For some companies, there’s a clear path to development that doesn’t contain buying different corporations or increasing organically: franchising. The U.S. has greater than 800,000 franchise companies, in line with Statista, and that quantity is predicted to continue to grow yr over yr. However franchising a enterprise — licensing a enterprise mannequin and model to an out of doors operator — requires a number of contracts, authorized compliance and documentation, which all serve to additional complicate an already concerned enterprise mannequin.
Brooklyn-based Harmonyze desires to assist franchisors hold observe of all of it utilizing AI, and it has simply raised a $2 million pre-seed spherical led by Bowery Capital to additional construct out its AI brokers.
The startup’s customized AI brokers sit in a non-public cloud database between the franchisor and the franchisees. These brokers can speak to one another and carry out over 200 duties like making certain a franchise has paid a product vendor accurately or {that a} franchise is updated on insurance coverage renewals. This helps franchisors make sure that they, and their franchisees, are staying compliant — franchising is a heavily-regulated trade. One other main profit is that they don’t need to spend as a lot time on such administrative duties.
The corporate was began in 2023 by childhood pals Gary Liskovich, CEO, a former product supervisor at startups like EvolutionIQ and SmartAsset, and Jonny Greenspan, CTO, a former engineer at corporations like Salesforce. Liskovich instructed TechCrunch they dabbled in creating a product for the authorized area, however selected franchising due to how untapped the market was, and since that they had a private connection: Greenspan’s dad owned a Totonno’s Pizza franchise location.
“Franchising is that this factor that everyone is aware of the phrase, however most individuals haven’t accomplished a number of digging; it makes up 10% of U.S. companies,” Liskovich mentioned. “We began trying on the franchising area — it’s an unbelievable quantity of unstructured information, which we actually assume AI can unlock and translate into one thing that’s usable.”
Harmonyze exited stealth in early 2024, and demand from franchisors has been robust ever since, Liskovich mentioned. He added that regardless of demand, Harmonyze is selecting to work with a choose group of shoppers at first to allow them to proceed to get suggestions and iterate on the product and its options.
Liskovich mentioned the corporate plans to place a lot of the capital from the seed spherical towards hiring to allow them to proceed to construct out the product. The spherical noticed participation from Focal.VC and quite a few people from the franchise trade.
Harmonyze determined to deal with constructing for, and promoting to, the franchisor, versus the franchisee, as a result of the franchisor offers with considerably extra unstructured information, which makes their issues lean higher towards an AI resolution, Liskovich mentioned. He hopes Harmonyze can even have the ability to assist franchisors spot sensible enterprise practices at franchisees that may be rolled out to everybody.
“Franchisees are very identified for innovating and are individuals which might be tweaking the system,” Liskovich mentioned. “Very famously, [McDonald’s] Filet-O-Fish got here from a franchisee. That’s the place we wish to begin to consider: The place are your finest franchisees innovating? And utilizing that info to make everybody extra worthwhile.”
Liskovich thinks the startup has been profitable up to now due to its deal with constructing vertical SaaS for franchisors as an entire as a substitute of specializing in sectors inside franchising, which may embrace corporations starting from McDonalds to Orangetheory Health to UPS shops. He mentioned regardless of the varied various kinds of franchised companies, the inner construction of those corporations largely appears the identical.
There isn’t a lot competitors within the franchise area — at the very least for now — which is stunning given the dimensions of the sector and the truth that it’s rising persistently.
Harmonyze is at present focusing on franchisors that head up a large community of franchisees, versus house owners that simply work with a handful. Liskovich thinks the startup will doubtless construct tech to work with these smaller gamers too, however the market is large enough in its goal space to maintain it busy for now.
“We’re excited concerning the growth [of the franchise market],” Liskovich mentioned. “It’s not simply giant however rising at an insane charge. That chance is a rising alternative.”
