Vodafone set for £85m court showdown with ex-franchisees
An £85m court battle between Vodafone and its former franchisees will kick off on Thursday over claims the telecoms giant imposed cuts on franchises which left managers facing closures and bankruptcy.
The 62 ex-franchisees pursuing a civil action against Vodafone – recently renamed VodafoneThree – will launch their case at the High Court for the first time.
A campaign to strengthen protections for franchise owners has been backed by a cross-party group of MPs who say they could put forward legislation as soon as this year’s King’s Speech.
The former franchisees, represented by lawyers at Gatehouse Chambers, will meet for a case management conference (CMC) with VodafoneThree’s lawyers, Brick Court Chambers, on Thursday morning.
The claimants say the telecoms firm breached its duty of good faith and the terms of the Franchise Agreement by imposing irrational and arbitrary decisions on their franchises in the name of cost cutting.
The ex-franchisees claim they were promised uncapped earning potential but were often locked into commission structures which forced their stores to make losses.
Claimants also allege the FTSE 100 firm benefited from government business rate relief during the Covid-19 pandemic which was intended for specific franchises facing financial distress.
VodafoneThree says it rejects all allegations made by the claimants and talks over a potential out-of-court settlement ended last year without an agreement.
Reform MP Tice leads campaign for regulation
Several MPs whose constituents are among the claimants have been pushing for new legislation to protect franchisees, who they say are vulnerable because they do not have the rights of formalised employees.
In February, parliament’s business and trade select committee – having reviewed evidence from VodafoneThree’s former franchisees – called on the government to create a code of conduct for franchise operators.
“Gaps in the oversight of franchise agreements allow serious employment abuses to go unaddressed and leave franchisees exposed to unfair contractual practices,” the committee said.
Richard Tice, Reform UK MP for Boston and Skegness, where two of the claimants ran Vodafone franchises, told CityAM he is exploring the possibility of amending a bill set to be included in the King’s Speech in May to include protections for franchisees.
He expressed concern over the impact of the franchises on his constituents.
“The stress, the pressure was utterly devastating – to an almost catastrophic degree for one of them, and this is what MPs should do,” Tice said.
“We should all want to be proud of Vodafone and what they’ve achieved in their growth over the years. And that’s why this is such a disappointment – how they’re behaving in a coercive and bullying way.
“It sets a very bad tone around the whole franchise concept, which can be a very good concept and can allow great ideas and products to grow very rapidly.”
The dispute has “all the hallmarks of the Post Office scandal,” Tice said.
Minister reviews law over Vodafone dispute
Labour MP Johanna Baxter said she is pushing for ministers to tighten rules for franchise operators.
She told CityAM: “I will work with MP colleagues to try to ensure that there is better regulation of franchising, to make sure that the balance of power between the corporates and the franchisees is better balanced so that there are protections afforded to franchisees.”
Rachel Beddow-Davison, one of the claimants in the lawsuit, told CityAM: “There is no regulation. I don’t want anyone else to have to go through what we’ve been through.”
Thursday’s court hearing will set out the timetable for the case, which is not expected to come to trial before November 2027.
A spokesperson for VodafoneThree said: “We continue to run a successful franchise business in the UK with over 350 stores, and the majority of our partners have expanded their business with us.
“We reject their claims and will continue to robustly defend all aspects of this commercial dispute.
“We have engaged in efforts to resolve the matter with the claimants, including making a reasonable offer to settle. We have every confidence in our case and the court process, and in the absence of reaching a settlement, we remain firmly committed to resolving this dispute through the courts.”