Vodafone legal battle: This is a complex commercial dispute, says telecoms giant

“It was something that perfectly suited my entrepreneurial mindset and my personal situation. Living with Ehlers Danlos Syndrome, a chronic illness that requires daily management, I believed this opportunity would allow me the flexibility I needed.”

However he claims that within months, it became clear that the promises made to him were hollow.

He said that during the final lockdown – between January and April 2021 – he was left to cover all costs alone. As a new business with new staff, he said he wasn’t eligible for most Government support, which left him with costs for around £100,000.

“Vodafone had assured me that I would recoup this through the rate card, but instead, in November 2021, my rate card was cut without warning, significantly reducing my margins. Six months later, Vodafone made further cuts to my Hull and Beverley stores.”

The former Vodafone franchisees allege that Vodafone breached its’ duty of good faith and imposed “irrational and arbitrary” business decisions on them, resulting in significant financial harm and causing lasting mental health consequences.

It is claimed for example, that commission payments to franchisees were cut drastically and with little or no explanation and that Vodafone benefitted from government business rate reliefs that were intended for the franchisees when they were facing financial distress during Covid.

Vodafone says that while it fully reject the claims against it, it is sorry if any franchise had difficulty in operating their business.

Mr Holmes told The Yorkshire Post: “I want Vodafone to acknowledge the hurt and distress that they’ve caused me and to offer fair financial recompense.

“What I would love to see is that the action we take improves the situation for everyone else who finds themselves in this position, creating a framework to prevent this from happening again. I have lost all faith and trust in the franchise system.”

Yorkshire businessman Martin Mellor joined the Vodafone franchise programme as one of its first franchisees.

He told The Yorkshire Post he had previously held several senior roles at Vodafone, including a stint as regional manager.

“It was a brand I knew and trusted; I used some inheritance money to set the business up. From July 2018 until COVID, it was brilliant. I more than doubled turnover across the four Vodafone stores I ran as a franchisee in Bury, Bolton, Halifax and Wakefield.

“We doubled the headcount and invested heavily in commission schemes and pension schemes, we made it a nice place to work. At the peak we had about 30 staff working across the four shops.”

“Things really changed when we went back into the stores..following the latest lockdown.

“On a conference call the following month, other franchisees and I were told that our upgrade commissions were being cut by around 40 per cent. I complained about this because there seemed to be no rhyme or reason for it.

“I was told that we had been paid too much money as franchisees, but they didn’t provide any data to justify this.

“The reality is that business became harder after Covid. The reduction in upgrade commissions almost put you on the breadline.”

Mr Mellor ceased to be a Vodafone franchisee in March 2024, shortly after he had returned from his mother’s funeral in New Zealand.

“I want accountability from senior people at Vodafone and I want this case to go to court. Between 2000 and 2014 I would have done anything for that business. It was a great company.”

A Vodafone spokesman described the £85m legal claim against the group by 62 former franchisees as a complex commercial dispute.

The statement added: “While we fully reject the claims against us, we are sorry if any franchisee had difficulty in operating their business.

“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 have engaged in efforts to resolve this commercial dispute, including making a reasonable offer to settle, and remain open to further talks.”

The spokesman added that Vodafone conducts regular audits across its retail estate to ensure regulatory compliance and that customers receive the service they deserve.

The statement added: “On occasion, we have issued penalties to ensure these obligations are met.

“Fines or clawbacks are considered only where there is clear evidence of regulatory misconduct, material non-compliance, or behaviour that has resulted in, or presents a foreseeable risk of, consumer harm.”

The spokesman said Vodafone had an obligation to the Financial Conduct Authority to ensure compliance with their regulations, “in particular our obligation to ensure good customer outcomes”.

“Fines and clawbacks are issued in the form of commission reductions, and represent ~0.4% of the £773m in commissions paid to franchise partners over the lifetime of the franchise programme.

Vodafone always retains full accountability for regulatory compliance and customer outcomes, the spokesman said.

The statement added: “Our approach is aligned with the broader regulatory principles applied by both Ofcom and the FCA, which use financial penalties as a deterrent where breaches cause, or risk causing, consumer harm and where such measures support improved compliance.

“We run a transparent process which allows anyone to raise issues in the knowledge they will be taken seriously. Once issues were raised, we ran several in-depth investigations including a full assurance review.

"Vodafone did identify some actions, including changes to fines, that would improve the programme.

"Following the review, we made a series of goodwill payments to many franchisees totalling £4.9M across our franchise estate, with no obligation to do so. This included revisions to some fines or clawbacks since the franchise programme began, totalling around £1m (including VAT).

“We have taken the opportunity to explain to MPs how the franchise programme operates, the steps we have taken to strengthen it over time, and the context around the points raised.

“We would of course be willing to meet relevant MPs to discuss these matters further.”

In the spring and summer of 2020 Vodafone Group undertook a review of the distribution strategy and costs associated with acquiring and retaining customers across all direct channels, the statement added.

“The review found that the cost of retaining customers in retail was notably higher than in other channels owing to the higher level of commissions for upgrades paid to franchise partners.

“A reduction of approximately 40% in commissions was therefore implemented for upgrades specifically. Commissions for acquiring new customers remained unchanged,’’ Vodafone said.

“Each claimant voluntarily entered into new, and in some cases additional, franchise agreements with Vodafone after the matter about which they complain. By doing so, they expressly acknowledged and agree to all prior changes to Franchise Renumeration.

The costs associated with running a franchise business can go up and down and Vodafone adjusts its cost model accordingly, said the spokesman.

“We have increased commission rates when costs have gone up in key areas such as energy costs, real living wage, rent and business rates, or recent changes in employer national insurance.”

Responding to claims that that Vodafone took “business rate relief for themselves, factoring it into the rate card to boost their own profit”, the spokesman added: “We cover most costs associated with running a franchise business including rent, business rates, wages, and utilities and these are included in our cost model.

“Vodafone categorically denies the allegation that the business used government Covid support to boost its own profits. Business rates relief were only factored into our rate card modelling for franchise partners from the beginning of FY23 (the financial year 2023).

“Commercial business rates are an occupier tax and, as such, Vodafone was able to only claim this relief for our Vodafone managed stores.”