The 25 Best State Economies for Franchising in 2023

Location, location, location. Understanding regional financial patterns and potential economic outlooks can be crucial tools for franchise operators to optimize franchise growth strategies and anticipate franchisee success. This piece aims to spotlight the top 25 states for franchising, as deduced from ALEC-Laffer's 16th annual "Rich States, Poor States" Economic Competitiveness Index.

Two crucial rankings are provided in ALEC-Laffer's report — Economic Performance and Economic Outlook. The former looks at a state's performance over the past decade, while the latter projects a forecast based on 15 current state-policy factors. Although a lower outlook index rank doesn't necessarily deter franchise expansion, it does indicate a need for more strategic expansion planning.

Generally speaking, states that spend less (especially on income transfer programs) and states that tax less (particularly on productive activities such as working or investing in business) experience higher growth rates than states that tax and spend more.

“This amazing repository of data on the competition among the states is the ultimate guide to economic growth and prosperity,” said Dr. Arthur Laffer. “‘Rich States, Poor States’ tells a clear story: states with low taxes attract more business investment and more workers. People move to where they have economic opportunities.”

For example, this report shows that North Carolina has maintained its second position due to its historic 2013 tax reform while Virginia has impressively climbed from the 24th to 18th spot due to significant tax reductions and rebates enacted during its 2022 legislative session.

Utah holds the prime position in economic outlook for the 16th consecutive year. Its consistent position can be attributed to a flat personal income tax rate, pension reform and innovative property tax reform strategies.

Here are the top 25 states for franchising based on the Economic Competitiveness Index:

1. Utah
2. North Carolina
3. Arizona
4. Idaho
5. Oklahoma
6. Wyoming
7. Indiana
8. North Dakota
9. Florida
10. Nevada
11. Tennessee
12. Georgia
13. Texas
14. South Dakota
15. Arkansas
16. Michigan
17. Wisconsin
18. Virginia
19. New Hampshire
20. Ohio
21. South Carolina
22. Mississippi
23. Alaska
24. Alabama
25. Colorado

Despite individual state rankings, prospective entrepreneurs should not be dissuaded from investing in a franchise. If the market conditions are suitable and a brand addresses a need in that market, franchisees can still expand and scale their operations. However, aspiring business owners in states with a lower outlook should consider brands with a lower entry cost.

In conclusion, the findings of the ALEC-Laffer’s 16th annual “Rich States, Poor States” Economic Competitiveness Index offer invaluable insights into the financial landscape of the United States, shaping strategic plans for franchise owners and potential investors alike.