While Adidas is keen to revive Reebok business in India at the earliest, a battle of sorts is brewing among franchisees of Adidas and Reebok over new terms and conditions for operating stores in the country. The German sports goods maker has given an ultimatum to some 70 franchisees in the Delhi-NCR, asking them to accept the new terms or shut shop by August 31, 2012.
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 200-odd Reebok employees and integration of the two brands’ suppliers, Claus Heckerott, MD 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.
However 125 Reebok franchisee stores in the Delhi-NCR region, who have formed a group called Delhi Reebok Franchisee Association are not willing to accept the new terms and conditions since it is not a viable option according to them owing to investments made so far. Under the earlier, minimum guarantee (MG) model, franchisees were assured a minimum amount from the company irrespective of sales. But now, Adidas, which acquired Reebok globally in 2005 and merged operations in India in 2011, is offering stocks to franchisees at a reasonable discount.
Franchisees have alleged that they’ve not received any new Reebok stock from the company for the last few months. For the April-June quarter, Adidas reported a 26 per cent decline in sales of Reebok-branded products despite group revenues growing seven per cent. Adidas had attributed the fall in Reebok sales to the negative impact of the commercial irregularities in India.