For Bengaluru-based home interior solutions startup HomeLane, artificial intelligence (AI) is turning out to be the key lever for retail expansion. At the heart of its strategy are franchise-owned and franchise-operated (FOFO) stores that are expected to cut both cost and time to the customer’s doorstep.
Co-founder and CEO Srikanth Iyer says the company will penetrate larger urban markets with franchise-owned and company-operated (FOCO) stores, but expansion into tier 2 and tier 3 cities will be spearheaded by franchisees.
“Our strategy is to go beyond metros and build a strong presence in fast-growing residential hubs,” he says.
FOFO model
HomeLane currently operates 26 live studios based on the FOFO model. The Peak XV-backed startup plans to move rapidly into cities like Visakhapatnam, Vijayawada, Nashik and Allahabad, among others. By the year-end, it plans to increase its presence to 100 cities in India from 40 currently and add 100 stores operating on the FOFO model.
AI will be the lynchpin of the stores owned and run by franchisees. The brand has integrated AI into its interior designing platform, Spacecraft, which automates the process right at the foundational stage.
“With AI, we do not need designers in our stores as the initial stage of designing can be done with the help of technology,” says Iyer. “Human interaction can be handled by our franchisee representatives present on location.”
The shift to a FOFO model and the use of AI have allowed HomeLane to improve margins. It has cut down costs related to infrastructure, lead generation and design.
“While stores operating on the FOCO model give a margin of 18% to 19%, franchise-operated studios offer a higher margin — around 24% to 25%,” says Iyer.
This does not mean the company will take its eyes off urban markets — they help move products with a bigger price tag. If stores running on the FOCO model generate about Rs 1–1.5 crore a month, smaller cities with studios operating on the FOFO model generate about Rs 15–20 lakh a month.
HomeLane is confident its new strategy will help it achieve profitability by the end of FY27. It announced a 22% YoY revenue growth to Rs 756 crore in FY25, achieving EBITDA profitability for the first time in Q4 FY25.
Way to Go
Industry experts have given a thumbs up to the brand’s new move.
“FOFO is an efficient approach for brands to expand in tier 2 and tier 3 cities,” says Mukul Aggarwal, Lead – Retail & Marketplaces, for German sleep solutions brand Emma. “By shifting capital expenditure and a portion of operating costs to franchisee partners, companies gain from an asset-light structure that improves reported margins.”
What’s in it for the consumer?Lower upfront costs. “HomeLane will cater to those who wish to save on cost and still get quality,” says Karan Sethi, Founder, Qube Design.
“On an average, 10 designers are required for every 100 projects and their salary can range between Rs 10 lakh and Rs 20 lakh per annum,” shares Sethi. Factor that in and the cost to the consumer goes up by 10–15%.
However, making a success of this model will require McDonald’s-like speed and precision. HomeLane will have to standardise its onboarding practices for franchise owners, develop robust training modules and track the performance of franchise operators in real time, caution experts.
“Having strong audit mechanisms and incentive structures that line up well is equally important to make sure partners focus on customer satisfaction instead of quick sales,” says Emma’s Aggarwal.
That apart, while the FOFO model improves reported margins by reducing corporate overhead and fixed costs, it can also compress realised margins because franchisees typically expect a share of profits and incentives to compensate for their risk.
“In contrast, company-owned stores retain full margin capture,” says Manish Shah, Founder and Creative Director, Nimmit, who cautions that the brand’s profits might see a slide in the early phases of its FOFO expansion.