£120m Lawsuit Joined By 12 Franchisees, Vodafone Ends Contracts

62 franchisees have claimed that the telecom firm “unjustly enriched” itself at their expense, a claim that the company vehemently denies.

As part of a £120 million high court lawsuit against the telecom company, Vodafone has also terminated the contracts of 12 franchisees who have continued to operate the brand’s high street locations.

In December, 62 franchisees filed a lawsuit alleging that Vodafone had “unjustly enriched” itself at the expense of other small business owners who were at risk by reducing commissions paid to franchisees who run the mobile phone company’s retail locations. 

Despite joining 50 former colleagues in pursuing the legal matter, 12 of the claimants had continued to be part of the franchise program. Some of the 62 reported having suicidal thoughts as a result of the pressure from the telecoms giant, while many stated the company’s activities caused them to dread losing their homes, jobs, or life savings after accruing over £100,000 in personal debt.

Vodafone has maintained that the action is “a complex commercial dispute between Vodafone UK and some franchise partners and we refute the claims.” The company estimates the legal claim is worth £85.5 million.

A Vodafone representative responded to reports that the contracts of the 12 existing franchisees were being cancelled by saying: “We are focused on building a successful and thriving franchise program.” We therefore have a clear obligation to support franchise partners who are dedicated to our shared success in any way we can.

Many of the claimants have stayed in the franchise program and had their contracts renewed over the more than two years that the issue has been going on. However, we are becoming more and more worried about how our franchise program is being impacted by bad campaigning.

The spokesperson went on to say: “After giving it some thought and feeling disappointed, we therefore decided that working with franchise partners who are supporting the negative campaign against the business was no longer viable.”

A franchise is a kind of license that permits a business to market goods or services under the name of another company in exchange for payment of specific expenses like rent and salaries. Vodafone franchisees received commissions as part of their agreements, which were based on the money they made from the sale of phones and airtime to clients who visited their locations.

The FTSE 100 company is accused in the court documents of acting in “bad faith” by unilaterally reducing franchise fees, imposing hefty fines of thousands of pounds on them for allegedly trivial administrative mistakes, and then pressuring them to take out government grants and loans to keep their businesses afloat.

Vodafone stated that it strongly rejects that the business “unjustly enriched” itself. The company also said that it has looked into the claims in depth and made “a number of improvements to our franchise partner program” as a result.

The group’s investigations “found no evidence of misconduct, but some actions between Vodafone and franchise partners had not always adhered to the standards we expect.” The mobile operator also disclosed that it has reimbursed franchisees over £5 million, which included “retrospective reimbursement of fines and clawbacks.”

It has recently come to light that whistleblowers had alerted a number of senior Vodafone executives that numerous franchised store owners risked financial disaster two years prior to the high court claim being filed.

In the meantime, negotiations to resolve the conflict failed last month, which might lead to the issue going all the way to the supreme court.

Earlier this month, Vodafone revealed that it had agreed to pay £16.5 billion to merge its British division with rival Three UK. With a network of over 27 million users, the merger, which was first suggested in 2023, would become the largest mobile provider in the UK.

The recently formed VodafoneThree joint venture announced on Thursday that it would close some of its nearly 650 locations in malls and high streets where the two previous companies had stores nearby.

“The commercial dispute is specifically between Vodafone UK and some of our franchisees,” stated Margherita Della Valle, the CEO of Vodafone. Despite our best efforts, the conflict has not been settled by our first joint mediation attempt. As the process progresses, we are still amenable to additional conversations.