What Alaska’s Economic Outlook Means for Franchisors

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 Alaska, 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: 23
• 2023 Economic Performance Ranking: 49

The State

Alaska’s economic performance ranks among some of the nation’s lowest. But according to Alaska Business, this isn’t abnormal. Citing a 2022 study, Alaska Business claims for the last seven years, the state’s economy has ranked “at or near the bottom” compared to all other states. The report says this is because even before the COVID-19 pandemic, Alaska was already recovering from a three-to-four-year recession.

However, the state may experience a slight recovery by the end of the year, as economists say there’s some room for optimism. According to Alaskanomics, since May 2022, most Alaskan-based industries grew or remained flat over the last year, and the private and public sectors both added new jobs. However, as of May 2023, the state’s unemployment rate stood at 3.6%, placing Alaska at 35th in the country compared to other states.

In terms of population, the state seems to be on a downward trend. Although Alaska’s population rose very slightly in 2022, the state saw more people leave than arrive, marking the 10th consecutive year of negative net migration.

Making Sense of the Data

What does this mean for Alaska’s economy? To start with the Economic Performance report, the index shows that within the past 10 years, Alaska has been outperformed by 48 other state economies. 

The performance index is based broadly on a state’s performance within state gross domestic product (GDP), absolute domestic migration and non-farm payroll employment. Alaska has seen a decline in absolute domestic migration of about 70K, placing the state at 34th in the country. 

The Economic Outlook tells another story about Alaska’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, Alaska appears at No. 23, with a top marginal personal income tax rate of 0.00% and a top marginal corporate income tax rate of 9.40%.

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 prospective 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.

Sylvan Learning*

• Current units in state: 7
• Growth capacity in state: 1
• Total jobs created at max growth capacity: 10 to 15
• Total unit count: 710+
• Investment range: $85,525 to $186,930

Sylvan Learning is a leading provider of supplemental and enrichment education for students in grades K-12. According to Sylvan Learning CEO John McAuliffe, the brand is seeking to expand its footprint in states and locations with a high number of families who could benefit from such a program.

“We choose areas to focus our franchise development efforts based on demographic data we receive from our mapping system provider,” said McAuliffe. “We look for areas with a high concentration of families with school-age children whose annual income is $50K or above. We also look at some other factors such as shopping centers, where tutoring centers can be located, schools and competition.”

Express Employment

• Current units in state: 0
• Growth capacity in state: 2 territories (Anchorage and Fairbanks)
• Total jobs created at max growth capacity: N/A
• Total unit count: 865+ franchised locations throughout North America, South Africa and Australia
• Investment range: $140,000 to $211,000

Express Employment Professionals is an international staffing franchise that works with job seekers and businesses to find the perfect match. As the brand approaches its 900-unit milestone, Express is offering an incentive and is waiving its $40,000 franchise fee in more than 25 territories across North America. That includes Anchorage, Alaska.

“We feel that Express should really be in these areas,” said Dan Gunderson, the senior franchising director at Express. “We've identified these open territories as a real opportunity for us, so we’ve created these very appealing incentive programs to help us reach our goal of 900 offices.” 

Footprints Floors*

• Current units in state: 0
• Growth capacity in state: 5+
• Total jobs created at max growth capacity: 75+
• Total unit count: 150+
• Investment range: $78,505 to $113,030

Footprints Floors, the flooring installation brand, has seen exceptional growth over the last few years, and the brand continues to use that momentum to expand its operations across the United States.

“We have experienced a lot of maturation as a business and focused on new relationships and connections,” said founder and CEO Bryan Park. “Our volume is really starting to open doors for us, which has been exciting to see. We aim to continue this pattern of growth and to lean into more strategic partnerships. There’s been a great deal that’s happened for our relatively young franchise, and we’ve done exceptionally well. I’m excited to see what the future holds for the brand.”