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

Vodafone is facing a legal claim worth more than £120 million brought by 61 current and former UK franchisees, representing one of the largest franchise-related claims against a major British company.

The group of claimants, who are several long-standing and loyal franchise partners who started their careers with Vodafone, allege that the telecom giant breached its duty of good faith and breached the terms of its franchise agreement from July 2020 onwards.

Central to the claim are accusations that Vodafone imposed “irrational and arbitrary” business decisions, reduced franchisees’ commissions without warning or explanation, allocated government subsidies to small businesses, and failed to pass on rent-free periods negotiated with landlords. The claimants say Vodafone’s approach stands in stark contrast to the “true partnership” model it originally promoted, and is inconsistent with the company’s public image as a supportive franchisor.

The legal action also highlights the severe personal and financial toll on some franchisees. Many reported facing bankruptcy, the prospect of home repossession, and debilitating mental health issues after changes to their pay structures and the removal of their store operations left them piling up debt. One former franchisee said the ordeal “started as a dream – and ended as a nightmare”, while another said it undermined their ability to support their families and maintain their personal wellbeing.

In specific allegations, the prosecution states that Vodafone reduced commissions with 14 days’ notice, and imposed disproportionately large fines and penalties on partners. In one case, a franchisee was fined £21,000 over a simple error in charging a customer £7. The group also asserts that Vodafone has effectively neutered the benefit of coronavirus business rates relief intended to help struggling small retailers, by using relief information provided by franchisees to reduce their commissions.

It is worth noting that the prosecution confirms that Vodafone stopped paying the commission for selling mobile phones completely, despite it being one of the most famous brands in the field of telecommunications in the United Kingdom. Instead, the company allegedly paid only commission on broadcast contracts, increasing its profit 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 expulsion, prompting them to collectively decide to pursue a formal legal route. The lawsuit follows Vodafone’s recent withdrawal from the British Franchise Association, and could pose a serious challenge to the reputation of the company, which provides mobile, broadband and other services to millions of UK consumers.

Vodafone has so far denied the allegations in pre-move correspondence. With the lawsuit now before the courts, it is expected to be a hotly contested legal battle. If franchisors prevail, it would represent a landmark case in 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.