Brendon Dennewill sits down with Michael Iannuzzi, Partner and Franchise Practice Leader at Citrin Cooperman, to unpack the financial and operational fault lines that quietly derail growing franchise systems. Michael brings a practitioner's lens built from advising brands at every growth stage, and his message is clear: franchisee profitability is not just a franchisee problem. It is the most critical data point a franchisor has, and the brands that treat it that way are the ones that scale.
The conversation moves through the competing incentive structures baked into the franchisor-franchisee relationship, the discipline required to focus on the right two or three priorities each year, and the infamous 100-unit ceiling that breaks even well-run systems. Michael shares what high-performing operators consistently do differently, from designing KPIs that actually match the category to knowing when to fire yourself as a founder and bring in the leadership your next stage demands. He also makes a strong case for building the full tech stack from day one rather than retrofitting it at scale, and closes with a sharp read on why private equity interest in franchising is accelerating across all three legs of the stool.
This episode is essential listening for franchise operators, RevOps leaders, and executives who want a clearer financial framework for building systems that scale profitably without losing franchisee alignment along the way.
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Michael Iannuzzi | Partner - Franchise Practice Leader at Citrin Cooperman
Michael Iannuzzi is a Partner and the Franchise Practice Leader at Citrin Cooperman. As a Certified Public Accountant (CPA) and Certified Franchise Executive (CFE), he provides strategic financial and operational counsel to franchisors and multi-unit operators across a wide range of industries, from QSRs to service-based concepts. Operating at the intersection of finance and franchise operations, Michael specializes in corporate structuring, cash flow optimization, and long-term profitability analysis. He is an active leader and educator within the franchise community, serving on the International Franchise Association (IFA) Supplier Forum Advisory Board and frequently sharing his expertise on industry podcasts, panels, and roundtables. |
Brendon Dennewill: Michael, you work with franchise brands at many different stages of their growth. What separates organizations that scale profitably from those that struggle operationally as they expand?
Michael Iannuzzi: Great question, and this is what franchising is really all about: scaling, growing, multi-unit operations without needing a huge headcount. The brands that do it best are really into systems. Not necessarily IT systems, but the systems of the brand. How is my supply chain set up? How am I collecting data from the franchisees? When I collect that data, what am I doing with it? Do I have field consultants advising franchisees on profitability? When I'm going into new markets, what products and services am I testing?
They're really focused on the brand, the system, and making sure their franchisees are profitable, making money, and would buy more. I'm very big on data collection from the franchisees. We have to help them with their businesses, and the franchisors know their systems best. The more data they can feed back into the system, the happier the franchisees are. They'll buy more and they'll validate the system for new franchisees looking to get in.
Unit Level Economics and Why Brands Still Get It Wrong
Brendon Dennewill: Unit level economics is always a big deal at IFA, and it's core to success in franchising. So why do so many brands, especially emerging ones, still struggle to get their unit level economics right?
Michael Iannuzzi: There's so much information out there. When you walk the exhibitor hall at the IFA convention, there's so much in front of you: technology, vendors, new ideas. I think it's easy to get a little lost. Really sitting down and focusing on a few things a year that you want to improve is where you avoid that.
It's very easy to say you want to do 20 things, but will you ever get to number four on the list? Take the top three that are most important for the year. Maybe it's a dashboarding platform. You want to get good at dashboarding so you can report back to franchisees. Vet it, figure out how to implement it, make sure it works, get franchisee buy-in, test it, then roll it out. That takes a lot of time.
Now imagine doing ten things at once. You may never get there, or you end up shortcutting things just to check boxes. Sitting back, evaluating what you want to accomplish each year, and setting realistic goals is where you get the most benefit.
Disconnects Between Financial Strategy and Operational Execution
Brendon Dennewill: As franchise systems grow, where do you most often see disconnects between financial strategy and operational execution?
Michael Iannuzzi: Franchisees are making money on the bottom line and franchisors are making their money on the top line. Those are competing factors by nature. Sometimes a franchisor wants to roll out certain brand promotions or limited time offers. Those can be good, but if you're discounting or giving things away, that can hurt the franchisee.
