Reebok gives ultimatum to franchises

With some franchises in New Delhi refusing to agree with

the new business model announced by sportswear major Adidas for Reebok in India, the company has asked them to liquidate products at 50 per cent discount and shut their stores by November-end. The letters sent out to the franchisees also say it would repurchase unsold stocks at the end of the deadline at not more than 10 per cent of the wholesale price. “To support a large scale stock liquidation till November 30, 2012, RIC (Reebok India Co) recommends a ‘Flat 50 per cent’ sale till November 30, 2012,” the letter said. During this extended sale period, RIC is willing to support the franchisees with additional discount of up to 40 per cent of WSP (wholesale price), it added.

However, this additional discount support is available only on sales made during the extended sale period and will be passed on to the franchisee through the distributor, it added. In case of unsold stocks at the end of November 30 deadline, the company said it may repurchase it at a ‘mutually agreed’ price. “Mutually agreed price will be the price RIC is expected to realise if the stocks are to be sold in the market. Given the ageing of stocks and current market scenario, we feel the same is not likely to be more than 10 per cent of WSP,” the letter said.

Earlier it was reported that Adidas had asked Reebok India franchises to either agree to the new rules or shut stores in 15 days, which had upset the franchise network in Delhi. The franchises have also said that the company has refused to settle dues violating rules mentioned in the agreement.