About 300 Reebok India franchisees downed their shutters in the Capital on Monday, protesting against what they called the ‘unfair exit options’ thrust upon them. They claim to have suffered losses of Rs 900 crore due to Adidas Group’s new management policies for India.
Reebok India, however, claimed that at least two-third of its franchisees in India had made a smooth transition under the Franchisee Transformation Project. Under this, the company is looking to switch from the minimum guarantee (MG) model to cash-and-carry ventures.
“A chunk of franchisees, which have made a clear commitment to adopt the new business terms, will attend the meeting this week to view the Spring Summer ’13 product range along with strategy for the coming year to give Reebok a fresh start in 2013,” a Reebok India spokesperson said.
Vivek Sood, President of Delhi Reebok Franchisees Association and Rest of North Reebok Franchisees Association, said, “There are nearly 900 Reebok franchisees across the country. Each franchisee is sitting on inventory worth Rs 1 crore. Reebok India’s new policies have left us in financial crisis, as we had borrowed heavily to expand.”
The franchisees were largely operating under the MG scheme under which they get a minimum amount from the company irrespective of sales. Now, the company has given them an ultimatum to move to the new terms and conditions latest by November.
Sood said that Reebok had told its franchisees that if they were unwilling to continue under the new model, they should clear their inventories through a ‘flat 50 per cent sale’ till November.
After that, Reebok would buy back the unsold stock at 10 per cent of the original price at which the franchisee had initially bought the stock.
He said the new model was based on flat margins of 35 per cent on store sales, and would be effective from December 1, 2012. Several franchisees that Business Line spoke to said that if the company wanted to downsize or shut its operations, it should have given a winding-up petition to the Government.
Also, they alleged that the company had not been providing accounts statements to its franchisees.
The company spokesperson said, “We appreciate that this is a difficult time for some of our franchisees as their stores are being closed. Our last planned discussions with them were disrupted by the protest they initiated.
The reconciliations to support a fast closure process are cumbersome due to the scale and nature of commercial irregularities that have caused significant differences in customer accounts.”
The spokesperson said the company had invested significant time and resources in the process and had even set up a special customer response team and customer account reconciliation team to expedite the process.