300 Reebok stores to remain closed in protest against 'unfair exit route policy'

More than 300 Reebok franchisee stores in north India will remain closed on Monday in protest against an 'unfair exit route policy' of the troubled sports goods brand, which franchisees allege will lead to losses of more than 500 crore for them.

"We are protesting against Reebok's exit route policy. If they want us to exit, they should do it in a manner that doesn't amount to financial losses for us," said a franchisee partner who has been associated with Reebok for a decade and is a member of Delhi Reebok Franchisee Association.
Reebok India last month announced a new business model, which franchisees call unviable and a ploy to get rid of them.

A Reebok spokesman, however, said, "The new business model includes comprehensive performance-based commercial terms, which will help drive store profitability." German sports goods maker Adidas AG, which owns Reebok, has told franchisees if they don't want to continue with Reebok under the new model, they should sell off their inventories through 'flat 50%' sale till November.

After that, Reebok will buy back unsold stock at 10% of the original price at which the franchisee had initially bought the stock.

This, franchisees allege, will lead to more than Rs 500-crore losses for them because of massive inventories they have built up. Adidas, which in May said financial irregularities in Reebok India have cost Rs 870 crore to the parent, has done away with a minimum payment to franchisees irrespective of sales under the new business model for Reebok.

The new model, based on flat margins of 35% on store sales, will be effective from December 1, 2012.

Several Reebok franchisees have joined hands to reject the new model.

"We regret to say 'no' to the new business proposal. It seems that the proposal has been put forth fully knowing that it will be not viable for us and is a ploy by the company to get rid of us," they said in a letter to Reebok.

The company spokesman agreed that it is a difficult time for franchisees that are closing their stores.

"We have set up a special customer response team and customer account reconciliation team to expedite the reconciliation process," he said in an email reply to ET. In May, after unearthing the irregularities, Adidas AG had said it will close down one-third of Reebok stores here.

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