Vodafone terminates contracts of 12 franchisees who joined £120m lawsuit

Vodafone has terminated the contracts of 12 franchisees who have continued running the brand’s high street stores while also being part of a £120m high court claim against the telecoms group.

The legal case was launched in December, when 62 franchisees claimed Vodafone had “unjustly enriched” itself at the expense of scores of vulnerable small business owners by slashing commissions to franchisees operating the mobile phone company’s retail outlets.

A dozen of the claimants had remained in the franchise programme even though they had joined 50 former colleagues in pursuing the legal case. Some of the 62 said they had had suicidal thoughts because of the pressure exerted by the telecoms group – while many claimed the company’s actions made them fear they would lose their livelihoods, homes or life savings after running up personal debts of more than £100,000.

Vodafone, which says the legal claim is worth £85.5m, has consistently argued the case is “a complex commercial dispute between Vodafone UK and some franchise partners and we refute the claims”.

Responding to news that the 12 current franchisees are having their contracts terminated, a Vodafone spokesperson said: “We are focused on building a successful and thriving franchise programme. As a result, we have a clear duty to do everything we can to support those franchise partners who are committed to our joint success.

“The dispute has been ongoing for over two years and a number of the claimants have remained within the franchise programme and had their contracts renewed during that time. However, we are increasingly concerned about the impact negative campaigning is having on our franchise programme.”

The spokesman added: “After careful consideration, and with disappointment, we therefore decided it was no longer viable for us to work with franchise partners who are supporting the negative campaign against the business.”

A franchise is a type of licence that allows a company to sell a product or service under another business’s brand name, in return for paying certain costs such as rent and wages. As part of their deals, Vodafone franchisees were paid commissions based on the handset and airtime revenues they generated from customers visiting their stores.

The court papers allege that the FTSE 100 company acted in “bad faith” by unilaterally cutting fees to its franchisees; imposing swingeing fines on them totalling thousands of pounds for seemingly minor administrative errors; and then pressuring them into taking out loans and government grants to keep their businesses afloat.

Vodafone said it strongly refutes that the company “unjustly enriched” itself and said it had conducted a number of investigations into the allegations, which resulted in the company making “a number of improvements to our franchise partner programme”.

The group’s investigations “concluded that some actions between Vodafone and franchise partners had not always adhered to the standards we expect, however no evidence of misconduct was found”. The mobile operator has added that it had paid back almost £5m to franchisees including the “retrospective reimbursement of fines and clawbacks”.

It has since emerged that, two years before the high court claim was launched, whistleblowers had warned a series of senior Vodafone executives that scores of its franchised store owners faced financial ruin.

Meanwhile, talks to settle the dispute ended without resolution last month – leaving the case potentially heading for the high court.

Vodafone announced earlier this month that it had sealed a £16.5bn deal to combine its British arm with its rival Three UK. The merger, first proposed in 2023, creates the UK’s largest mobile operator with a network of more than 27 million subscribers.

On Thursday, the new VodafoneThree joint venture said it planned to close some of its almost 650 stores on high streets and in shopping centres where the two former brands had outlets in close proximity.

The Vodafone chief executive, Margherita Della Valle, has previously said: “The commercial dispute is specifically between Vodafone UK and some of our franchisees. Our first joint attempt at mediation has not resolved the dispute despite our best engagement. We remain open to further discussions as the process continues.”