchises as conveyed were necessarily limited to twenty-five years, the then life of the companies. The first part of this act has prolonged the corporate life to ninety-nine years. In the sense which we have already defined the franchise granted by the state, as conferring the right to use and occupy the streets with permission from the city, the act may be consistently held to extend and validate the deeds of transfer as conveying a continued right to such franchise for the extended period of the lives of the corporations. ”

“ The franchise is their corporate property, which, like any other property, would be taxable, if a price had not been paid for it, which the legislature accepted, as the consideration for allowing them to use the franchise during the continuance of their charters. The capital stock is another property-corporately associated, for the purpose of banking-but in its parts is the individual property of the stockholders in the proportions they may own them. Being their individual property, they may be taxed for it, as they may for any other property they may own. ”

“ The Consolidated Companies considers itself bound to use franchise privileges and corporate organization for the equal benefit of all those who contribute of their capital, with due regard for those public interests which corporations are created to serve, and to rest content with a fair return upon its own capital and a reasonable compensation for their services, on the part of the officers of the enterprises of which it assumes the responsibility and direction. ”

“ A franchise is an incorporeal hereditament, and arises either from royal grants or from prescription which presupposes a grant. Such franchises are bodies corporate, the right to hold a fair, market, ferry, free fishery, &c. ”

“ J. Welch, in explaining what is meant by sale and transfer of the franchise to be a corporation, says: "That a corporation can, when authorized by law so to do, transfer, sell or convey its charter or franchise to be a corporation, and thus vest it in others, seems to be quite well settled. ”

“ For, it is said, 'there must always be a corporation in existence liable to the public for the duties and liabilities assumed by the grantee for the privileges conferred in the grant of the franchise.' This reasoning, it seems to us, assumes that the franchise to operate the road did not pass by the sale, unless such new domestic corporation is organized. ”

“ Land, money, chattels may by industry and intelligence be made productive without a franchise; but no excellence in these desirable qualities can ultimately render a franchise productive without the use of money, chattels, and land in connection therewith, and when the juncture is made the earning capacity of the real and personal property, plus the franchise and plus intelligence and industry, is really no greater than it would be without the franchise, for the franchise has added no producing power to the realty or personalty ”

“ When, however, the managers are able to exert influence enough to have the franchise extended, and the investors believe in the skill of the managers and perhaps in their power to bribe the legislators, the value of the stock continues higher than it could usually be under a limited franchise. Such circumstances becloud the question whether the exceptional income arising under the franchise should go to the public or to the company. ”

“ But not to distinguish the acts enjoined or permitted, to give to the corporation its intended purpose and object, is to confound the franchises with such acts, and would nullify the means by which the franchises are to be produced.
A franchise is a privilege conferred in the United States by the immediate or antecedent legislation of an act of incorporation, with conditions expressed, or necessarily inferential from its language, as to the manner of its exercise and for its enjoyment. To ascertain how it is to be brought into existence, the whole charter must be consulted and compared. ”

“ Franchises are not peculiar to corporations, they are granted to individuals, and may be held by any persons capable of holding or enjoying property; a franchise is property, a right to the privilege or immunity conferred by the grant ”

“ These are under government control usually in cities, because they employ the public streets for carrying on the enterprise. The franchise is really an extension of the license in particular directions. This is usually issued with the expectation of great public benefit from a large investment of capital which would not be made without relief from competition, because not immediately profitable. The franchise usually carries with it certain restrictions as to use of public highways and limitation to a term of years. ”

“ For these reasons, I believe that on principle a franchise should be held to have no value except that arising from its use as a shield to protect those investing their property on the faith thereof, and that, it renders fruitful, it possesses no more economic value for the investor than does an actual shield possess fighting value, apart from the soldier who bears it. ”

“ I think it obvious, as I have endeavored heretofore to point out, that either for the purpose of condemnation or regulation the value of a franchise depends wholly upon what is earned under it and I believe the best way of finding out how much a franchise, separately considered, is worth, is to ascertain what those persons desirous of continuing operation under it consider it to be worth. In a corporation whose stock is freely bought and sold, such value is measured by the success attending the sale of stock based entirely upon capitalization of the franchise ”

“ It is not like the butcher, who has his stall in the public market in a row of twenty similar stalls, and who competes for trade among the passing throng. The public service corporation has, in great degree, the character of a monopoly. The quasi-public element in the public service corporation is recognized originally and conclusively by the grant of any franchise carrying special privileges or providing for exclusion of other similar corporations. ”

“ Therefore it can claim the franchises and privileges of its constituent companies by succession, only under the words 'property,' or 'assets and effects,' if at all. These words certainly are not happily chosen to express the transfer of a franchise, still less to express the continuance of a right not to be competed with, granted by the legislature to a named corporation, after that corporation shall have ceased to exist. ”

