When the High Court ordered a split trial in the claim brought by 62 former Vodafone franchisees in March 2026, it decided that the first stage should deal with one central question: could the franchisees be treated as "commercial agents"?
The case settled in July 2026 before that question was answered. But the question has not gone away. It matters to anyone whose franchise involves selling products on behalf of the franchisor and being paid by commission. This article explains what a commercial agent is, why the status matters, and how to think about where you stand.
What is a commercial agent?
In Great Britain, commercial agents are protected by the Commercial Agents (Council Directive) Regulations 1993. They come from an EU directive, but remain part of UK law.
The Regulations define a commercial agent as a self-employed intermediary who has continuing authority to negotiate the sale or purchase of goods on behalf of another person, called the principal, or to negotiate and conclude those sales in the principal's name.
Three features stand out:
- The agent is self-employed, which includes a limited company acting as agent.
- The authority is continuing, not a one-off arrangement.
- The agent sells on behalf of the principal, rather than buying the goods and reselling them on their own account.
Why the status matters
If the Regulations apply, the agent has rights that cannot simply be removed by the contract. The most important are:
- Compensation or indemnity when the agency ends. In England and Wales, unless the contract provides for an indemnity, an agent is generally entitled to compensation for the loss suffered when the relationship ends. This can be a substantial sum, and it can apply even when the principal ends the agreement in line with its terms.
- Minimum notice. One month in the first year, two months in the second, and three months from the third year onwards, unless the contract gives more.
- A duty of good faith on both sides. The principal must act dutifully and in good faith towards the agent, including providing necessary information and warning the agent if it expects the volume of business to be much lower than the agent would normally expect.
- Rights to commission information, including the right to see information needed to check commission owed.
Why franchisees are not usually agents
In a typical franchise, the franchisee buys stock or supplies from the franchisor or approved suppliers and sells to customers on its own account, keeping the margin. That is a buy-and-resell relationship, not agency, and the Regulations do not usually apply.
Some franchise models work differently. In certain sectors, including mobile phone retail, the franchisee sells the franchisor's products and contracts in the franchisor's name and is paid by commission. In that situation, the relationship can look much more like agency, whatever the agreement calls it.
Courts generally look at the substance of a relationship rather than the label the parties give it. Calling an agreement a "franchise" does not, on its own, decide whether the Regulations apply.
The complications
Several questions can make the answer difficult, and they were among the issues the Vodafone trial was expected to address:
- Goods or services? The Regulations apply to agents negotiating the sale or purchase of goods. Where most of what is sold is a service, such as an airtime contract, there can be argument about whether the Regulations apply at all, or to which parts of the business.
- Secondary activity. The Regulations exclude people whose activities as commercial agents are secondary to their main business. Where a franchise business does several things, there can be argument about which is primary.
- Who the customer contracts with. If the customer's contract is with the franchisor, that points towards agency. If it is with the franchisee, it points away from it.
- Time limits. A commercial agent who wants compensation must notify the principal within one year of the agency ending, or the right is lost.
What the Vodafone case would have decided
In March 2026, Mr Justice Bryan ordered that liability should be decided before the amount of any compensation, and approved the use of sample claimants. The first trial was designed to determine at an early stage whether the claimants could qualify as commercial agents under the Regulations.
Had the court answered that question, it would have given useful guidance to franchisees and franchisors in commission-based models across the UK. Because the case settled confidentially in July 2026, without any admission of liability by Vodafone, there is no ruling, and the question remains open for each business on its own facts.
How to think about your own position
If your franchise ends, or is about to, and you are paid by commission for selling the franchisor's products, it is worth asking whether the Regulations might apply. Useful questions include:
- Do you buy stock and resell it, or sell in the franchisor's name?
- Who does the customer have a contract with, you or the franchisor?
- How are you paid: margin on your own sales, or commission from the franchisor?
- What proportion of your sales are goods, and what proportion are services?
- Is selling the franchisor's products your main business, or a side activity?
- When did the relationship end, or when will it?
A wider lesson for franchise models
The question also matters to franchisors. Commission-based franchise models are used in several sectors because they let a brand control pricing and products while partners run the stores. But a model that looks like agency may carry the legal consequences of agency, including compensation on termination. Clear agreements, honest communication about how the model works, and fair treatment when the relationship ends reduce the risk of disputes for everyone.
For franchisees, the lesson is simpler: understand how your business actually works, not just what the agreement calls it. That understanding can make a significant difference to your rights when the relationship ends.
Do not miss the deadline
The one-year time limit for notifying a compensation claim is strict. If you think the Regulations might apply to you, act quickly. It is far better to notify a possible claim and later decide not to pursue it than to lose the right altogether.
This is an area where specialist legal advice is often needed. We can help you gather the evidence that answers the questions above: how you were paid, what you sold, and how the relationship worked in practice. That gives you an honest view of your position, and if you do need a solicitor, they start with your evidence pack ready, which can save thousands of pounds in legal fees.
Initial discussions are free and in confidence.