Getting that communication aligned across the brand, having a franchisee advisory council or franchisees who can participate in those decisions, that helps the system in the long run and creates better alignment around promotions and initiatives. The big systems have that in place. Those franchisees are very active in what's going on with the brand, new products coming to market, new things that need to be tested.
Brendon Dennewill: So it comes back to the importance of data. And if I were to summarize what I just heard you say: franchisee profitability, the bottom line, has to be a really critical data point if you want the brand as a whole to scale and grow.
Michael Iannuzzi: Yes. And when brands are looking for franchisees, depending on the type of system, there are probably five key traits that are non-negotiable. Whatever they are for that system, you need your franchisees to have those characteristics. For the other five, maybe it's on the franchisor to fill the gap.
Maybe you don't want to turn your franchisees into accountants, so you build a good accounting platform for them. You don't want to turn them into KPI readers, so you create the KPIs for them. You don't want them sourcing products, so you have the approved product line ready for them to log in and purchase. Make things as easy as possible for the franchisee because that's exactly why they're becoming a franchisee: you have that infrastructure in place. Other things, you need them to bring because the system requires it.
The Role of Communication in a Healthy Franchise System
Brendon Dennewill: I think we hear that a lot: any franchise system is only as strong as its weakest franchisees. So ultimately, everyone is more successful when all franchisees are thriving.
Michael Iannuzzi: It really comes down to communication. Franchisees are on the ground. They're in the local markets. They know what's going on in that area. A franchisor may be in the Midwest but have sold units in New York or Long Island. Different things could be going on in those regional markets. So get that feedback, understand it, test it, go visit, listen to what's happening in the system.
Brendon Dennewill: There's a strong link between data and the communication of that data. First, determine what the most important KPIs are, then make sure that communication is frequent and clear to everyone so they know what they're working toward.
Michael Iannuzzi: Exactly. And it comes back to traits, this time financial ones. If you're a home service business, there are three or four metrics that are crucial: fuel costs, insurance, vehicle costs. As the franchisor, you know what makes a successful franchisee based on those numbers.
There are other things you can't control, like whether a franchisee is running personal expenses through the business. Those are things to highlight. But there are core metrics for every brand that will define franchisee success. Figure out what they are, quantify them, and get them out to franchisees so they can run their business with that information.
Profitability and Operational Discipline Alongside Revenue Growth
Brendon Dennewill: A lot of businesses focus heavily on revenue growth. How should leaders think about profitability and operational discipline alongside expansion?
Michael Iannuzzi: We think about this internally as a firm too. We're big on communication: what are the goals, who's going to be where, who's doing what, and how are we going to accomplish those goals. We also pick a couple of focus areas per year, because if we go in too many directions, we end up spinning our wheels without accomplishing anything.
When I'm meeting with my team leaders, these are the conversations we're having, and they're the same conversations we have with the brands we advise. What makes sense to grow revenue? Is it going through the broker network? Do we need to bring our AUVs up at the unit level? Do we need new products? Some brands roll out a complementary brand. These are the types of strategic decisions leaders have to make at the brand level.
Brendon Dennewill: In your experience, when they're evaluating those decisions, are they thinking about it from a profitability perspective or purely from a revenue growth perspective?
Michael Iannuzzi: That's always evolving. I was at the Restaurant Leadership Conference in April, and there was a lot of talk on limited time offers. The question is: are we doing it just to drive dollars even if there's very little profitability for the franchisee? Or are we putting a new product into the market to see how it reacts? You have to figure out whether you're building top line, building profitability, or using something as a loss leader: an entry point that opens the door to other services once the relationship is initiated.
Brendon Dennewill: And back to your point, it's the data all the way through. This might be a loss leader, but it leads to increased lifetime value from all the new customers acquired through that campaign.
Michael Iannuzzi: You have to experiment and be open to testing. I used to be more resistant to that kind of thing. Now, as the economy changes and AI evolves, it's worth asking whether a service you didn't want to offer before is now possible. That same openness exists in the franchise community. Do you want to add a breakfast item? A coffee item? Look at all the brands adding dirty sodas and specialty drinks. Dunkin' Donuts now has a whole list of drinks you couldn't get two years ago. They're adapting to what customers want.
Financial and Operational Metrics That Are Commonly Overlooked
Brendon Dennewill: From your perspective, what financial or operational metrics do growing franchise organizations most commonly overlook?