“ The incorporation of a single individual is not legally possible in this country.
The corporation, because of its peculiar advantages over other forms of business organization, has become the accepted form for most large enterprises. The gathering together of large capital funds, the ease and efficiency of management and control, continuous life, the facility of transfer of ownership, and the limited liability of the stockholders, make the corporate form attractive to the investor and absolutely necessary to the large businesses carried on today. ”

“ It is to their self-interest, truly, to place the franchise in the hands of the Consolidated Companies, but it is also to the best interests of the public, who, after all, are most concerned, because the Companies is equipped with men and funds to give them greater efficiency or cheaper transportation than any smaller organization could possibly afford to do. ”

“ Nor does it change the truth of the last statement that the difficulty of procuring franchises produces, and long has produced, a traffic in them. On every private sale of franchise property, the price paid is so much money lost to the public by official incompetence or worse, and such sale can confer on the vendee no right to compel the consumer to repay him a price that should have been paid to the State. ”

“ The Companies buys, therefore, from those who have to sell, and its moral responsibility begins only upon its acquisition."
The transaction, large as it was, proved not a lengthy one. The franchise was formally made over to the Consolidated Companies, and the controlling stock in the New York Street Railways Company changed ownership. Properly certified checks for the franchise and for the stock were duly delivered into Brady's hands, and the business of the conference seemed to be completely settled to the satisfaction of all concerned. ”

“ A corporation cannot, without the assent of the legislature, transfer its franchise to another corporation, and abnegate the performance of the duties to the public, imposed upon it by its charter as the consideration for the grant of its franchise. Neither the grant of a franchise to transport passengers, nor a general authority to sell and dispose of property, empowers the grantee, while it continues to exist as a corporation, to sell or to lease its entire property and franchise to another corporation. ”

“ Corporations with existence limited in time may take a fee simple or a franchise of longer duration than themselves. Minneapolis v. Minneapolis Street R. Co. 215 U.S. 417, 430, 54 L. ed. 259, 269, 30 Sup. Ct. Rep. 118; Detroit v. Detroit Citizens' Street R. Co. 184 U.S. 368, 394, 395, 46 L. ed. 592, 610, 611, 22 Sup. Ct. Rep. 410. There is a distinction between the franchise to be a corporation and that to operate its plant. ”

“ In most cases, however, it is probably found that the bond issue is in excess of the value of real estate and the replacement value of the physical property, the balance representing a capitalization of the franchise.
To determine the real value of the franchise or franchises is a difficult matter and involves the whole question of the company's relations with the community which it serves and with the local lawmaking bodies. ”

“ The natural meaning of the words would be that the ordinary property of the consolidating corporations, the property such as any one might own without special franchise, and might transfer by deed, shall belong to the new company without deed, but the franchises of the new company would seem to be left to be determined by the general law. ”

“ It would have become essentially a special franchise, even if it had not been granted as a special franchise by any competent legal authority; and, like every similar franchise, it would increase automatically in value with the growth of the community in population and business. ”

“ The Society has on its Register, Members in China, India, the Mauritius, on the Continent, and in all parts of the United Kingdom; the interests of the most distant Shareholders being carefully attended to.
Persons desiring the Freehold Franchise in Counties, can acquire plots of Land of adequate value, without any trouble beyond that of forwarding the price of the plot they may select, on any Estate, after inspection of the Plan. ”

“ The typical business corporation of the last century, owned by a small group of individuals, managed by their owners, and limited in size by their personal wealth, is being supplanted by huge concerns in which the lives of tens or hundreds of thousands of employees and the property of tens or hundreds of thousands of investors are subjected, through the corporate mechanism, to the control of a few men. ”

“ Three if not four of the charters are dead by limitation, one company sold its franchise to another, one is slumbering with an occasional show of life, another is leading a questionable life and two are producing and selling power. ”

“ The abuses growing out of the careless use of the franchise granting power have recently led to a more strict supervision of franchises to public service corporations. In most cities, franchises are no longer perpetual, but are limited to a definite and rather short period, say fifty years. To an increasing extent, franchises are drawn up by experts, so that the terms of the grant will safeguard the interests of the public. ”

“ Conversely, when a flourishing partnership or similar private firm has gained an assured footing of good-will, in the way of any or all of the items enumerated under that term above, its lot, as prescribed by modern business exigencies, is to go up into a corporation, either by simple conversion into the corporate form or through coalition with other firms into a larger corporate whole. ”

“ The writer, therefore, would suggest that, since franchise value is a very elusive item, depending on the life of the franchise, the attitude of the community toward the corporation, the activity of competing corporations, and numerous indeterminate items, the term, "business value," or, "going concern value," be used instead of "franchise value." "Going concern value" is not as good a term as "business value" or "value of the business," because it may be assumed to include both the value of the business and the value of the property. ”

“ Franchises are of various grades, from that of a mere right of succession to an estate in land, to the grant of a County Palatine, which is the highest franchise known to the law; the nature and character whereof is the same, whether the grant is to one or many. Corporations are also of all grades, and made for varied objects; all governments are corporations, created by usage and common consent, or grants and charters which create a body politic for prescribed purposes ”