Retailers are being stung by unfair contracts on a daily basis costing them up to £23,000 in exit fees, it has been revealed, as industry figures call for better protection for small businesses.
As new research from the Federation of Small Businesses (FSB) found small firms are losing £1.3bn a year due to unfair terms, the NFRN revealed the extortionate costs faced by store owners.
“The NFRN deals with contract issues under its legal policy on a daily basis,” head of operations Margaret McCloskey told Retail Newsagent. “Termination of a contract is calculated by the ‘loss of sales’ for the supplier and it could cost a retailer anything between £7,000 and £23,000 to exit the contract early.”
She added while the NFRN had been successful in working with some suppliers to save retailers from high costs, it had also been threatened with litigation because it had been vocal about the unfairness of contracts.
Retailers and small businesses said they had been duped by contracts that failed to make auto-rollover clauses clear, high early-termination fees, and by details being concealed in the small print.
“The NFRN calls on the government to protect small to medium-sized business by having clearer contract terms and stopping the use of high pressure sales tactics and misleading information that results in a retailer signing a contract, without having time to read and understand the clauses,” Mrs McCloskey added.
Meanwhile, the FSB found 2.8 million small businesses had suffered a loss because of unfair contract terms, while 75% of those affected had been stung twice or more in the past three years.
The FSB is calling for trading standards to be given more power to take action against suppliers imposing unfair terms.
Doug Love, from the Islington Trading Standards team, said: “There is a good argument that the protection that consumers benefit from should be extended to small businesses, as they can be equally vulnerable to unclear or unfair contract terms.”