Franchise Brands is an AIM-quoted company and we have chosen to follow the QCA’s Corporate Governance Code for small and mid-size quoted companies (the “Code”) as we believe that this provides an appropriate governance framework for a group of our size.
We believe that good corporate governance is vital in supporting our Company’s growth strategy and in turn its long-term success. The Board of Directors has chosen to apply the Quoted Companies Alliance (the “QCA”) Corporate Governance Code (the “Code”) as it believes that this provides an appropriate governance framework for a group of our size and should help support our growth and success. We seek to comply with the Code’s principles and application wherever possible, but there can be circumstances where the interests of the Company and its shareholders are better served by departing from the Code’s requirements. In these circumstances, we will seek to explain the divergence.
Corporate governance plays a crucial role in helping to preserve value for shareholders by providing a process for decision-making which should ensure that all major decisions are considered in good time, that the Board is provided with good-quality briefing materials which cover all relevant factors and that our deliberations consider the risks, as well as the opportunities, in the issues before us. It is for these reasons that the Board is committed to achieving high standards of corporate governance.
The QCA Code requires us to provide an explanation for any departures from the principles or application of the Code. As a result, the remainder of this report explains how we have applied the Code during the year. Further information on the Group’s governance practices, the business model and strategy can be found in the Strategic Report and Governance sections of this Annual Report and Accounts.
In addition to choosing to apply the QCA Code, Franchise Brands is a member of the QCA in order to support the work it does in promoting good corporate governance.
OUR COMMITMENT TO SECTION 172
As a Board, we continue to uphold the highest standards of conduct and make decisions for the long-term success of the business
The disclosures set out on page 51 of the annual report demonstrate how the Board has arrived at five principal decisions for the year. We define principal decisions as both those that are material to the Group, but also those that are significant to any of our key stakeholder groups: employees, franchisees, shareholders, customers and local communities and suppliers.
In making these principal decisions the Board considered the outcome for its stakeholder engagement, as well as the need to maintain a reputation for high standards of business conduct and the need to act fairly between the members of the Company.
Stephen Hemsley, Executive Chairman
In making decisions, the Company’s Directors are cognisant of all their legal duties, including their duty under Section 172(1) of the Companies Act 2006 to act in the way that is most likely to promote the success of the Company for the benefit of its members as a whole and to have regard (among other matters) to the factors set out in Section 172(1)(a) to (f) of the Companies Act 2006.
Examples of some of the principal decisions taken by the Board during the year and an explanation of which factors the Directors had regard to when reaching such decisions, including those set out in Section 172(1)(a) to (f) of the Companies Act 2006, are set out on page 51 of the annual report.
QCA PRINCIPLE 1
Establish a strategy and business model which promote long-term value for shareholders
Focused on building market-leading businesses using primarily a franchise model. Focus is on established brands which can benefit from our shared support services and Group expertise and resources.
Further information around our strategy and business model can be found in the Strategic Report section of the Annual Report.
QCA PRINCIPLE 2
Seek to understand and meet shareholder needs and expectations
The Executive Chairman and Corporate Development Director meet regularly with institutional shareholders and provide feedback. Retail shareholders benefit from presentations and website updates. All shareholder presentations are available on the website.
The Board is provided with research notes from sell-side analysts plus insight into shareholders’ views from the Company’s brokers and nominated adviser. The Group welcomes the personal investment in its equity that many employees and franchisees have made, as well as our retail investors.
We regularly update the Investor Relations section of the Group’s website with the aim of providing useful information for all investors, but particularly our retail shareholders. We use our Annual Report to provide shareholders with details of the Group, operations, performance, strategy and policies. The Group also exhibits and presents at events attended by retail investors (whether virtually or in person) and subscribes, and provides content to, retail financial news websites such as Proactive Investor.
All Directors are invited to attend the AGM, at which there is an opportunity for shareholders to ask questions formally. Voting at the AGM is by poll, with the results being announced in the meeting.
