Franchise agreements under scrutiny — what franchisors need to know about the Vodafone case

From fast food and coffee chains to accountancy firms and homecare providers, franchising has become one of the UK's most successful business models. As the sector continues to grow, however, legal disputes such as the ongoing High Court case involving Vodafone and 62 of its franchisees are bringing increased scrutiny to how franchise agreements are interpreted and the liabilities that franchisors may face when relationships come to an end.

In June 2026, The Business Desk reported that the sector contributes an estimated £19.1bn a year to the UK economy and supports around 710,000 jobs. Around 50,000 franchise business units now operate across roughly 935 brands, with retail giants like McDonald’s, Domino’s Pizza, Costa Coffee and Subway among the best-known success stories. Against that backdrop, the outcome of the case, APK Communications et al v Vodafone Ltd [2026] EWHC 811 (Comm), is being closely watched across the franchise community.

Here, Samantha Thompson and Sara Ludlam from our commercial team examine the issues at the heart of the claim and outline what the decision could mean for franchise businesses.

Background

The claim has been brought by former Vodafone franchisees who allege that the reality of their experiences was significantly different to what was expected when they entered into the franchise arrangements. Among other things, they argue that reductions in sales commission and substantial fines for minor administrative errors placed significant financial pressure on their businesses. The Claimants are seeking just over £52m in compensation for this specific claim, alongside a number of others.

As noted by Mr Justice Bryan at the Case Management Conference on 26 March 2026, many of the individuals behind the claim are former employees — including store managers — who it’s said were persuaded by Vodafone to take on franchise stores on the basis that it was a heritage British brand that they trusted. Together, the Claimants operated 183 out of a total of 400 UK Vodafone franchise stores between them.

The case centres on a number of legal issues, including whether the franchise agreement can be interpreted as being subject to a duty of good faith and/or ‘Braganza’ implied terms as well as whether the franchisees should be regarded as ‘commercial agents’ and therefore subject to the agency regulations.

Why do the Claimants want to be ‘commercial agents’?

Franchise agreements are notoriously drafted in favour of the franchisor. It’s therefore unlikely that the Claimants would be able to recover sufficient damages for a breach of contract claim alone to make it financially worthwhile. 

However, if the Claimants can persuade the Court that they’re ‘commercial agents’ and not just a contractual party to a B2B contract, they can take advantage of the Commercial Agency Regulations (the Regulations). In particular, they could benefit from provisions that allow agents to recover monies when their agreements are terminated.

If the franchisees are held to be agents, there are two possible ways in which such termination fees are calculated: an ‘indemnity’ basis or a ‘compensation’ basis.

Could the Vodafone franchisees be commercial agents?

The Regulations only apply to entities supplying tangible goods and not the supply of services. In this case, the Claimant franchisees were selling both goods (for example, mobile phones) and network services. If the selling of the goods is deemed to be a secondary activity to the provision of the services, the Regulations won’t apply.

A decision in favour of the Claimants qualifying as commercial agents could result in other franchisors being liable for increased exit costs going forward if the terms of their franchise agreements meet the requirements identified in the final judgment.

What’s the story about ‘good faith’ obligations & Braganza implied terms?

Another argument by the Claimants is that the franchise agreement should be subject to an obligation of ‘good faith’ (requiring the parties to act honestly, fairly and not undermine the purpose of the agreement) or the Braganza duty, which is a developing area of English contract law. 

Courts tend to be reluctant to accept that B2B arrangements can contain an implied duty of good faith. However, as franchise agreements are usually one-sided, this could provide scope for franchisees to argue in favour of an implied good faith duty. As franchise agreements are long-term arrangements involving significant investment, ongoing communication, mutual trust and a degree of dependency between the parties, they may be viewed by the courts as ‘relational contracts’. This would make them more susceptible to the implication of duties of good faith in appropriate circumstances.

While there’s no general duty of good faith, the courts have shown a willingness to imply such obligations where necessary, provided that the express terms don’t exclude them. Most franchise agreements will be drafted to expressly exclude good faith obligations by the franchisor to the franchisee, so this doesn’t seem like the strongest argument — but we don’t know if the Vodafone franchise agreement did so.

A related concept is the Braganza duty, derived from Braganza v BP Shipping Ltd [2015] UKSC 17, which may apply where one party is entrusted with a contractual discretion that affects both parties and gives rise to a potential conflict of interest.

In those circumstances, discretion must be exercised honestly, in good faith and not arbitrarily, capriciously or irrationally. For franchisors, this may be relevant when making decisions under the agreement that materially affect franchisees.

However, the duty has limits: it generally doesn’t apply to the exercise of an absolute contractual right, objectively determinable matters or variations that the parties have expressly agreed.

Next steps

Franchisors should take the opportunity to review their agreements now, particularly around the nature of the franchisor-franchisee relationship and the potential for franchisees to argue that they act as commercial agents.

We'll continue to monitor developments and provide further commentary once judgment is handed down.

Talk to us

The Vodafone case highlights the importance of ensuring that franchise agreements are fit for purpose and capable of responding to legal developments. Our commercial team can assist in assessing the potential vulnerabilities in your agreement terms and can help you to understand how emerging issues may affect your business.

Talk to us by emailing hello@brabners.com, calling 0333 004 4488 or completing our contact form.