Corporate Sep 17, 2012
Days after government relaxed FDI norms in retail, over 150 franchisees of Adidas Group's Reebok India from northern states took to the streets demanding return of their investments.
The franchisees are asking the management of Reebok India to settle their dues for exiting from its dealerships in the wake of the company moving to a new business model. "We are keen to have FDI in India, but the action of a big international organisation like Adidas Group has left us jobless. We are demanding our hard earned money back for justice to be done," Delhi Reebok Franchisees Association General Secretary Jagmeet Singh said.
Over 150 franchisees, representing more than 300 outlets in Delhi, Punjab, Himachal Pradesh, Haryana, Jammu & Kashmir and Uttar Pradesh held a protest at Jantar Mantar. Singh said they will also submit memorandums to the President, Prime Minister, Commerce Minister and the German Embassy to help sort out the matter.
In August, Reebok India had asked its franchisees, who are unwilling to move to a 'new business model', to liquidate products at discounts of up to 50 per cent, while giving them time till November-end to exit. It had also said unsold stock at the end of the deadline would be repurchased at not more than 10 percent of the wholesale price.
Singh claimed because of the development, the North India franchisees will incur a "collective loss of Rs 500 crore". When contacted, Reebok India Company said: "We are putting the necessary support to facilitate this transition. The main challenge to transition consists liquidating the massive inventories built over year. We are supporting the liquidating process with an additional financial support to help our partners in coming back to the required level".
The company, however, did not share details on its financial support. The government on Friday had allowed 51 per cent FDI in multi-brand retail, while the sourcing norms for foreign investments in single brand retail have also been relaxed.
Under a Franchisee Transformation Project for making a fresh start from 2013, Reebok India had said it was undertaking a new business model, which includes comprehensive performance based commercial terms. As per the old contract, the franchisees were hired by Reebok India under Minimum Guarantee (MG) basis, in which they used to get fixed returns on investments irrespective of their sales from the outlets.
In May this year, the German parent 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.
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