Sportswear major Reebok India’s franchisees from Delhi have accused the company of asking them to shut their shops by August 31 if they do not agree to the new business model.
The franchisees have also alleged that the company, which had filed complaint against two former top executives for an alleged Rs 870 crore fraud, has refused to settle dues in violation of their franchise agreement.
“As per our agreement with the company, whenever a franchisee wants to exit the business, three months time would be given to liquidate the stock and if any product remain unsold, the company would take it back at the purchase price.
“Now they are asking us to close the shop in just 15 days. They are saying that once the goods are transferred, it is our responsibility,” Delhi Reebok Franchisee Association spokesperson said.
The franchisees claimed that they received notices from Reebok India’s parent Adidas Group on August 13 for closing down their stores by August 31 if they do not accept the new terms of the agreement. “They are purely holding us on ransom and are not ready to settle our claims at all,” they alleged.
The franchisees said they were hired by Reebok India under the minimum guarantee (MG) basis, in which they used to get fixed returns on investments irrespective of sales.
When contacted, Reebok India Company, did not comment specifically to the allegations but said it will “follow good standards of respectful and professional conduct to engage with our stakeholders while restructuring the business”. “Despite the challenges, we are committed to the Indian market and believe in the growth potential of Reebok India. Hence, we are working closely with all our Reebok franchise partners and discussing revised business terms to drive strong profitability for both the franchise partners and Reebok India,” the company said.
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Under the Franchisee Transfor-mation Project for Reebok India making a fresh start from 2013, the new business model includes comprehensive performance based commercial terms.
The company said although it received “a very good response from our partners from across the country”, however, “some of our franchisee partners are a bit uneasy about making a change from an existing model”.
“Basis our discussions, we expect some 2/3rd of the current 900 Reebok franchisee store base to transfer over to the new business model,” it added.
In May this year, Adidas had said it planned to shut down one-third of its 900 Reebok stores in India as a part of a restructuring strategy for the brand.
Adidas Group CEO Herbert Hainer had said the restructuring could lead to additional one-time charges of an estimated ^70 million in the remaining quarters of 2012.