Reebok, adidas franchisees take protests into India’s streets

It is not hard to understand what this is all about: franchisees in any language are the least likely 99% protesters in the world.

1. Franchisees protest at company’s doorstep, Business Standard, Aughust 31, 2012:

Excerpt:

The tussle between a section of Reebok franchisees and German sports-goods maker Adidas took an ugly turn today, with about 100 people protesting at the gates of the company’s headquarters in Gurgaon.

The franchisees from the National Capital Region (NCR) were protesting against the new terms proposed by the German sports goods major for operating stores in India. The company had given an ultimatum to about 70 franchisees in the NCR region to either accept the new terms, or shut shop by August 31.

Together, these franchisees operate about 125 Reebok stores in the NCR region. The franchisees, who have formed a consortium called Delhi Reebok Franchisee Association, say the new terms and conditions aren’t viable. These terms seek to do away with the minimum guarantee (MG) model the franchisees were operating on so far. Under the MG model, franchisees were assured a minimum amount from the company, irrespective of sales. It was because of this model Reebok was able to set up about 900 stores in 325 cities and towns, becoming the largest sports-wear brand in India.

2. Reebok’s Delhi franchisees cry foul over notice to close shop, SmartInvestor.In, August 26, 2012

“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 told PTI.

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.

And…

In May this year, Reebok India had filed an FIR, alleging that its former Managing Director Subhinder Singh Prem and Chief Operating Officer Vishnu Bhagat were involved in a Rs 870-crore fraud by indulging in “criminal conspiracy” and “fraudulent” practices over a period of time.

Currently, Serious Fraud Investigation Office and the Income Tax Department are probing the alleged financial irregularities in Reebok India Company.

For Canadian franchisees, there’s gold in the hills of unfair industry practices.

The Ontario courts have put real teeth into the Arthur Wishart Act (Franchise Disclosure), 2000.

Common industry practices are more and more being considered unfair or offensive to right to associate. The Justices are willing to award real cash to improve the vulnerable partys’ practical plan for improvement (proportionality), access to justice, and behaviour.

One example is timothy’s Coffees of the World Inc.: $50,000 award for franchisor’s breach of good faith duty. How many franchisees are in your system?

However, these claims must be mined, extracted and refined most usually within a functioning, patient independent franchisee association, IndFA.

Franchisees need outside, non-legal help to learn about these matters. IndFA leadership needs to be nurtured and supported in the next-to-unknown franchise power area. There is a role for the elite franchisee bar that’s developing in  Canada but the cannot develop franchisees from the ground-up. For sustainable gains, franchisees have to do it themselves (but with some help).

This is what IndFA  business consulting is all about.

To nurture efficient and effective franchisee-led collective gold mining through patient negotiation and litigation, if necessary.

Why should we try to form another independent franchisee association?

That’s a very good question.

Traditionally, franchisee associations get a few quick wins and when the leaders are bought off or banished. The gains (plus) are clawed back.

That doesn’t have to happen any longer. The gains can be permanent, quantifiable and anonymous.

Like all things, managing information has changed: this time in franchise investors’ favour.

To release the million of dollars, you’ll need  a pro to advise you.

Can you imagine yourself as a member of a union?

An independent franchisee association is the only way to work toward justice.

It may, however, require you to think beyond a 5th grade level.

Franchisee organizations need legal standing in civil litigation

It’s only fair to both sides and will stop the continuing carnage.

Independent franchisee associations, IndFA and their consultants should be treated as if they were individuals within a franchise agreement.

• Franchisors’ corporations get to accumulate over decades information, expertise and capital.
• Franchisees should have the same advantages by building their own IndFA and contracting with a consulting firm that specializes in leadership development,  conflict resolution and system reform.

Dr. Gillian Hadfield: Amend the Bill to include mechanisms for low cost enforcement of the rights and obligations. Mechanism could include permitting franchise association/class standing in civil litigation; dispute resolution mechanisms including mediation that would operate outside the civil litigation system.  SUMMARY OF RECOMMENDATIONS, BILL 33 – Franchise Disclosure Act, 1999, Legislative Assembly of Ontario, Canada, March 31, 2000

– Justice, Plaster model created by Walter Allward between 1925 and 1930 and used by stonemasons in the construction of the Vimy Memorial in France. The figure of Justice leans her forehead against a sword hilt.

War if necessary but not necessarily war

Canadian Tire is a rare franchisee success story.

At one time, Canadian Tire,  grocery and auto dealers all used to have real power with their franchisor. The grocers and auto dealers went south over the decades.

Only Canadian Tire consistently stood up to their franchisor and resisted being betrayed by their “professionals”.

Anytime the franchisor had a stupid idea, slam, the CT franchisees hammered them.

• Smart. Tough. Cohesive.

Capital must accumulate and patiently wait

A for-profit, multi-share  corporation is the only effective means of preventing future franchisor opportunism.

Only got non-profit, dues-supported IndFA after 3 years?

• License for impotence at best, failure at worst.

Where’s the Wiki you made of your franchisor’s documents?

THIS is only the question a potential franchisee needs to ask existing franchisees.

An interesting article from the New York Times called A Wiki Takes Aim at Obama .

Many companies and organizations, including the United States Army, have seized on the Wikipedia model to encourage their members to build up information collaboratively. This seems to be an early effort to use the idea behind WikiLeaks, a repository of secretive or difficult-to-obtain documents, for a specific political end.

As I understood and have advised since last summer, every franchise system should have their own franchisee-directed wiki of franchisor’s documents.

Isn’t a resident 2nd opinion a waste of $ once you lawyer-up?

No: actually an independent business consultant is needed during legal action.

It is wise to avoid a franchise lawyer for at least a year (commercial, slander, etc. are fine). Lots of reasons but mostly groups need to mature and build trust before any professional can really help them. Leaders especially need a type of de-programming.

Franchisors understand one thing: power. In 2010, predators understand only actionable legal threats. There are therefore 2 stages: pre-first legal claim and post-first claim.

Pre-first Legal Claim: It takes 1 to 2 years and a one-time investment of $500,000 for a franchisee group to develop a susttainable independent franchisee association.

Only after that investment can you decide whether to sue your franchisor or not. No shortcuts: it takes time, experience and money. Most franchisees have never been in a group before and many choose to free ride on the dues paid by others. Frequently, only 10 to 15% of franchisees pay, while all of the benefits are distributed to 100% of the franchisees.

What happens most times is that the early professionals end up subsidizing the creation and early survival of the group. These are obligations or accounts receivable that consultants like me have accumulated over the years.

First Legal Claim: Once the legal card is played, the dynamics change. It has little to do with the honesty of the attorney: it’s just the way it is when their is such an imbalance of information between client and professional.

Every attorney is a credence good provider: their services are difficult to determine as far as quality and quantity are concerned.

Problem: The risk of low quality or excessive quantity of services is very real. Groups of franchisees are at the mercy of monop0ly legal service providers once the papers are filed (see The Price of Law: How the Market for Lawyers Distorts the Justice System).

The best solution is for the consultant to remain as a resident 2nd opinion during the life of the lawsuit.

What is fair compensation (accumulated A/R and ongoing services, who does what) should be determined in a transparent way before the writ flies. Not only is it fair to pay your obligations, it’ s being a long-term, shrewd businessperson.

Lawsuits should not be about franchisors paying out cents (now) and then clawing back $ (later).

The destruction of the independent franchisee association should not be an option on the table as settlement time happens. Its survival should not be acceptable under any terms.

How much does it take to establish an adult independent franchisee association?

One million dollars.

Compared to what every one has put in, this is a very good deal.

Real businesspeople know they have to pay their own way.