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Vodafone faces £120 million franchisee legal battle over alleged ‘bad faith’ business practices

December 10, 2024

Vodafone is facing a £120 million-plus legal action brought by 61 of its current and former UK franchisees, marking one of the largest franchise-related claims to hit a major British company.

The group of claimants, many long-standing and loyal franchise partners who began their careers with Vodafone, allege the telecoms giant breached its duty of good faith and violated the terms of its Franchise Agreement from July 2020 onwards.

Central to the claim are accusations that Vodafone imposed “irrational and arbitrary” business decisions, slashing franchisees’ commissions without warning or explanation, appropriating government support intended for small businesses, and failing to pass on rent-free periods negotiated with landlords. The claimants say that Vodafone’s approach stands in stark contrast to the ‘true partnership’ model it originally promoted, and is at odds with the firm’s public image as a supportive franchisor.

The legal action also highlights the severe personal and financial toll on some franchisees. Several have reported facing bankruptcy, potential home repossession, and debilitating mental health issues after changes to their remuneration structures and the removal of their store operations left them with mounting debts. One former franchisee said the ordeal “started as a dream – and ended as a nightmare,” while another said it had undermined their ability to support their family and maintain their personal well-being.

In specific allegations, the claim states that Vodafone cut commissions with as little as 14 days’ notice, and levied disproportionately large fines and penalties on partners. In one instance, a franchisee was fined £21,000 for a simple £7 customer mischarge. The group also contends that Vodafone effectively neutralised the benefit of Covid-19 business rates relief intended to help struggling small retailers, using the relief information provided by franchisees to reduce their commissions.

Notably, the claim asserts that Vodafone stopped paying commission for selling mobile phones altogether, despite being one of the UK’s most recognisable telecoms brands. Instead, the company allegedly only paid commission on the airtime contracts, increasing its own margins at the expense of franchisees.

Although the franchisees initially sought to resolve matters through dialogue, they say they were repeatedly met with silence or dismissal, prompting their collective decision to pursue a formal legal route. This lawsuit follows Vodafone’s recent withdrawal from the British Franchise Association and could present a serious reputational challenge for the company, which supplies mobile, broadband, and other services to millions of UK consumers.

Vodafone has thus far denied the allegations in pre-action correspondence. With the claim now before the courts, a fiercely contested legal battle is expected. If the franchisees prevail, it would represent a landmark case within Britain’s franchising and retail sectors, raising questions about the obligations of major brands and the protections afforded to their small business partners.

Vodafone has been asked for comment.