Corporate Governance

As a Board, we continue to uphold the highest standards of conduct and make decisions for the long-term success of the business.

On pages 57-59 of the annual report we explain how the board develops an understanding of the views of our key stakeholders, and on pages 60-61 demonstrate how the Board took these into account in its principal decision-making during 2023. Our key stakeholder groups are our employees and wider workforce, franchisees, shareholders, lending banks, customers and local communities and suppliers.

In making its principal decisions the Board considered the outcomes for these key stakeholders and others who may be impacted by its decisions, 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 pages 57-61 of the annual report.

Establish a strategy and business model which promote long-term value for shareholders

We are focused on building market-leading businesses, primarily using a franchise model. In general, we prefer to invest in 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.

Seek to understand and meet shareholder needs and expectations

The Executive Chairman, Chief Financial Officer and Corporate Development Director meet regularly with institutional shareholders and provide feedback to the Board and management board.  The Board and management board are provided with research notes from sell-side analysts plus insight into shareholders’ views from the Company’s brokers and nominated adviser.

Detailed reports on trading, financial and ESG performance are provided through our interim and annual financial reports, trading updates are issued regularly via RNS, and through our Capital Markets Day and other investor presentations, retail digital platforms and at shareholder meetings. The Group also exhibits and presents at events attended by retail investors and provides content to retail financial news websites.  All our material shareholder communications are available on the website.

The Group welcomes the personal investment in its equity that many employees and franchisees have made, as well as our retail investors. All of these personal shareholders benefit from website updates, which include all presentations we make to institutional shareholders and at investor conferences.

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.

All Directors attend the AGM, at which there is an opportunity for shareholders to ask questions formally. Voting at the AGM is by poll, to ensure that the votes of all shareholders are taken into account, regardless of whether they are able to attend the meeting.

We were pleased that all of the resolutions proposed at our AGM received the support of more than 98.5% of the votes cast, other than in relation to the management of our share capital where there is an increasing divergence of views among investors. Even on these resolutions, we received the support of more than 85% of the votes cast.

Take into account wider stakeholder and social responsibilities and the long-term

In making decisions, the Company’s Directors are cognisant of all their legal duties and obligations, including the requirement 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 that section.

The Board has a clear understanding of the key stakeholders in our business, both internal and external. The Board and the Management Board consider the factors that are important for all its stakeholders, seeks to maintain 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, suppliers, customers and local communities and shareholders. Their views and feedback are important to us and are used to inform our decision making.

Our commitment to S172 and stakeholder engagement is set out on pages 57 to 61 of the annual report.

Embed effective risk management throughout the organisation

The Board reviewed its risk management framework during 2023 and adopted a new methodology for rating the impact and likelihood for risks. This methodology was specifically designed to ensure that all risks could be rated on a comparable basis. The Board has also defined the risks it is prepared to take in the expectation of earning a return (its risk appetite), the risks it expects the business to seek to manage (its risk tolerance) and which risks it is not prepared to face.  The latter are the risks that, if they materialise, will prevent us delivering on our business plans or have other impacts that we cannot live with.

The management board and the Board each review the corporate risk register at least biannually and the Board reviews the effectiveness of the systems of risk management annually.

For further information on our approach to risk management, please see the section on page 76 of the annual report.

Maintain a well-functioning, balanced Board

The Company is run by the Board of Directors. The Board members have a collective responsibility and legal obligation to promote the interests of the company and are collectively responsible for establishing and maintaining effective corporate governance arrangements.

The Board comprises two Executive Directors – the Executive Chairman and CFO – and three Non-executive Directors.  The Board judges that Pete Kear and Andy Brattesani are independent directors. While he demonstrates complete independence of thought, Nigel Wray is not considered by the Board to be independent in view of his significant shareholding and long tenure with the Group.

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.

The two Executive Directors work full-time in the business.  We expect the Non-executive Directors to commit sufficient time as is necessary for the proper performance of their duties, including attending all scheduled Board and committee meetings, the AGM, site visits and other non-scheduled calls and meetings. In addition, they are expected to devote time to reading papers and being prepared fully for each of these meetings or events. In total, we estimate that this should amount to two-three days per month, but the actual time commitment is open-ended.

All Directors receive regular and timely information on the Group’s operational and financial performance. Detailed Board papers are sent out in advance of Board meetings, and the Board receive the monthly management accounts detailing the performance of our brands.

Ensure that the directors collectively have the necessary, up-to-date experience, skills and capabilities

Our directors are drawn from a wide range of backgrounds, skills and experiences. We are confident that collectively our Board members possess the necessary mix of capabilities to deliver the Company’s strategy for the benefit of our shareholders over the medium- and long‑term. Directors are encouraged and supported to ensure their skills remain up to date, including training courses and continuing professional development.

