Vodafone is facing a significant legal challenge with a £120 million lawsuit, as it is accused of violating franchise agreements in the UK by implementing “irrational and arbitrary business decisions” that adversely affected retailers.

Over 60 current and former franchisees of the London-based telecommunications giant have initiated legal proceedings, alleging that Vodafone acted in breach of its duty of good faith and the established terms of the franchise agreements.

The lawsuit, filed this week in the commercial division of the High Court, claims that commission payments and other forms of remuneration were reduced “drastically” without adequate explanation.

Furthermore, the lawsuit alleges that Vodafone profited from government business rate relief intended for franchisees during the Covid pandemic. It also states that the company frequently failed to offer rent-free periods in its lease agreements, further straining many franchisees that were already under financial pressure.

Accusations have been raised against Vodafone executives for acting in stark contrast to the expected franchise model, which was initially designed to foster a “true partnership”.

Several franchisees have reported that their businesses were abruptly removed with little notice and vague explanations from Vodafone executives, who claimed the stores were being taken in a “different direction”.

According to the franchisees, Vodafone marketed its franchise program with assurances of unlimited earning potential, yet many found themselves on commission structures that often led their businesses to incur losses.

The lawsuit mentions that a senior official from Vodafone acknowledged that a substantial reduction in commissions implemented in 2020—with less than two weeks’ notice—significantly harmed numerous franchisees.

Vodafone stated it is taking the lawsuit “very seriously” and expressed remorse to any franchisees who have faced difficulties. The company plans to “strongly refute” claims of having “unjustly enriched” itself at the expense of franchise operators.

“Our franchise model is based on a commercial relationship. We provide substantial cost-free support to our franchise partners, but, like any business, there are no guarantees of commercial success,” the company added. They stated that they have made efforts to address concerns raised and believe their treatment of franchisees has been fair.

The claimants, represented by the law firms IBB and Bird & Bird, allege that Vodafone has not provided sufficient justification for its drastic commission cuts.

This legal action, first reported by The Guardian, also claims that when government financial support for small businesses was introduced during the pandemic, Vodafone gathered data on the relief being received by franchisees and incorporated those figures into its commission calculations.

The claimants contend that this practice effectively diminished or eradicated the benefits that those franchisees should have gained from government aid for Vodafone’s direct advantage.

Vodafone is accused of enforcing clawbacks on franchisees due to alleged poor performance, with fines reaching up to 30 percent of a store’s commission, alongside penalties that included outright termination of franchises.

According to the claim, these fines were often disproportionate to the alleged offenses, illustrated by one franchisee facing a £21,000 penalty for a £7 customer mischarge.

Franchisees have noted that Vodafone stopped providing commissions for mobile phone sales, notwithstanding its status as one of the UK’s leading network operators. Allegations suggest that in 2021, Vodafone decided to pay commissions solely based on the value of airtime contracts, allowing the company to boost its profit margins on physical device sales.

Andrew Kerr, 42, a franchisee based in Bangor, Northern Ireland, stated that nearly a third of his revenue vanished following Vodafone’s commission cuts with just a fortnight’s notice. He lamented the loss of his three stores last year.

“It began as a dream but has turned into a nightmare that I relive every day,” Kerr expressed about his franchise experience. “I felt like I became Vodafone’s financial resource. They drove me towards financial ruin and then took away my stores, leaving me deeply in debt.”