Michael Iannuzzi: On the operational side, at the franchisor level, sold but unopened is a big one. It goes right into the FDD, and you see stories of 25 sold but only one open. Multi-unit development is the way to go, and I have no issues with that. But you have to have a plan for how you're going to get all those units open. Or are you willing to renegotiate a development agreement because a franchisee got halfway through and now needs more time to scout locations? You may need to amend agreements because you have a good franchisee who got 10 out of 12 done. Give them the extra year to finish.
Building out the infrastructure for field consultants and for reporting back to franchisees is also very important. On the financial side, cash flow is huge, and royalty self-sufficiency comes up at almost every conference. Once your royalties are covering operating costs, that's when the magic starts to happen. As you open new units, you drop a lot more money to the bottom line and have more resources for development, product testing, and new initiatives. Figuring out how many units it takes to reach royalty self-sufficiency is a critical financial metric.
Brendon Dennewill: I'm familiar with a franchise brand where a franchisee bought three units but three years later was still waiting to find the right real estate. Which is, to your point, often unpredictable.
Michael Iannuzzi: And in those cases, there are competing interests. Did the ten-year franchise agreement clock start at signing, at lease signing, or at store opening? Now that person is three years in, hasn't opened, and the build-out takes another six to twelve months. Do they only have six years left on the agreement?
Brendon Dennewill: That's a good example of where a good franchisor sits down and says, if they're the ones looking for real estate and they're not finding it, it's somewhat out of the franchisee's control. Hopefully they just change the clock.
Michael Iannuzzi: Just change the clock, yes.
Patterns in the Highest Performing Franchise Systems
Brendon Dennewill: You advise both franchisors and operators. What patterns consistently show up in the highest performing systems?
Michael Iannuzzi: On both the franchisor and franchisee side, the top performers live and breathe the business. They're passionate about the brand. They're excellent communicators and excellent leaders. They bring other people in. They know how to surround themselves with people who are more financially savvy, or better in the kitchen, or stronger in whatever area they need. They know how to assemble the team.
Nobody can do anything alone. I'm fortunate to have a great team around me. They allow me to do all of these things because they know I'm going to support them, and they support me just as equally. The people who have the right people around them, who structure the business correctly and educate themselves on the industry, they're the ones doing well.
What I love most about franchising is that people are genuinely willing to help each other. You sit at a conference roundtable next to a competitor and they're not keeping secrets. They're telling you what they do. That's something special about this community, and the people who are truly immersed in it are reaping those benefits.
Brendon Dennewill: For newcomers to franchising, they're always shocked at how helpful everybody is. Because everyone understands that the franchising world is successful when everybody is successful.
Michael Iannuzzi: Exactly. And it's a big community. Franchising isn't an industry; it's a way of doing business. There's no reason two pizza chains can't talk to each other.
Brendon Dennewill: There's also a culture of abundance. There are enough units for everybody. Whoever's willing to do the work, hire the right people, and run their locations well is going to be successful. Everybody wants to see more of that.
Michael Iannuzzi: For sure. And organizations like the IFA do such a great job with educational content: webinars, newsletters, panel speakers. I go to these events to network, but also to sit down and learn. What are the hot topics? What's happening with private equity? They're great places to get educated.
Current Trends and the State of the Franchise Market in 2026
Brendon Dennewill: Let's dig into that a little. You've been active across the franchise space. What are you seeing as the latest trends and areas of excitement as we wrap up Q2 of 2026?
Michael Iannuzzi: I've been to about six conferences between January and now. I just got back from the first ever Franchise and Fitness conference in Chicago a couple of weeks ago. The energy is really active. A lot of events are seeing record attendance. New people are constantly coming in. I met private equity groups I had no idea were involved in franchising because they were at that fitness conference. New lawyers, new brands I was seeing for the first time.
People seem very excited about the franchise space as a whole. Developers seem excited. You see all the content being pushed out on LinkedIn and other channels constantly. Conferences wouldn't be at record attendance if people weren't bullish on franchising. I'm bullish on it. There's always consolidation, always new brands coming to market, always people looking to try new things. It's going to continue because of the amount of people around and excited to be part of it.
Private Equity's Growing Role in Franchising
Brendon Dennewill: From a PE perspective, that was a major takeaway after IFA this past February: the growth of private equity in franchising. What are you seeing, and why is there so much interest from PE firms?
