Secret agreement ends Vodafone £85m franchisee legal dispute

Vodafone has reached a confidential settlement with 62 former UK franchisees, bringing to an end a long-running High Court legal dispute over the company’s franchise model. 

An official statement 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.”

Neither Vodafone nor the claimants have disclosed the financial terms of the agreement.

The claim, which was due to be heard at trial, alleged Vodafone had been unjustly enriched at the expense of its franchise partners through changes to commission structures, financial clawbacks and other commercial practices. The claimants were seeking damages reportedly worth up to £85 million.

The parties do not reveal, the total amount paid, how it will be divided among the 62 claimants, whether Vodafone is paying their legal costs, whether individual payments reflect each franchisee’s claimed losses, whether there are non-financial terms, such as undertakings, releases or restrictions on speaking publicly.

The case attracted significant attention because of its scale and because dozens of independent franchisees joined together to bring collective legal action against one of the UK’s largest mobile operators.

Legal experts say the settlement is likely to increase scrutiny of franchising relationships and the way franchisors exercise their contractual powers over independent businesses.

Lucy Pringle, Commercial Partner at Keystone Law, said: “This settlement shines a spotlight on the increasing scrutiny being applied to franchising relationships.

“The Vodafone dispute highlights the potential for collective action by franchisees. The ‘David v Goliath’ nature of franchising relationships makes easier for franchisees to challenge contractual practices when they work as a team, and we are likely to see this happening more often. 

“For franchisors, the lesson is act as if a duty of good faith applies, even if the contract does not specify one. But there is a cautionary note for franchisees too – take legal advice at the outset to ensure you know what you are signing up to.”