Hundreds of franchisees of sportwear major Reebok India, which is entangled in a financial scam, are scheduled to meet the company management at the corporate office this week to discuss how to give the brand a fresh start in 2013.
The meeting is expected to break the ice by bringing a large number of old and new franchisees to the discussion table.
Reebok's business in India, which is severely impacted by financial irregularities, could result in a negative impact of up to €70 million on the operating profit of the parent group, Germany's Adidas, in 2012.
Reebok said it has found that a large number of franchisee stores have been incurring losses. "It's now clear that Reebok India had been subsidising a large store base over years, resulting in significant losses... in future this model won't be profitable," the company spokesperson said.Reebok will restructure its existing minimum guarantee model to one based on performance. The company has offered VRS to 200 employees.
"The new model is essential ... to ensure profitability in India," a Reebok official said. Franchisees, however, beg to differ. "The company opened stores, whenever they needed money, so the loss was expected," the Delhi Franchisees' Association said.
They have also alleged that the company prevented them from entering the Reebok office, which it has denied.