Reebok franchises in India are agitated with the brand’s parentorganisation Adidas, which recently announced a new business model in India. The model is based on flat margins on store sales beginning 2013. In a letter sent to Herbert Hainer CEO, Adidas Group, the Reebok Franchise Association has asked to address their grievances else they would be forced to take legal action against the company.
Earlier, in a letter issued to the franchises, the company asked them to liquidate the existing stocks by November 30 at a ‘flat 50 per cent’ sale. It further said that no minimum guarantee, rent or fixed incentives will be given. After announcing a three-pronged strategy at its Reebok India operation, which includes possible closure of nearly a third of its 900 Reebok stores, a voluntary retirement scheme (VRS) for the 200-odd Reebok employees and integration of the two brands’ suppliers, Claus Heckerott, Managing Director of Adidas, group-market India had said that the group is changing its model from a minimum guarantee scheme (rent plus model) offered to franchisees, which is not sustainable for a cash-and-carry model and one-third of the franchisees are ready to go with this model.
The woes at Reebok India continue to affect the sportswear major’s plans to bounce back in 2013. After Adidas accused top Reebok India executives of alleged Rs 870 crores fraud, the case is currently being investigated by the Serious Fraud Investigation Office (SFIO) of the Union ministry of corporate affairs and the Economic Offences Wing (EOW) of the Gurgaon Police.