Corporate Governance

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

CORPORATE GOVERNANCE

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

RISK MANAGEMENT

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 two Executive Directors – the Executive Chairman and CFO – and three Non-executive Directors of which two 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

The Board and its committees

The plc Board is responsible to the Company’s shareholders for:

  • Setting the Group’s strategy, business plans and budgets;
  • Checking that necessary financial and human resources are in place to meet the strategic aims of the Group;
  • Setting the corporate culture, guiding principles and values;
  • Maintaining the policy framework and decision-making processes through which the strategy and business plans are implemented;
  • Providing entrepreneurial leadership within a framework of good governance and sound risk management;
  • Oversight of the Group’s businesses and their performance against key financial and non-financial indicators, supporting and challenging management to deliver long-term sustainable success
  • Checking that obligations to shareholders and other key stakeholders are understood and met; and
  • Overseeing the systems of risk management and internal control.

The plc Board is supported in the delivery of operational results by the management board.  The plc Board sets business plans and budgets and monitors the delivery of results.  The management board is responsible for co-ordinating and driving the operational performance of the group’s businesses.  The management board is accountable to the plc Board through the Executive Chairman, Stephen Hemsley, supported by the Chief Financial Officer, Mark Fryer.

There is a formal schedule of matters reserved for the Board’s decision.

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.

The board of Franchise Brands plc has created Audit, Remuneration and Nomination committees with formally delegated powers, duties and responsibilities, set out in written terms of reference.

Audit Committee

The role of the Audit Committee is to check:

  • that the Board maintains sound policies and procedures to satisfy itself on the integrity of financial and narrative statements and other public reporting and that these present a fair, balanced and understandable assessment of the Company’s position and prospects;
  • that the Company maintains sound procedures to identify and manage risk and to oversee the internal control framework and systems;
  • whether the Company’s enterprise-wide internal controls are sufficiently robust to support the effective management of identified risks and whether there are appropriate assurance activities in place;
  • that there is an appropriate relationship with the external auditor, such that they are able to deliver an effective and objective external audit; and
  • whether there is a need for an internal audit function or, where there is such a function, its remit, independence, objectivity and independence.

The members of the Audit Committee are Andy Brattesani (Chairman) and Peter Kear, each of whom is an independent non-executive director.

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 fees payable to the auditors for non-audit services, and the nature of those services.

To view or download the terms of reference of the Audit Committee, please click here.

Remuneration Committee

The role of the Remuneration Committee is to:

  • ensure that the Company establishes an effective remuneration policy aligned with the Company’s purpose, strategy and culture as well as its stage of development and that the remuneration policy (i) motivates management and promotes the long-term growth of shareholder value and (ii) supports and reinforces the desired corporate culture and promote the right behaviours and decisions;
  • check that remuneration policies and practices support the successful delivery of the Company’s long-term strategy and in particular that a significant proportion of executive directors’ and senior managers’ remuneration is structured to clearly link rewards to corporate and individual performance; and
  • that there is a formal and transparent procedure for developing policy on executive remuneration and for setting the remuneration packages of individual directors, including the granting of share awards and other equity incentives through the Group’s employee share schemes.

The members of the Remuneration Committee are: Peter Kear (Chairman) and Andy Brattesani, each of whom is an independent non-executive director.

The Executive Chairman is invited to attend meetings of the Remuneration Committee, but does not participate when his own remuneration is being discussed.

To view or download the terms of reference of the Remuneration Committee, please click here.

Nomination Committee

The role of the Nomination Committee is to:

  • make recommendations to the plc Board for the appointment of directors;
  • to manage any recruitment processes for Board roles to ensure that these are objective and that diversity factors are considered; and
  • to monitor and review succession planning for Board and management board roles.

The members of the Committee are Peter Kear (Chairman), Stephen Hemsley, Andy Brattesani and Nigel Wray.  As recommended in the QCA Corporate Governance Code, at least one member of the committee is an independent non-executive director.

To view or download the terms of reference of the Nomination Committee, please click here.

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 7 February 2024