Pepperfry partners with Franchise India to expand its offline studio

Pepperfry is looking to expand its offline studio presence even as it charts a strategy to cut costs while spreading its wings. The Goldman Sachs and Norwest Venture Partners-backed firm has partnered with Franchise India to expand its offline studios through a franchise model this year.

Ashish Shah, COO, Pepperfry, said, "Studios are working for us as a model and therefore we want to expand in this direction. Lesser capital requirement and the idea of empowering entrepreneurs is what led us to this model."

The Mumbai based firm currently has 18 studios and is looking to expand to 46 studios in 15 cities by the end of FY18 through the franchise model. 

While the franchisees will own and operate the studios, Pepperfry will train the staff and ensure the order completion from the booking stage on wards. 

Additionally, the franchisee studios will allow customers to book and pay for an order from the studio ­ a feature that is not available in the company-owned studios at present. The franchise studios will operate on a commission-based revenue model with margins spanning 8-13% per order.

The franchise model will help the company cut costs by over Rs 20 crore for FY18.

Shah said, "Every studio can potentially clock sales of Rs 50-70 lakh month. Basis on our attribution today, some of the flagship stores can clock sales worth Rs 1 crore month."

Pepperfry clocked a 4x rise in revenue growth at Rs 98 crore year on year in FY16, even as total expenses more than doubled to Rs 253 crore as per documents filed with the registrar of companies and sourced from Tofler.

Shah said, "For FY18, we are looking to grow between 70% and 100%. Typically, a retail shop may earn business worth Rs 20-25 lakhs month. We estimate that Pepperfry will clock Rs 50-60 lakhs in revenues per month."

In order to achieve the ambitious growth targets, the company has introduced two new services that will add to its revenue muscle. Pepperfry has tied up with interior designers and architects as channel partners for leads and order fulfillment. 

For every order that is received through these partners, the company will offer a 5-10% commission. The two week-old pilot will see a 10x jump in the number of channel partners with a target of 300 designers and architects to be on boarded by the end of the quarter.