Claims Direct's franchise holders have seen their income drop following a barrage of negative publicity in the national press and television.

Franchise holders are paid by Claims Direct on a per case basis, which means their income is directly tied to how many claimants they can recruit.

Many would have paid around £30,000 to secure the rights to run a Claims Direct high street branch for five years, as the personal injury claims market underwent a rapid expansion.

But recent unfavourable coverage of Claims Direct's practice of deducting a £1,200 flat rate premium from successful claimants has damaged the company.

The claims management company has seen its level of business halve from around 5,000 new cases in November to 2,523 in January 2001. Claims Direct's founder Tony Sullman stepped down as chairman after the company issued a profits warning on January 25.

A spokesman for Claims Direct said it would be wrong for franchisees who suffered a drop in income to blame the company. Their contract states clearly that franchise income is related to the number of claimants they sign up.