A number of current and former Vodafone franchisees in the UK have filed a legal claim against the carrier this week over alleged cuts to their commission payments and remuneration.
In total, 61 claimants have filed the lawsuit and are seeking more than £120 million ($151m) against the company, which last week was given regulatory approval to complete its £15 billion ($19bn) merger with Three.
According to Byfield Reputation Counsel, which announced the case this week on behalf of the claimants, 25 of the 61 franchisees are still in the franchise program, while the other 36 have either had their contracts terminated by Vodafone, or resigned themselves.
Some of the claimants detailed how the actions of Vodafone had caused them and their families severe financial and personal distress, including reaching the edge of bankruptcy.
The program was set up in 2017 by Vodafone before it was expanded a year later.
However, it was during 2020, that some of the franchisees pinpoint the downfall of the program.
On July 17, 2020, Vodafone invited its 150 franchisees, who operated about 400 stores, to join a video call to tell them that their commissions were being cut. Those on the call noted that Vodafone gave little to no notice and no other explanation beyond the company deciding to take its stores in “a different direction."
One former franchisee owner, Andrew Kerr, 42, claimed that with just 14 days’ notice, almost a third of his revenue was wiped out by Vodafone’s decision to cut his commission. Kerr had three stores in Northern Ireland, but lost his business in March 2023.
“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,” said Kerr.
Another franchisee owner, Donna Watton, 43, of Lincolnshire, claims her revenue was cut by more than 40 percent. Before joining the program, Watton spent 10 years as a Vodafone store manager, but after exiting the program now has debts close to £100,000 ($126,614).
“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," said Watton.
"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."
Some of the claimants initially didn't realize the scale of the issue, before realizing that others had similar problems with the carrier.
In response, Vodafone has denied the allegations.
“We are aware of the allegations and take them very seriously, and we are sorry to any franchisee who has had a difficult experience. While we have acknowledged challenges were faced by some franchisees, we strongly refute claims that Vodafone has ‘unjustly enriched’ itself at the expense of small businesses," said Vodafone in a statement this week.
"Our franchise model is a commercial relationship. We offer our franchise partners a large amount of cost-free support, but, as with any business, commercial success is not guaranteed. The majority of franchise partners are profitable and there is strong demand among our current franchisees to take on new stores. We maintain that where issues have been raised, we have sought to rectify these and believe we have treated our franchisees fairly.“
The claimants note that franchisees were sold the program with the promise of uncapped earning potential, "but in reality, were often given commission structures that meant their stores were loss making."
It's also alleged that Vodafone "excessively fined and imposed clawbacks on its franchisees," while senior staff were incentivized to fine franchisees, claim the plaintiffs.