Franchise Brands plc Annual Report and Accounts 2018 29 Financial Statements Strategic Report Governance Barking Mad Description Adjusted EBITDA (profit before interest, tax, depreciation, amortisation, share-based payments, non-recurring items and excluding central costs) is the KPI which the Group uses to measure the underlying performance of its brands. Ovenclean – Performance in 2018 EBITDA was essentially flat in 2018 as a result of a slowdown in relation to franchise recruitment, however, this was compensated for by an increase in MSF. Description Adjusted EBITDA (profit before interest, tax, depreciation, amortisation, share-based payments, non-recurring items and excluding central costs) is the KPI which the Group uses to measure the underlying performance of its brands. Barking Mad – Performance in 2018 EBITDA declined 14% in 2018 as a result of a slowdown in relation to franchise recruitment. System sales (£m) Ovenclean EBITDA (£m) EBITDA (£m) £0.3m +2% £0.2m -14% 2018 £0.3m 2017 £0.3m 2016 £0.3m Description The number of franchisees recruited is a driver of franchise recruitment income in the current year and MSF in both the current and future years. It is not measured in isolation as the Group also assesses the quality of new franchisees. Ovenclean – Performance in 2018 Recruitment at Ovenlean declined in 2018 as we believe interest in such a franchising opportunity is linked to levels of employment/redundancy in the wider economy. Virtually none of the new recruits come from a related background and are franchising is their first step into self employment. Description The number of franchisees recruited is a driver of franchise recruitment income in the current year and MSF in both the current and future years. It is not measured in isolation as the Group also assesses the quality of new franchisees. Barking Mad – Performance in 2018 The reduction in new franchisees in 2018 was for similar reasons to that set out for Ovenclean. Barking Mad is primarily a lifestyle business that is purchased at a point of change in people's lives and the high levels of employment and uncertainty over Brexit meant that less people were making lifestyle changes. Number of franchisees recruited Number of franchisees recruited 19 -17% 15 -38% 2018 19 2017 23 2016 28 2018 15 2017 24 2016 0 Description The total number of franchisees is an indicator of the overall health of the franchise system, however, the Group is placing more emphasis on the quality of franchisees and their ability to grow their businesses. Ovenclean – Performance in 2018 The number of franchisees in the system in 2018 was the same as 2017 as a result of 19 new joiners and 19 leavers. However, the number of leavers was in line with 2017 and 2016. Description System sales are the total aggregate sales of franchisees of services to third-party customers. Barking Mad – Performance in 2018 System sales were 6% higher in 2018 than 2017 as the number of franchisees in the system grew from 77 to 80. However, sales may have been impacted by the long hot summer and more people holidaying in the UK with their dogs. Total number of franchisees 106 0% £3.8m +6% 2018 106 2017 106 2016 102 2018 £3.8m 2017 £3.6m 2016 £0.4m 2018 £0.2m 2017 £0.2m 2016 £(0.01)m