Businesses are adopting cryptocurrency at a rapid pace. Tesla, the world’s most valuable automaker, purchased more than $1 billion worth of Bitcoin in February 2021, and according to CEO Elon Musk’s Twitter account, the company still holds most of it. Square, a leading digital payments processor, disclosed Securities and Exchange Commission filings that it has spent more than $200 million buying cryptocurrency. Even Lush, a cosmetics company, allows customers to buy its products with cryptocurrency on its website.
Franchises are getting in on the cryptocurrency game, too. College HUNKS Hauling Junk, the moving and junk removal franchise started by a pair of college buddies, recently announced it would accept cryptocurrency as payment for franchise fees. And Rooter-Man, a sewer and drain cleaning franchise, announced it was building a platform to allow customers to pay its franchisees using cryptocurrencies.
Nick Friedman, CEO and co-founder of College HUNKS, said he sees using cryptocurrency as “walking the walk” of their core values, which involve being “technology enabled.” The company has a history of dealing in alternative assets. Twelve years ago, the first College HUNKS ‘zee paid his franchise fee with a parcel of land he had inherited in Florida. Ten years later, said Friedman, that franchisee was ready to move on and asked the founders to buy him out using Ethereum, another cryptocurrency network.
“Based on that request we did some investigations,” said Friedman, and they “realized it was the equivalent of transferring dollars into ethereum and transferring that into his account,” a straightforward process. At the time of payment, the cryptocurrency was near an all-time high of $900, said Friedman. A few months later, it crashed back down to near $300. “I don’t know if he sold it or not,” he said. “I hope he didn’t.” As of October 18, ethereum was trading around $3,750.
College HUNKS is taking a similarly straightforward approach to accepting cryptocurrency payments. “We have a Coinbase account,” said Friedman, and if a ‘zee ever decides to pay with cryptocurrency, he said the company will simply send the franchisee its wallet address and wait for the transfer of tokens.
The company will only accept two cryptocurrencies: Bitcoin and Ethereum. Friedman said the two have “withstood the tests of various experts,” and have a stronger commercial use case than many other cryptocurrencies. Bitcoin, the original cryptocurrency, launched in 2009, while Ethereum launched in 2014. They are, by far, the largest cryptocurrencies by market capitalization, and their combined value accounts for 62 percent of the entire cryptocurrency market, according to data from CoinGecko.
“To me, it’s like saying we accept franchise fees in Canadian dollars,” said Friedman, referring to the process of accepting payments. He said thus far, no one has paid a franchise fee using cryptocurrency, but “if and when” they do, he expects College HUNKS will hold onto the cryptocurrency. He’s a big believer in diversification and sees potential upside in exposing the company to the cryptocurrency market.
Friedman clarified that, outside of accepting payments with it, College HUNKS is not actively buying cryptocurrency. And while he holds some cryptocurrency in his portfolio, he said he’s not a “crypto guy.”
Why would someone spend their cryptocurrency?
Unlike more conventional currencies, cryptocurrencies are volatile and prone to massive price swings. For the two largest cryptocurrencies, the balance of volatility has been enormously positive. The price of bitcoin has grown exponentially from an initial value of nothing to over $60,000, as of October 18. And the price of ethereum, sold initially at an effective rate of $0.30 per token, has grown more than 1 million percent since its 2014 pre-sale.
While cryptocurrency’s history of massive price appreciation may make it an attractive asset to hold, it makes it an equally unattractive asset to spend. Say you decide to buy a pizza using cryptocurrency. If you trade your cryptocurrency for pizza, and the price of the cryptocurrency doubles the next day, you’ve effectively paid double for the pizza.
Incidentally, the first commercial transaction using cryptocurrency involved trading bitcoins for pizza. In May 2010, Laszlo Haneycz, an early Bitcoin developer and miner, reached an agreement with a fellow miner to trade 10,000 Bitcoins for two Papa John’s pizzas. According to Bitcoin Magazine, the coins were worth roughly $41 at the time. At today’s prices, those 10,000 bitcoins would be worth more than half a billion dollars. That’s an expensive pair of pizzas.
Friedman acknowledged that it could be challenging to convince the crypto-rich to spend their cryptocurrency, but nevertheless said he believes there’s an opportunity to sell franchises to them and that he’s been talking with franchise brokers about the opportunity. “My comment to the brokers is that ‘hey look this could be a nice hunting ground to talk about franchise ownership, business ownership,” he said.
To that end, Friedman said College HUNKS franchises are capable of being run “semi-absentee,” and that many of its ‘zees are first-time business owners. It’s worth noting that franchises and pizzas are very different purchases. Unlike pizzas, franchises could be considered an asset and may appreciate or generate profits. If you buy a franchise with cryptocurrency and a year later the price goes up, you may still end up in the black.
Rooter-Man explores the future
Donald MacDonald, founder and CEO of Rooter-Man, shares Friedman’s belief that accepting cryptocurrency is a logical step for a technology-forward business. “We’re exploring the future,” he said of the company’s decision to allow customers to pay using cryptocurrency, and “we’re on the cutting edge of it,” he added.
That’s not where you’d expect to find the venerable franchise, which is still led by the founder, now in his 80s, and which still uses an antique fee structure in which ‘zees pay a flat fee based on the population of their territory. But MacDonald said the company was quick to get online, which helped the brand expand nationally beginning in 2000, and the company has a strong web presence. He believes cryptocurrency will power the next generation of computer technology, and he intends to be early to that party as well.
Rooter-Man isn’t accepting cryptocurrency yet, but MacDonald said the company is partnering with MyCryptoCheckout, a payments processor, to build a pilot program. “It’s like credit card processing, except it’s for crypto,” he said. Accepting cryptocurrency will be optional for franchisees, and the company only intends to accept a select few cryptocurrencies, although it hasn’t decided which ones, yet.
Unlike College HUNKS, MacDonald said Rooter-Man ‘zees wouldn’t hold onto the cryptocurrency. A key feature of the company’s platform is that it rapidly sells the cryptocurrency for U.S. dollars, limiting the business’s exposure to the fluctuations of the cryptocurrency market. It’s a bet that cryptocurrency will be used as currency—not that its price will go up.
As it stands, it’s not clear if anyone should ever buy anything using cryptocurrency. But to quote most financial advertising, “past performance is no guarantee of future results.” Haneycz and other early advocates of using Bitcoin as currency have been proven wrong—for now—but there’s no telling where it will go. Franchises such as Rooter-Man and College HUNKS are placing low-risk bets that one day, cryptocurrency will live up to the “currency” in its name, and are positioning themselves to benefit if and when that happens.