ESSENTIALS OF VALUE 67 
of rates is that these shall be fair and subject to regulation. In 
such cases the franchise value should not be made a part of a 
rate-base, determined by investment, except only to the extent 
that its acquisition has actually required legitimate investment, 
as is the case, for instance, when a city sells to a Street Railway 
Corporation the right to operate cars on certain streets for a 
certain period of time. The franchise value together with the 
value of other intangible elements is independent of the actual 
cost of these elements; but a franchise value may result from 
the establishment of rates which produce earnings in excess of 
reasonable interest return on the capital invested in the physical 
properties. 
The ascertainment of franchise value and value of all other 
intangible elements connected with public utilities is similar to 
the ascertainment of the value of the good-will of a private 
business but with this difference. . . . In the case of the public 
utility there is usually protection against competition, while in 
the case of the good-will of a private business, competition or 
the possibility of competition is to be assumed and such com- 
petition may materially affect the value. 
A franchise is sought for and operations thereunder are un- 
dertaken for profit. Sometimes, of course, the profit to the 
party who accepts the franchise and operates thereunder is an 
indirect one, as in the case of the railroads which make large 
land holdings valuable. While the privilege to do business is 
granted in order that certain property may be used for the 
benefit of the public, the person or corporation undertaking the 
business must be assumed to be doing so in the hope of reaping 
an adequate reward. 
The Franchise Term.— In many of the states perpetual 
franchises have been granted. Rights to use water-powers, 
wharf and water-front privileges, the privilege to supply gas or 
water and the right to occupy streets for various purposes when 
thus granted without time limit may acquire relatively high 
value and may prove a serious obstacle to the ultimate rational 
development of natural resources. The perpetual franchise 
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