For some businesses, there is a clear path to growth that doesn’t involve acquiring other companies or expanding organically: franchising. The U.S. has more than 800,000 franchise businesses, according to Statista, and that number is predicted to keep growing year over year. But franchising a business — licensing a business model and brand to an outside operator — requires a lot of contracts, legal compliance and documentation, which all serve to further complicate an already involved business model.
Brooklyn-based Harmonyze wants to help franchisors keep track of it all using AI, and it has just raised a $2 million pre-seed round led by Bowery Capital to further build out its AI agents.
The startup’s custom AI agents sit in a private cloud database between the franchisor and the franchisees. These agents can talk to each other and perform over 200 tasks like ensuring a franchise has paid a product vendor correctly or that a franchise is up to date on insurance renewals. This helps franchisors ensure that they, and their franchisees, are staying compliant — franchising is a heavily-regulated industry. Another major benefit is they don’t have to spend as much time on such administrative tasks.
The company was started in 2023 by childhood friends Gary Liskovich, CEO, a former product manager at startups like EvolutionIQ and SmartAsset, and Jonny Greenspan, CTO, a former engineer at companies like Salesforce. Liskovich told TechCrunch they dabbled in developing a product for the legal space, but decided on franchising because of how untapped the market was, and because they had a personal connection: Greenspan’s dad owned a Totonno’s Pizza franchise location.
“Franchising is this thing that everybody knows the word, but most people haven’t done a lot of digging; it makes up 10% of U.S. businesses,” Liskovich said. “We started looking at the franchising space — it’s an incredible amount of unstructured data, which we really think AI can unlock and translate into something that is usable.”
Harmonyze exited stealth in early 2024, and demand from franchisors has been strong ever since, Liskovich said. He added that despite demand, Harmonyze is choosing to work with a select group of customers at first so they can continue to get feedback and iterate on the product and its features.
Liskovich said the company plans to put most of the capital from the seed round toward hiring so they can continue to build out the product. The round saw participation from Focal.VC and numerous individuals from the franchise industry.
Harmonyze decided to focus on building for, and selling to, the franchisor, as opposed to the franchisee, because the franchisor deals with significantly more unstructured data, which makes their problems lean better toward an AI solution, Liskovich said. He hopes Harmonyze will also be able to help franchisors spot smart business practices at franchisees that can be rolled out to everyone.
“Franchisees are very known for innovating and are people that are tweaking the system,” Liskovich said. “Very famously, [McDonald’s] Filet-O-Fish came from a franchisee. That is where we want to start to evaluate: Where are your best franchisees innovating? And using that information to make everyone more profitable.”
Liskovich thinks the startup has been successful thus far because of its focus on building vertical SaaS for franchisors as a whole instead of focusing on sectors within franchising, which can include companies ranging from McDonalds to Orangetheory Fitness to UPS stores. He said despite the various different types of franchised businesses, the internal structure of these companies largely looks the same.
There isn’t much competition in the franchise space — at least for now — which is surprising given the size of the sector and the fact that it is growing consistently.
Harmonyze is currently targeting franchisors that head up a sizable network of franchisees, as opposed to owners that just work with a handful. Liskovich thinks the startup will likely build tech to work with those smaller players too, but the market is big enough in its target area to keep it busy for now.
“We’re excited about the expansion [of the franchise market],” Liskovich said. “It is not just large but growing at an insane rate. That opportunity is a growing opportunity.”