The Board recognises that as the Group evolves, the mix of skills, knowledge and experience required on the Board will need to change, and Board composition will need to evolve in response.  New appointments will always be considered against objective, merit-based criteria and have due regard for the benefits of diversity in all its forms. In early 2024 the Board created a Nomination Committee with specific responsibilities around succession planning and managing the process for Board appointments.

The Board is supported by the Company Secretary, who advises and supports the Chairman and Board on corporate governance, risk, legal and regulatory matters and is available to any Director to provide advice.

Directors are provided with access to the Company’s Nominated Advisor, who provides briefings on necessary legislation and regulations from time to time. In addition, the Company’s external legal counsel is available to the Board and individual Directors as needed. The Remuneration Committee is supported by an external remuneration consultant, who provides detailed insight into peer group practice and the views of proxy advisory firms, institutional investors and their representative bodies.

There were no specific matters on which any Director sought external advice during the year.

Evaluate Board performance and seek continuous improvement

The Board has carried out performance effectiveness reviews on a biennial basis since 2018, with the last review being undertaken in 2022. Each of these was conducted by an independent Non-executive Director with expertise in corporate governance, with the results being shared with the full Board. Agreed actions arising from these reviews have been completed and continue to inform how the Board operates.

No review was undertaken by the Board in 2023 and no decision has yet been taken on whether to carry out a performance evaluation in 2024, or whether this should be externally facilitated.

We are fully aware of the need for progressive refreshing of the Board, and succession planning is a key focus.  The composition of the Board has continued to evolve in recent years. In October 2022 we appointed an additional independent Non-executive Director, Andy Brattesani, who brings immense experience of franchising in the UK and overseas. In October 2023 two Non-executive Directors retired from the Board, having each completed seven years’ service, and we appointed Pete Kear. He brings vast knowledge of IT and experience of building an international software business quoted on the AIM market. In January 2024 a Nomination Committee was created to formalise and better oversee our approach to succession planning.

Promote a culture based on ethical values and behaviour

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.

We pride ourselves on having a dynamic and entrepreneurial culture with tone set from the top. Our ethos is “do more of what works, and less of what doesn’t”. At every level of management our people are encouraged to try out new approaches and ideas and to test whether these work; our only stipulation is that we form a view on the success (or otherwise) of an initiative quickly and dispassionately.

During the year, all of the Directors participated in the company’s Growth Summit, which was attended by around 65 senior managers drawn from all parts of the Group. By getting to meet such a wide range of people face-to-face both formally and informally, they are able to assure themselves that there is a healthy corporate culture. The Directors also meet with management board members very regularly, which provides further insight into the culture of the organisation.

Maintain fit-for-purpose governance structures and processes

There has been significant change in our governance structure during the latter part of 2023 and into early 2024.  For details of our governance framework, please see pages 86-87 of the annual report, which summarises the remit of each of our governance bodies and how these interact.

The Board and its Committees

The plc 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.

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

The roles and responsibilities of specific Directors are clearly understood:

Executive Chairman

• Lead the Board and the Management Board
• Propose strategy for agreement by the Board and business plans and budgets aligned with that strategy for Board approval
• Lead the implementation of Board-approved business plans and budgets, and provide transparent reporting on operational and financial performance
• Ensure that shareholder and other key stakeholders’ interests are taken into account when managing the Group’s business

Chief Financial Officer

• Lead the Finance function
• Ensure that accounting policies and practices are aligned with IFRS and other GAAP and applied consistently across the Group
• Ensure that appropriate internal financial controls are implemented and maintained
• Ensure that the Group’s financial reporting is of a high quality and presents a true and fair view of business performance
• Engage with our shareholders and lending banks

Non-executive Directors

• 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
• Review management performance and the reporting of such performance to shareholders

The Senior Independent Director is a Non-executive Director with additional responsibilities. They are available to shareholders to discuss any matters that it may not be possible or appropriate to raise with the Executive Chairman or the CFO. In addition, they will lead Board discussions on the performance of the Executive Chairman.

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.

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.

Communicate our governance performance to shareholders and other relevant stakeholders

We engage regularly with our shareholders. We explain how we communicate trading and financial performance under QCA Principle 2 above.

The Board uses the Annual Report and the associated website disclosures as the primary way to provide shareholders with details of the Group’s governance framework and the effectiveness of this in supporting operational and financial performance. The Executive Chairman and, if appropriate, the Senior Independent Director are available to shareholders to discuss governance matters as needed.