Michael Iannuzzi: A lot of it comes down to predictability. When the franchise model is done right, you can calculate expected run rates and cash flow. At the franchisor level, you can scale very large without needing hundreds and hundreds of employees. Those characteristics are very exciting for private equity.
PE is involved on both the franchisor and franchisee sides. Now you're also seeing franchise suppliers being rolled up: marketing companies, development companies, all being consolidated under private equity as well. So all three legs of the franchise stool are coming together. I think you're going to see more of that going forward, and some brands starting to go public because they've turned so many times and there are only so many PE groups left to acquire the very large ones. It's going to be an exciting time.
Growth Ceilings and When Systems Break
Brendon Dennewill: In your experience working with emerging brands, mid-size brands up to around 500 units, and larger systems: we're seeing an interesting trend in our benchmarking data around these growth ceilings. Most emerging brands are trying to get to 10 units first. A lot of them get to 10 but never make it to 30. A lot of those who reach 30 never get past 40. And those fortunate enough to reach 100 find things breaking again before they get to 300.
I'm using what's sometimes called the rule of threes and tens, from Hiroshi Mikitani, the CEO of Rakuten, who observed that in all types of organizations, things break at multiples of three and ten. Whether it's people going from 3 to 10 to 30, or revenue going from 10 million to 30 million to 100 million, the systems and structures that got you here won't get you there.
So zooming in on a brand that has made it past what we're starting to call the "death zone" of 30 to 40 units and reaches 100, but then finds their systems breaking again: what are you seeing break at those different stages, specifically around infrastructure, technology, and the systems that drive franchise development and franchisee success?
Michael Iannuzzi: That rule of threes actually makes a lot of sense when you see it. On the franchisor side: as brands reach those different unit thresholds, they have to ask themselves whether the founder should still be doing all the discovery days and franchise interviews, or whether that time is better spent consulting with existing franchisees. That's when they're figuring out the people side of things at the franchisor level. Do I need a controller? A chief marketing officer? A field consulting team? And that changes at each level of units.
You might have sold 40 units but only have two open right now. In three years, 50 are open. How many people do you need to support those 50 units? On the franchisee side, depending on the type of business, you may have very high employee counts. But if you signed a 25-unit development deal, who's doing all the lease negotiations? Who's managing the build-outs and dealing with contractors? You have the actual operations of the business, plus the constant work of setting up new locations.
Those are the areas you need to figure out. Do I need in-house counsel to review all these lease agreements? Do I need a construction manager to get units open? The bigger multi-unit operators have that infrastructure. They have construction managers, in-house counsel, real estate teams scouting new locations. And as you grow, you're also asking: do I need to move off QuickBooks? Do I need a better CRM? You're constantly asking yourself those questions.
Brendon Dennewill: That's very consistent with what we're finding. Often when a brand reaches out to us, it's because their CRM is broken. They know that if they want to get from 150 units to 300 or 500, they need a new system. But in many cases, that's not necessarily going to fix the real issue, which is that the current leadership needs to identify who the next hire is. And they need to make sure they're not becoming the obstacle, which happens in every business and industry when we become so attached to our roles that we don't realize we'd provide more value by delegating.
Michael Iannuzzi: This exact topic came up at a conference I was at during the lunch session. The founder of a brand was speaking, and that's exactly what she said. As they were growing, she had to figure out when to fire herself. She said, "I'm not a president. I'm the founder." And so she brought in a brand president to run the operations. She's still the founder, but they hired a brand president about eleven months ago and it seems to be working well. She had to figure out when to fire herself because she was getting in the way.
Brendon Dennewill: Do you recall how many units they were at when that happened?
Michael Iannuzzi: Over a hundred, for sure.
Brendon Dennewill: That's what we're seeing. They're often realizing at 120, 130, or 140 units that they should have updated their team, systems, and processes before they got to 100, not after.
Michael Iannuzzi: There's something about that number, 100. I've seen lots of presentations on it. The calculations around what people and infrastructure you need to build to 100 units, it's not an exact science, but it's very close. That number keeps coming up.
