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Vodafone faces £120+ million legal claim by 61 of its current and former franchisees –

Members of the claim speak out about the financial, mental and physical impacts of the retail giant’s “irrational” business decisions

LONDON, 10 December - A group of 61 current and former Vodafone franchisees across the UK have today filed a £120+ million legal claim against Vodafone, the telecoms giant and one of the UK’s largest retail franchise businesses.

The affected Vodafone franchisees, many of whom started their careers with Vodafone and have been loyal ambassadors for the brand over the years, claim that Vodafone – which has recently left the British Franchise Association – has breached its duty of good faith and the terms of the Franchise Agreement. They allege that Vodafone did this by imposing irrational and arbitrary business decisions on them from July 2020.

Andrew Kerr, Rikki Lear and Donna Watton, three former franchisees and members of the claim, say Vodafone’s actions have caused them and their families severe financial and personal distress including reaching the edge of bankruptcy, potential repossession of their homes, and serious mental health issues – impacts they believe are felt by others across the programme.

Franchisees trusted Vodafone. What they got was broken promises, emotional distress, and businesses left in ruins.

The claim, which was first reported by The Guardian on Tuesday, alleges that commission payments and remuneration to the affected franchisees were cut drastically and with little or no explanation; that Vodafone benefitted from government business rate reliefs that were intended for the franchisees when they were facing financial distress during Covid; and that Vodafone often failed to pass on rent free periods in its underlease terms to affected franchisees and charged them full rent, again when many of their businesses were already being squeezed. They say this is in stark contrast to how the franchise model was originally promoted as a ‘true partnership’ and to how Vodafone portrays the franchise and the company publicly.

A number of the franchisees say their stores were taken away from them with little notice and no other explanation than that Vodafone was taking their stores in “a different direction”.

All of this culminated in a number of the affected franchisees independently seeking legal advice as a last resort back in October 2022, before coming together to form a group, and now launching this claim.

Andrew Kerr, 42 from Bangor, Northern Ireland, who is married with 10- and 21-year-old daughters, became a franchisee in 2019. He claims that, with just 14 days’ notice, almost of a third of his revenue was wiped out by Vodafone’s decision to cut his commission. Andrew had three stores and eventually lost his business in March 2023. To this day, he is still dealing with the repercussions of Vodafone’s actions.

“It started off as a dream – and it’s ended up as a nightmare that haunts me every day. I felt I became Vodafone’s piggy bank. They pushed me to the point of financial ruin, and then took away my stores leaving me in crippling debt,” he said.

Andrew secured loans based on a Vodafone approved business plan, including from his family, because he believed in the strength of the Vodafone brand and the way the whole franchise programme was promoted as a partnership. However, when this all started to change for Andrew, he says that Vodafone did not listen to him or other franchisees who were facing similar issues.

The stress caused by this whole experience led to serious physical and mental health issues for Andrew, he says. In November 2022, he collapsed in his kitchen and had to spend eight days on a heart monitor. His family was so concerned about the mental and financial strain he was under that they feared he might take his own life, and insisted he see a counsellor.

Andrew continued: “Despite trying to raise issues and find solutions with Vodafone, I often felt silenced. I was let down by Vodafone on all the elements of the partnership that were important to me – trust, cooperation, good faith. My mental and physical health, as well as my financial security, have all taken a battering as result of the way I have been treated. I haven’t been able to think about anything else for the last four years and the last hope I have of holding Vodafone accountable is in bringing this claim. I want to be a dad again, a partner to my wife – I just want my life back.”

Donna Watton, 43, from Lincolnshire who is a mother to a 19-month-old daughter and stepmother to two boys aged 15 and 10, says that her revenue was cut by over 40% as a result of Vodafone’s arbitrary and irrational business decisions. For Donna, this turned her only profit-making store into a loss making one almost overnight.

Donna was formerly a successful Vodafone store manager for 10 years. After exiting the programme, she has been left with debts of almost £100,000 and is facing the prospect of having to sell her house. She says that this has impacted her desire and ability to have more children.