QCA PRINCIPLE 3
MANAGE OUR RESPONSIBILITIES TO WIDER STAKEHOLDERS
The Board has a clear understanding of the factors important to all its stakeholders and maintains strong relationships, solicits feedback and fosters responsible working practices.
As a progressive, principle-led Group, we are committed to working in partnership with all our stakeholders. We place particular importance on directly engaging and collaborating with our employees, franchisees, shareholders, customers and local communities and suppliers.
Our commitment to S172 and stakeholder engagement is set out on page 35 of the annual report.
QCA PRINCIPLE 4
The Board reviews its risk management framework bi-annually to detail the key risks, their potential impact and mitigation and embeds risk management principles to drive proactive management.
The Risk Management section on page 44 of the annual report details our proactive approach to risk management.
QCA PRINCIPLE 5
MAINTAIN A WELL-FUNCTIONING BOARD
The Company is controlled by the Board of Directors. The Board comprises seven Executive Directors, three of which are Managing Directors of the two largest businesses, and four Non-executive Directors of which three are considered to be independent.
The Board is responsible to the Company’s shareholders for:
- Setting the Group’s strategy;
- Maintaining the policy and decision-making process through which the strategy is implemented;
- Checking that necessary financial and human resources are in place to meet the strategic aims of the Group;
- Providing entrepreneurial leadership within a framework of good governance and sound risk management;
- Monitoring performance against key financial and non-financial indicators;
- Overseeing the systems of risk management and internal control; and
- Setting values and standards in corporate governance matters.
The role of the Non-executive Directors is to:
- Challenge constructively and help develop proposals on strategy;
- Satisfy themselves as to the integrity of the financial reporting systems and the information they provide;
- Satisfy themselves as to the robustness of the internal controls;
- Ensure that the systems of risk management are robust and defensible; and
- Review management performance and the reporting of such performance to shareholders.
All Directors receive regular and timely information on the Group’s operational and financial performance. Detailed strategic Board papers are sent out in advance of Board meetings, and the Board receive the monthly management accounts detailing the performance of our brands. The Directors’ contracts provide that they must each devote such time to the Company as is required to fulfil their duties.
QCA PRINCIPLE 6
ENSURE DIRECTORS HAVE NECESSARY, UP-TO-DATE SKILLS
Directors are drawn from a range of backgrounds, skills and experiences. New appointments will be considered against objective, merit-based criteria and with due regard for the benefits of diversity. Details of the skills and experience of the Board, which cover sector, financial and public markets skills and experience, can be found on page 47 of the annual report. Where new Board appointments are considered the search for candidates is conducted, and appointments are made, on merit, against objective criteria and with due regard for the benefits of diversity on the Board, including gender.
The Board recognises that as the Group evolves, the mix of skills and experience required on the Board will change, and Board composition will need to evolve to reflect this change, with due regard for the benefits of diversity on the Board, including gender.
Directors are provided with access to the Company’s Nominated Advisor who provide briefings on necessary legislation and regulations from time to time. Directors are supported to ensure their skills remain up to date, including training courses and continuing professional development.
QCA PRINCIPLE 7
EVALUATE BOARD PERFORMANCE
A performance self-evaluation was undertaken led by an independent Non-executive Director, the results of which will be implemented by the Board in 2023. The review will be repeated biennially.
Since the Company joined the AIM market in August 2016, there has been an evolution in the Board’s composition. In October 2022 the Group appointed an additional independent non-executive director, Andy Brattesani.
QCA PRINCIPLE 8
PROMOTE A VALUE-BASED CORPORATE CULTURE
Franchise Brands has five well established guiding principles that inform the way we work with each other, support our franchisees and serve our customers and communities.
- We demand integrity: We are professional in everything we do and treat people with respect.
- We empower our people: We empower our people and expect them to take ownership of a situation and to be accountable for their actions and the results they generate.