Brendon Dennewill: And the founders and operators who made it through 100 have all shared with me that once they got there, they had to break and fix everything again. As long as you're growing, it's not going to last forever. That leadership mindset, knowing that things are going to break because you're growing, is half the battle. You just need to know at what point to make the decisions you've been alluding to all along: when to make a change, hire someone, or adjust a process.
Michael Iannuzzi: Some of it is also an investment question. It's tough. There's cash flow to think about. How are you funding bringing in a brand president? These are very difficult decisions.
Brendon Dennewill: Which comes right back to your royalty self-sufficiency metric. Will that cover hiring a president or a COO? Or do you need to borrow to make it happen? Because without doing it, you're just making life harder for yourself.
Technology, Automation, and the Future of Financial Leadership in Franchising
Brendon Dennewill: As we wrap up: how do you see technology, automation, and data reshaping financial leadership and franchise operations over the next few years?
Michael Iannuzzi: A few presentations stand out. On the franchise development side, I'm seeing a lot around auto texting tools, auto callback tools, and people searching for brands on ChatGPT. When you're on certain portals and lead generation sites, you can get a large volume of leads, some of which are bots or phishing attempts. There are now programs that developers are using to filter through all of that quickly, so the same one or two people who used to spend three months working through leads can now focus on the qualified ones, have better conversations, and get them closed faster. I think you'll continue to see more of that on the development side.
On the financial side, giving franchisees a full tech stack from day one is going to be increasingly important. Yes, QuickBooks or Xero are a starting point, but what else can you layer in to help the franchisee run their business better? A CRM from the start? An accounts receivable tool so billing happens faster? Dashboarding set up on day one? Why wait until you have 100 units to set that up?
When every franchisee turns on their unit, these are the four tools they're going to use. It's much easier to implement at the beginning than to get everyone to adopt something later. Franchisors do charge tech fees, and those fees exist to cover this. If you're a newer emerging brand, think about what your franchisees will need to run their business and build it into the stack from day one. It's here, it's done, they don't have to think about it. Train them during discovery days, during onboarding, during initial training, and get them used to it from the start.
Brendon Dennewill: If you had to guess, of the 4,000 to 4,500 franchise brands that exist today, how many have full visibility across all their units from a marketing, sales, and financial perspective?
Michael Iannuzzi: I think it's the bigger ones, for sure. Maybe the top 10 to 15 percent. You have the publicly traded franchises, and then the next tier owned by the large private equity groups. My guess is that if those PE-backed brands didn't already have full visibility, they're putting it in place now because that's what gets them ready for the next turn, the next life cycle of the business.
But I think it's easier now than it ever has been. The tools are out there. The information is out there. People are writing their own code to do certain things. For new brands coming to market, you can set yourself up from the beginning. Make that your competitive advantage.
Brendon Dennewill: Absolutely. The tools exist. So why aren't more systems implementing them to get that full visibility and predictability? And this probably comes back to the private equity question: PE folks understand how critical that visibility is, and they know that implementing those systems drops value to the bottom line very quickly.
Michael Iannuzzi: That's exactly what they look at: unit level economics. They want to know the franchisees are doing well. That's how they validate the system. Franchisees have to be doing well.
Closing Advice for the Franchise Community
Brendon Dennewill: Michael, any last piece of advice you'd like to leave our listeners?
Michael Iannuzzi: I'd go back to the education piece, and this is for all three legs of the stool: franchisor, franchisee, and supplier. Utilize what's out there. Become an IFA member. Go to the specialty conferences that focus on your segment. Use the webinars, the content, and be open to talking to people. If you reach out to people in this industry, they're going to talk to you. That's just how it is.
You and I connected at a conference, and now we're doing a podcast together. That's how this community works. And a lot of it is free. Utilize what's right in front of you.
Brendon Dennewill: Really good advice. There are so many people who know this industry inside and out and are willing to give you guidance and point you in the right direction. Not taking advantage of that would be a missed opportunity.
Michael Iannuzzi: And when I talk to colleagues in other industries, this kind of community doesn't exist the way it does in franchising. There are associations for manufacturing, distribution, and other sectors, but I don't think any of them have what the franchise community has. There is always something going on.
Brendon Dennewill: Michael, thank you so much for joining me today. I learned a lot, as always.
Michael Iannuzzi: Thank you so much for having me. It was a pleasure to be on the show.