“I felt empowered to join the programme and to be an entrepreneur - something I knew I was good at as I had done it before. Vodafone seemed to reflect my values and support women in business and once asked me to promote their initiatives, which I did because I believed they were going to champion me. Instead, I found myself in a situation where Vodafone took away my only profitable store – and therefore my livelihood, leaving me with mounting debt – while I was caring for my five-month-old daughter. In fact, they delivered the news over video call while she was sat on my knee.”

“I no longer trust Vodafone. Their actions, to me, felt deliberate and systematic. Despite putting all my energy into making my business work – even while heavily pregnant – trying to find solutions in the spirit of our partnership felt like banging my head against a brick wall. The whole experience was a nightmare and has put tremendous strain on my relationship with my partner, and I feel awful for my children whose lives this has significantly impacted too.

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“I used to be a happy and ambitious person. Now, I struggle to see the point and feel it was all for nothing.”

Rikki Lear, 44, husband and father of a 9-year-old daughter, and a former franchisee based in Kent, said:

“I joined the programme with the best intentions, to grow and learn as a businessman coming from a working-class background and with the opportunity to change my family’s life for the better. The experience I ultimately had as a Vodafone franchise partner almost broke me. I wouldn’t be here now if it wasn’t for the sense of purpose the group has given me to fight on behalf of people who have been collectively wronged. Vodafone needs to embrace accountability, integrity and kindness to build a culture that aligns with their pronounced ethical values based on trust.”

The claim, which is being served on Vodafone, and is now part of court proceedings that are likely to be contested, alleges that:

The franchisees were sold the programme with the promise of uncapped earning potential, but in reality, were often given commission structures that meant their stores were loss making.

A senior Vodafone figure admitted that a commission cut imposed by the company in July 2020 – with less than 14 days’ notice – had in effect ‘shanked’ a number of franchisees. When asked for documentary evidence to show the rationale for the July 2020 commission cut, Vodafone refused or failed to explain the process it underwent at the time or provide the documents requested.

During the Covid-19 pandemic, the UK government introduced financial support for small businesses, including Business Rates Relief, that was introduced to help small bricks-and-mortar shops carry on trading in financially precarious times. From around 2022, Vodafone gathered information on the relief the franchisees were receiving and then factored this into its cost modelling when calculating the commission paid to the franchisee. This had the effect of depressing or eliminating the benefit those franchisees should have received from government assistance for Vodafone’s own direct benefit.

Vodafone excessively fined and imposed clawbacks on its franchisees. Senior staff were incentivised to fine franchisees, and the franchisees infer that the purpose for such incentives was not purely to ensure franchisee compliance with the relevant procedures, but also with the aim of allowing Vodafone to increase its revenue. A singular fine could be as high as 30% of a store’s commission and even go as far as franchisees having their stores taken away. The severity of the fines, often in the thousands, were often totally disproportionate to the perceived cost of the failure to Vodafone. For example, one franchisee in the claim was fined £21,000 for a £7 customer mischarge.

On numerous occasions, Vodafone took decisions in bad faith that unfairly penalised the franchisees while benefiting the company. For example, Vodafone justified a commission cut through the closure of Carphone Warehouse, citing the extra footfall franchisees should have benefitted from which never materialised. Additionally, Vodafone often failed to pass on rent free periods in its underlease terms to affected franchisees when some of their businesses were already experiencing financial difficulties.

Vodafone stopped paying commission to its franchisees for selling mobile phones despite being one of the UK’s major mobile network operators and being widely known in the UK as place to purchase phones. In 2021, Vodafone decided to only pay commission on the value of the airtime contract increasing Vodafone’s margin from the sale of the physical device.

Throughout pre-action correspondence Vodafone has denied the allegations, and it is anticipated that Vodafone will choose to defend the claim. The claim is now part of court proceedings that are likely to be contested.