German sport goods major Adidas is finding it tough to make its Reebok store franchisees in India to accept terms of the new business agreement.
The discontent among Reebok franchisees runs so deep that many have offered deep discounts, as high as 80%, in an effort to clear
stocks and settle their accounts with the company.
In March last year, Reebok India uncovered a Rs.870-crore accounting scandal, after which Adidas announced changes in its business agreements with Reebok India franchisees.
Around 500 franchisees own and operate close to 900 Reebok stores across India.
"We are in the process of settling our accounts with the company," a Delhi-based Reebok franchisee said on the condition of anonymity. "The deep discount is to sell off the products."
"The company is offering us flat 35% margin on total sale proceeds. Earlier we used to get around 18% on our total investments and the company took care of rent and staff salaries as well," said another Reebok storeowner.
Senior executives at Adidas, however, insist that the new business model requires a franchisee storeowner to be more pro-active on sales.
"The new business model includes comprehensive performance based commercial terms which we believe will help drive strong profitability for both the franchisee partners and Reebok India. Currently the transition to the new model is overall running smoothly as per plan and expectation," Reebok India Company said in an e-mailed reply to HT.