Vodafone settles legal claim brought by 62 former franchisees

Vodafone has settled a long-running legal claim filed by 62 of its former franchisees who alleged the mobile phone group “unjustly enriched” itself at their expense by up to £85m.

The small-business owners – some of whom said they had suffered suicidal thoughts because of the pressure exerted by the telecoms group – launched the high court claim in 2024 after running up large personal debts they said had been caused by their deals with the company.

The former shopkeepers said in court papers that they had suffered large losses after Vodafone unilaterally slashed the sales commissions franchisees were paid for running the mobile phone group’s high street stores.

MPs subsequently compared the case with the Post Office Horizon IT scandal.

In a joint statement on Thursday, both sides said they had finally concluded the 19-month court claim, which had yet to come to trial.

They said: “Vodafone Ltd UK and the group of former franchise partners are pleased to confirm that the commercial dispute concerning the interpretation of franchise agreements has been settled.

“The settlement is entered into as a compromise of the dispute, without any admission of liability, and should not be construed as such. The agreement ends the legal proceedings between the parties. The terms of the settlement will remain confidential, and the parties will not be commenting further.”

The plight of the 62 franchisees – who represent almost 40% of a total 167 Vodafone franchisees – was first revealed by the Guardian in December 2024.

Court papers alleged that Vodafone 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 cajoling them into taking out loans and government grants to keep their businesses afloat.

The filings went on to allege that the telecoms group was aware of how its actions affected its partners, referencing a July 2020 voicemail message left to one franchisee, in which a Vodafone executive appeared to acknowledge the harm the commission changes had “unleashed”, before conceding franchisees had been “shanked” – or stabbed – by the company.

The Guardian also subsequently revealed that Vodafone had incentivised internal security staff to increase “clawbacks” levied on its own franchisees, including one alleged case of a £10,000 penalty for a franchisee whose mistake cost Vodafone £7.08.

The company said it was not its intention to profit from fines and that it has regulatory obligations in relation to the finances of franchisees, including imposing penalties.

Many of the former franchisees said they feared losing their livelihoods, homes or life savings after running up personal debts of more than £100,000.

Vodafone, which is valued at about £25bn on the London Stock Exchange, always insisted it “strongly refutes” that it had “unjustly enriched” itself and has consistently categorised the claim as a “commercial dispute”. However, it did apologise to the small-business owners who once ran the group’s UK high street shops. “We are sorry to any franchisee that has had a difficult experience,” it said in December 2024.

Last September, the company started offering financial settlements to a selection of former franchisees who were outside the group of legal claimants as it launched its fourth investigation into its troubled franchising division.

In 2024, Vodafone told the Guardian: “We have made a number of changes to our formal processes and governance and made a series of goodwill payments to numerous franchisees. For example, we made the decision to reimburse £4.9m including VAT [£4m] across our franchise estate (this included retrospective reimbursement of fines and clawbacks).”

The company has added that comparisons to the Post Office scandal are “wholly inappropriate”.