Vodafone executive admits commission cuts 'shanked' some franchise operators

A senior Vodafone executive admitted in a voicemail that the company’s 2020 commission cuts “absolutely shanked” some franchise operators, as ITV News Business Editor Joel Hills reports

Rikki Lear is moving home.

He said he has been forced to sell his family house in Kent to repay part of the £150,000 debt he ran up trying, unsuccessfully, to keep his Vodafone franchise afloat.

Rikki’s company ran Vodafone’s shops in Chatham, Gillingham and Orpington.

He says things started well. The former England footballer Terry Butcher attended the grand opening in 2018. But two years later, Vodafone cut the commission it paid to franchise operators.

“From that moment, we were in trouble,” he tells ITV News.

“I was angry for a long time. I’m still angry. But the place I’m in now is purely survival mode. I just have to get through this. My wife has been phenomenal and an incredible support for me.”

Back in 2017, Vodafone decided to franchise its network of 400 UK shops. It encouraged many store managers, including Rikki, to set up their own companies and take over the stores. In return, Vodafone agreed to pay commission on sales made in-store.

But on 17 July 2020 – just as the first Covid lockdown was lifting – Vodafone announced it was slashing commission rates.

Most of the 62 franchisees now taking Vodafone to court say their revenues fell by around 35% almost immediately and that their businesses began losing money.

It was Vodafone’s Head of Consumer Sales Operations, Jon Shaw, who originally informed franchise operators of the cut.

Two weeks later, on July 31 2020, he left a voice message for one of them acknowledging the financial impact.

In the recording, the existence of which was first reported by the Guardian, Mr Shaw says that “a small proportion” of partners had been “absolutely shanked” by the rate cuts.

He added: “Please don’t think we don’t care, don’t know,” and: “You have my guarantee I will do everything I can to make sure we get through this together.”

Mr Shaw acknowledged that partners had been negatively impacted by the cuts

The former franchise operators are now suing Vodafone, alleging the company unjustly enriched itself at their expense.

The legal action has attracted political attention. MPs debated the issue in Parliament earlier this summer.

“What Vodafone did is akin, potentially, to another Post Office scandal – where people have been driven towards bankruptcy, driven towards suicide, by Vodafone’s deliberate actions,” Richard Tice MP told ITV News.

Mr Tice says that, since September 23, he has been seeking a meeting with either Margherita Della Valle, Vodafone’s chief executive, or Jean-François Van Boxmeer, the group’s chairman, but that the company has not responded to the dates he proposed.

In a statement, Vodafone said: “We have tried on multiple occasions to resolve this complex commercial dispute. We offered to make a significant payment which we believed would ensure no claimants had debts associated with their franchise.

“We were disappointed to learn that our financial offer was rejected by the company funding the claim, without having shared it with all claimants.

“We remain open to further talks and are sorry if any franchisee had difficulty in operating their business. We continue to run a successful franchise business in the UK, with many current franchisees keen to take on more stores.

“We are always willing to meet Members of Parliament to discuss issues of concern to their constituents and are in the process of making arrangements to meet Mr Tice.”