- We are challenging of ourselves: We set high standards, are demanding of ourselves, are prepared to challenge the norm and have a relentless focus on continual improvement.
- We are fair: We consider that fairness and transparency are essential to creating high trust working relationships with each other, and with our franchisees, partners, suppliers and customers.
- We work as a team: We place a huge amount of importance on teamwork between our colleagues and our franchisees in creating a dynamic business.
QCA PRINCIPLE 9
MAINTAIN FIT-FOR-PURPOSE GOVERNANCE STRUCTURES
Franchise Brands has properly constituted Audit, Remuneration and AIM Compliance committees of the Board with formally delegated duties and responsibilities, comprised of independent Directors.
The role of the Audit Committee is to monitor the quality of internal controls and check that the financial performance of the Group is properly assessed and reported on. It receives and reviews reports from the Chief Financial Officer, other members of management and external auditors relating to the interim and annual accounts and the accounting and internal control systems in use throughout the Group. The members of the Audit Committee are David Poutney (Chairman), Rob Bellhouse and Andy Brattesani.
The Executive Chairman and Chief Financial Officer are invited to attend all meetings, with other senior financial managers invited to attend when necessary. The external auditors attend meetings to discuss the planning and conclusions of their work and meet with the members of the Committee without any members of the executive team present after each meeting. The Committee is able to call for information from Management and consults with the external auditors directly as required.
The objectivity and independence of the external auditors is safeguarded by reviewing the auditors’ formal declarations, monitoring relationships between key audit staff and the Company and tracking the level of non-audit fees payable to the auditors.
The role of the Remuneration Committee is to review the performance of the Executive Directors and make recommendations to the Board on matters relating to their remuneration and terms of employment. The Committee also makes recommendations to the Board on proposals for the granting of share awards and other equity incentives pursuant to any share award scheme or equity incentive scheme in operation from time to time. The members of the Remuneration Committee are: Rob Bellhouse (Chairman), David Poutney and Andy Brattesani.
The Executive Chairman is invited to attend meetings of the Remuneration Committee, but does not participate when his own remuneration is being discussed. All members of the Committee are independent Non-executive Directors.
The Company’s remuneration policy and details of the amounts due to the Directors of the Company in or in respect of the year are set out in the Remuneration Report on page 55 of the annual report. As the Company is not fully listed, it is not required to produce a formal remuneration policy or seek shareholder approval of that policy.
AIM Rules Compliance Committee
The role of the AIM Rules Compliance Committee is to ensure that the Company has in place sufficient procedures, resources and controls to enable it to comply with the AIM Rules for Companies and this role is set out in its terms of reference available on the Group’s website. The Committee makes recommendations to the Board and proactively liaise with the Company’s nominated adviser on compliance with the AIM Rules. The Committee also monitors the Company’s procedures to approve any share dealings by Directors or employees in accordance with the Company’s share dealing code and the requirements of the Market Abuse Regulation. The members of the Committee are Rob Bellhouse (Chairman), David Poutney and Andy Brattesani. In addition, all other Directors of the Company are invited to attend its meetings.
QCA PRINCIPLE 10
COMMUNICATE GOVERNANCE AND PERFORMANCE WITH SHAREHOLDERS
Regular shareholder communications on performance via interim and annual financial reports, trading updates issued via RNS, investor presentations, retail digital platforms including Proactive Investors and shareholder meetings. All shareholder communications are available on the website.
The Board also ensures that the corporate website is kept up to date with all the latest information about the governance and performance of the business. We use our Annual Report to provide shareholders with details of the Group, operations, performance, strategy and policies. The Group also exhibits and presents at events attended by retail investors and subscribes, and provides content to, retail financial news websites.
Results of shareholder votes:
AGM 18 April 2023: Result of Annual General Meeting
AGM 26 April 2022: Result of Annual General Meeting
This page was last updated on 12th June 2023.