The fastest-growing unit

Filta North America was the best performer in Franchise Brands' third quarter, and a large part of its momentum came from the price of a by-product rather than from service Demand alone. In its trading update of 3 November 2026, the group reported that Filta's system sales rose 20.8% in local currency, compared with 15.0% a year earlier. Stripping out used cooking oil, growth was 15.9%.

The oil line itself expanded much faster. Sales of used cooking oil increased 42.3%, with higher prices contributing 29.9 percentage points and greater volumes 9.6 points. A year earlier, price had contributed 18.1 points and Volume 12.5 points, so the pricing element has become more important.

Background to the group

Franchise Brands (LSE:FRAN) operates a portfolio of franchised businesses serving commercial and domestic customers, led by hydraulic hose specialist Pirtek, drainage group Metro Rod and Filta, which provides fryer management and kitchen services to restaurants in the United States. As part of that work, Filta collects used oil that is sold on, typically into the renewable fuels market. Stephen Hemsley is executive chairman.

How the rest of the group performed

Group system sales grew 8.4% in the quarter, described as a third-quarter record and an acceleration from 6.7% in the first half. Pirtek grew 6.3%, while Water and Waste Services managed 2.4%, held back as some Willow Pumps projects slipped into the fourth quarter. Filta also signed its first national account for FiltaClean Pro, with a large quick-service restaurant group.

The board expects adjusted EBITDA for 2026 to fall within market expectations of £36.5m to £38.0m, against a consensus of £37.0m, and said that view assumes no improvement in market conditions during the final quarter.

Why oil prices matter for the plan

Management said it expects the used cooking oil market to remain structurally supported around current levels into 2027. That matters because LSE:FRAN is simplifying around Pirtek, Filta and Metro Rod, and intends to use proceeds from any disposals to accelerate Debt repayment. At the half-year stage on 30 June 2026, adjusted net debt was £52.9m, down £9.2m, with Leverage of 1.5 times.

The gap between Filta's headline growth of 20.8% and the 15.9% figure excluding oil implies that the oil line added close to five percentage points to the unit's expansion in the quarter. A year earlier the equivalent gap was 3.4 points, so oil's share of the headline improvement has widened noticeably since.

Firmer oil income improves Filta's cash contribution while that process unfolds. It also makes Filta's reported growth look firmer than its underlying service activity, a distinction investors may wish to track carefully when comparing successive quarters and years.

Risks and limitations

Used cooking oil is a traded Commodity whose value depends on fuel policy, feedstock demand and wider energy markets, so a price Reversal would cut growth at the unit that is currently doing most to lift the group. LSE:FRAN has not named the businesses it might sell, nor given expected proceeds or timing, so the scale of any deleveraging remains unclear. Water and Waste growth is slow, and the Earnings outlook depends partly on deferred Willow Pumps work landing in the fourth quarter.

Understanding price and volume in a commodity line

Used cooking oil sales rose 42.3%, of which price contributed 29.9 percentage points and volume 9.6 points. The remaining 2.8 points come from other effects, such as mix and currency. Price accounted for about 71% of the increase, so the growth was driven mainly by a better price for each unit sold. A year earlier price contributed 18.1 points and volume 12.5 points, a total of 30.6 points, so the overall growth is higher this year while the volume contribution is smaller.

What the group figures show

Group system sales rose 8.4%, ahead of 6.7% in the first half, so growth accelerated in the quarter. Pirtek's 6.3% and the 2.4% from Water and Waste Services are both below the group average, which means Filta's 20.8% was the main reason the group exceeded the 8% level. The slower figure for Water and Waste reflects Willow Pumps projects slipping into the fourth quarter, so that Revenue is delayed rather than lost, provided the projects proceed.

The earnings guide and consensus

The market range for adjusted EBITDA of £36.5m to £38.0m is a narrow band of about 4%, and the consensus of £37.0m sits near its centre. The board's statement that it expects results within that range, assuming no improvement in market conditions, gives a measure of caution. If the outcome matches the consensus, adjusted EBITDA would be in line with expectations rather than above.

Debt and portfolio simplification

Adjusted net debt of £52.9m with leverage of 1.5 times implies adjusted EBITDA on a trailing basis of about £35m. Net debt fell by £9.2m in the half, which shows cash generation. The plan to focus on Pirtek, Filta and Metro Rod and to apply disposal proceeds to debt means the Leverage Ratio could fall further. Filta's first national account for FiltaClean Pro, with a large quick-service restaurant group, represents a new route to growth in the kitchen services line.

The franchise model

In a franchise system, franchisees own and operate the local businesses and pay fees to the franchisor. System sales are therefore the sales of the franchised network, rather than the group's own revenue, and the group earns a share of them. That is why system sales growth and group revenue can differ, and why the group measures network health through the former.

Seasonality and the final quarter

The fourth quarter is the last period of the financial year, so the third-quarter figures and the board's guidance set out how the year is likely to end. Used cooking oil prices can change quickly, so the result for the quarter depends on both the oil price and the level of services provided to restaurants. Investors will compare the final figures with the guidance range of £36.5m to £38.0m, and the full-year results will show how the group performed against it.

The franchise model also means that the group's own costs are lower than those of a company that owns all its outlets, but its income depends on the success of franchisees. A healthy network, with franchisees able to grow and invest, is therefore central to the group's outlook.

What to watch next

Investors will look for confirmation of the EBITDA range, any disposal announcements and the year-end net debt figure.