German LTAs have a large degree of freedom to design their franchises within the framework set by federal and European law. However, a typical franchising model has emerged.
This involves gross-cost contracts, with the LTA setting fares and taking on the revenue risk. While franchise sizes vary greatly, the average in 2025 was 500,000 route-km per year, representing the service provided by about 10 buses. Operators are usually responsible for providing the depots, fleet and staff. Most contracts have a length of 8 to 10 years. The LTA sets the timetable for all routes, sometimes expressed as minimum frequencies throughout the day. Branding requirements range from carrying the LTA’s logo on the bus to an LTA-wide unified livery and interior design.
This model has become the norm in Germany because of the following key advantages for LTAs and operators:
- It enables a high degree of integration with local and regional rail and tram systems; timetables, tickets and branding are often co-ordinated between the different modes.
- It helps LTAs to evaluate bids in a simple, transparent manner.
- It provides a level playing field for all operators and limits the advantages of incum-bency; competing operators do not need to design timetables or have detailed knowledge of current passenger patterns.
- It removes key risks for operators, notably revenue risk.
- It is arguably SMO-friendly, as evidenced by the continuing high participation of SMOs in the German market.