Harmonyze Seeks to Streamline Franchise Ops with AI Agents

Franchising presents a distinct growth strategy for businesses, differing from acquisitions or organic expansion. Statista reports over 800,000 franchise businesses in the U.S., with predictions of continued annual growth. However, franchising involves licensing a business model and brand to outside operators and has complex legal compliance, contracts, and documentation requirements.

Harmonyze, a Brooklyn-based startup, uses AI to simplify franchise management. It recently secured $2 million in pre-seed funding, led by Bowery Capital, to further develop its AI agents.

The company’s custom AI agents operate in a private cloud database between franchisors and franchisees. These agents can communicate with each other and perform over 200 tasks, including verifying correct vendor payments and tracking insurance renewal deadlines. This system helps franchisors maintain compliance in the heavily regulated franchising industry while reducing time spent on administrative tasks.

Harmonyze was founded in 2023 by Gary Liskovich and Jonny Greenspan, longtime friends since childhood. Liskovich, now CEO, previously worked as a product manager at startups like EvolutionIQ and SmartAsset. Greenspan, the CTO, has engineering experience from companies such as Salesforce.

Initially, the duo explored developing a product for the legal sector. However, they pivoted to franchising due to its untapped market potential and a personal connection – Greenspan’s father owned a Totonno’s Pizza franchise.

Liskovich explained, “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. 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 emerged from stealth mode in early 2024 and has since experienced strong demand from franchisors. Despite this interest, the company is selectively working with a limited group of clients to gather feedback and refine their products and features.

The pre-seed funding will primarily be used for hiring to further develop the product, according to Liskovich. The investment round included participation from Focal.VC and several individuals from the franchise industry.

Harmonyze opted to develop solutions for franchisors rather than franchisees. Liskovich explained that franchisors deal with more unstructured data, making their challenges more suitable for AI-based solutions. The company aims to help franchisors identify successful practices among franchisees that could be implemented across the entire network.

Liskovich stated, “Franchisees are very known for innovating and are people that are tweaking the system. 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.”

The startup’s success so far is attributed to its focus on creating vertical SaaS for franchisors as a whole rather than targeting specific sectors within franchising. This approach encompasses diverse businesses, from fast food chains like McDonald’s to fitness centers like Orangetheory Fitness and shipping services like UPS stores. Liskovich noted that despite the variety in franchised businesses, their internal structures are largely similar.

Despite its size and consistent growth, the franchise sector currently has limited competition in terms of specialized technology solutions. This scarcity of competitors is notable given the industry’s scale and expansion rate.

Harmonyze’s current focus is on franchisors managing extensive networks of franchisees rather than those overseeing just a few locations. While Liskovich anticipates that the startup may eventually develop technology for smaller franchise operations, the current target market is sufficiently large to keep the company occupied for the foreseeable future.

Liskovich expressed enthusiasm about the franchise market’s expansion, stating, “We’re excited about the expansion [of the franchise market]. It is not just large but growing at an insane rate. That opportunity is a growing opportunity.” This growth trend in the franchise sector represents a continually expanding market for Harmonyze’s services.