Vodafone terminates contracts for 12 franchisees joining £120 million lawsuit
Vodafone has terminated contracts with 12 incumbent franchisees, a group of 62 business owners, hunting down a £120 million high court claim against the telecom giant, exacerbating a fierce and long-standing legal battle over alleged abuse in its UK retail network.
The decision comes two years after franchisees first accused the FTSE 100 company of “unjust enriching” themselves, claiming Vodafone cuts commissions and imposed punitive fines on store operators, many of whom said they were struggling financially.
The 12 franchisees continued to operate Vodafone stores on Vodafone Avenue, while also participating in a lawsuit that accused the company of acting maliciously, issuing kickbacks and fines for small administrative issues, and imposing efforts on partners to withdraw loans and grants to keep them alive. Some claimants reported having experienced a serious mental health struggle, some said they were worried about losing their home or saving their lives after more than £100,000 in personal debt.
Vodafone objected to the size of the claim (for £85.5 million, the case was called a “complex business dispute” and said it “strongly dismissed” the injustice allegations of enrichment.
A Vodafone spokesman said in a statement confirming the termination of the contract that the company remains committed to establishing a “successful and thriving franchise program” and no longer actively participates in its “negative campaign” for the brand with partners.
“The dispute has been going on for more than two years, with many claimants still in the franchise program and renewing the contract during that period,” the company said. “However, we are increasingly concerned about the impact of negative campaigns on our franchise program. Carefully considering it, it is disappointing that we believe that working with franchise partners that support negative campaigns for businesses is no longer feasible.”
Franchisees operate stores under the Vodafone brand and earn commissions based on equipment and call time sales. Court documents state that in recent years Vodafone unilaterally cuts these payments and imposes high fines for minor violations such as document errors, thus undermining the financial viability of many small businesses.
Although Vodafone denies misconduct, it acknowledged that internal investigations revealed that interactions with franchise partners did not meet expected standards. The company has since issued nearly £5 million in reimbursement, including for kickbacks and fines, and said it has made “many improvements” to its franchise partner program.
However, tensions continue to escalate. What emerged is that the whistleblower raised concerns about the misery of franchisees before filing legal claims in December 2023.
Attempts to resolve disputes through mediation last month have increased the prospects for cases tried by the High Court.
The legal practice also occurred when Vodafone undergoes major structural changes. Earlier this month, the company completed a £16.5 billion merger with rival Tri-UK, forming the country’s largest mobile network with more than 27 million customers. The new Vodafonethree joint venture said it would rationalize its store portfolio, expecting the existing Vodafone and three outlets to overlap.
Commenting on the broader dispute, Margherita Della Valle, CEO of Vodafone, said: “The business dispute is between Vodafone, the UK and some of our franchisees. Our first attempt to mediate the dispute has not been resolved, although our interaction is the best.
As the company’s relationship with many former and current franchisees deteriorate, the consequences of the lawsuit could have a long shadow on Vodafone’s efforts to reshape its UK retail business and move towards a slimmer, post-post-future future.
