To lower cost and ensure better accountability fromits partners, German sportswear maker Adidas, which is undertaking an accelerated restructuring of its business activities in India, is in the process of changing its franchise business model for the Reebok brand. Adidas, which recently announced in statement that it has found some “commercial irregularities” at Reebok India, had last year communicated to its Reebok franchisees in India about its intention to discontinue the “Minimum Guarantee (MG) model” in the country.
“Under the new leadership team, management is undertaking an accelerated restructuring of its business activities, including significant changes to its commercial business practice, as part of the course of actions to protect the group’s interests in India,” Adidas has said. The restructuring is a part of a long-term strategic business plan ‘Route 2015’, it said. At present 900 Reebok outlets are operational in India.
As per the MG model, a franchisee can retain a part of total sales done by a store to cover high investment costs of setting and operating an outlet in an expensive location. Adidas has three brands in India, including the flagship brand that shares the same name as that of the group, Reebok and TaylorMade. The latter targets the golfwear market, while Reebok and Adidas are known for sportswear products. Prem, who was earlier the Reebok India MD and took over as the Adidas India MD last year, has been credited with turning around Reebok’s fortunes in the country. In India, Reebok leads Rs 3500 crores market with a share of 53 per cent.