What Alabama’s Economic Outlook Means for Franchisors

If you’re a franchisor looking to develop your business in Alabama, you’ll want to consider the state’s policy variables and growth rates when scaling your plans.

By Victoria CampisiStaff Writer

9:09AM • 07/12/23

This month, 1851 is taking an in-depth look at ALEC-Laffer’s 16th annual “Rich States, Poor States” Economic Competitiveness Index and how it can be useful to franchisors as they expand their footprints. The report ranks all 50 states based on two criteria: 1) Economic Outlook, a state’s current standing in 15 state policy variables; 2) Economic Performance, a retrospective measure based on a state’s performance over the past 10 years.

For the state of Alabama, these rankings reveal a lot about where the state economy is going and where there is opportunity for their economy to grow.

2023 Economic Outlook Ranking: 24
2023 Economic Performance Ranking: 20

The State

Alabama's economy experienced a 3.2% increase in the third quarter of 2022, followed by a 2.6% rise in the fourth quarter. Overall, the annual average increase in Alabama's gross domestic product (GDP) for the year 2022 was 1.6%. In 2023, the state's economy is projected to grow by 1%, with employment expected to increase by 0.4%.

In terms of job growth, Alabama added 7,900 jobs in April compared to the previous month. From April 2022 to April 2023, the state recorded a net gain of 40,800 jobs. Additionally, the seasonally adjusted unemployment rate declined from 2.5% in April 2022 to 2.2% in April 2023.

Alabama experienced significant population growth in 2022, surpassing its previous growth rates over the past decade. Between July 1, 2021 and July 1, 2022, Alabama's population increased by 24,450 people, representing a growth rate of 0.5%. This growth rate ranked Alabama at No. 20 nationally, ahead of states like Mississippi and Louisiana but trailing behind neighboring states such as Tennessee and the southern states along the East Coast.

Making Sense of the Data

What does this mean for Alabama’s economy? To start with the Economic Performance report, the index shows that within the past 10 years, Alabama has been outperformed by 19 other state economies.

The performance index is based broadly on a state’s performance within state GDP, absolute domestic migration and non-farm payroll employment. Alabama has seen an absolute domestic migration of 57,081, ranking it 17th in the country.

The Economic Outlook tells another story about Alabama’s economy. The ranking is based on a state’s current standing in 15 state policy variables. Each of these factors, ranging from sales tax burden to state minimum wage, is influenced directly by state lawmakers through the legislative process. In this ranking, Alabama appears at No. 24, with a top marginal personal income tax rate of 4.15% and a top marginal corporate income tax rate of 6.02%.

The report indicates that, generally speaking, states that spend and tax less experience higher growth rates than states that spend and tax more. While this is an important finding for entrepreneurs looking to start their own businesses, it shouldn’t discourage them from investing in their dream franchises if they're in a market with a slower growth rate.

Franchise Growth Plans

So what should franchisors do with this information? When it comes to deciding where franchisors should develop their brand, it’s always important to look at the complete picture of what the region has to offer. Though most franchisors take a shotgun approach — meaning wherever a prospect franchisee inquires, the franchisor will typically entertain that marketplace — the strategy of looking at these overall policies can help them scale their business at a more efficient rate. With that said, findings within the report should not be the deciding measure for franchisors, but they should play a role in the decision.

Pollo Campero*

Current units in state: 0
Growth capacity in state: 9
Total jobs created at max growth capacity: N/A
Total unit count: 350
Investment range: $1,287,250 to $2,491,500

Fast-casual chicken franchise Pollo Campero is looking to add new franchise units in Alabama in 2023. Although the state does not currently have any Pollo Campero locations, many neighboring states have already established restaurants, including Tennessee, Florida and Georgia. Escarcega says the team looks to reinvigorate the Pollo Campero brand presence in areas where there is untapped potential.

“In addition to targeting existing bases in good markets, we also look at consumers and their eating habits,” said Blas Escarcega, Pollo Campero’s director of franchise development. “For example, the markets we are looking at in the Southeast, such as Alabama, have a higher-than-average consumption of chicken. That is why there is such a high concentration of chicken concepts in the Southeast — people love chicken, fried in particular. It really transcends demographics. Everyone just loves chicken in the Southeast, and nobody does chicken like Pollo Campero.”

The Melting Pot

Current units in state: 0
Growth capacity in state: 4
Total jobs created at max growth capacity: N/A
Total unit count: 94
Investment range: $1,339,023 to $1,587,201

The Melting Pot, the 94-unit fondue franchise that has built a name in the experiential dining space, has set its sights on Alabama once again.

“We had great success in Alabama before with locations in Huntsville, Mobile and Birmingham,” explained Collin Benyo, franchise growth strategist for the brand. “Due to challenges outside of our control and other unforeseeable circumstances, we are no longer in the state. This is a true untapped market with remarkable interest as proven by the number of leads that we see in franchise development inquiries.”

With capacity for four restaurants across the state, Benyo says the Melting Pot team is focused specifically on the Birmingham area, as data has shown great potential in Mountain Brook and Cahaba Heights.

Patio Patrol

Current units in state: 5 territories
Growth capacity in state: 2
Total jobs created at max growth capacity: 6
Total unit count: 7
Investment range: $74,545 to $399,500

Patio Patrol, the emerging full-circle pest control concept, has identified Mobile, Alabama as its next target for franchise development. With successful operations in the greater Birmingham metro, the brand is looking to add two new units in the greater Mobile area.

“Alabama has proven to be very successful for Patio Patrol because of its geography and associated climate,” explained Rachel Southard, president of emerging brands. “With franchise owners operating in the Birmingham metro, we’re now looking to expand in and around Mobile, including areas like Daphne, Fairhope and Saraland.”