What Colorado's Economic Outlook Means for Franchisors

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

By Andrea Jablonski1851 Franchise Contributor

8:08AM • 10/20/20

This summer, ALEC-Laffer published its annual Economic Competitiveness Rankings, which forecasts a state’s current standing within 15 state policy variables. The report features two different rankings: Economic Outlook — a forecast based on a state’s current standing in 15 state policy variables — and Economic Performance — a retrospective measure based on a state’s performance over a 10-year period from 2008 until 2018. For the state of Colorado, these rankings reveal a lot about where the state economy is going and where there is opportunity for its economy to grow.

2020 Outlook Ranking: 18
2008–2018 Performance Ranking: 4

The State

According to economists, Colorado saw a much more substantial recovery this summer than anyone anticipated. As recently as August the rate of unemployment in the state was at 6.7%, down from 12.2% at its peak in May — after losing 342,700 jobs from January to April, it regained more than 126,000 beginning in May and June.

The state is inching its way to recovery, but that’s not to say that many of its industries weren’t severely affected by the pandemic. Colorado cut oil production by 14% compared to last year and the leisure and hospitality industry saw a 21.5% decline in employment. Non-emergency medical and hospital services slowed as well, but as things have begun to reopen the growth rate of jobs and clientele has increased in these industries. Over 104,000 businesses in Colorado borrowed $10 billion from the Paycheck Protection Program (PPP), an effort that’s projected to have saved 932,000 jobs.

Making Sense of the Data

What does this mean for Colorado’s economy? To start with the Economic Performance report, the index shows that within the past ten years, Colorado has been outperformed by 17 other state economies. The performance index is based broadly on a state’s performance within State Gross Domestic Product, Absolute Domestic Migration and Non-Farm Payroll Employment. Colorado experienced a significant growth rate of 45.5% in gross domestic product and 17.5% increase in non-farm payroll employment. Over the last 10 years, the state fluctuated in its domestic migration rate, and since 2018 it has welcomed 380,134 residents.

The Economic Outlook tells another story about Colorado’s economy. The ranking is based 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, Colorado is No. 18. ALEC-Laffer has ranked Colorado favorably over the last 10 years, with more potential to grow economically than 32 other states.

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 business, it shouldn’t discourage them from investing in the franchise of their dreams if they're in a market with a slower growth rate. For Colorado, this presents important opportunities for growth across industries.

Franchise Growth Plans

So what should franchisors do with this information? 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, the findings within the report should not be the deciding measure for franchisors, but they should play a role in the decision.

Here are a few franchise brands that are planning to grow in Colorado:

Amazing Lash

Current units in state: 3
Growth capacity in state: 15
Total jobs created at max growth capacity: 225

“Generally, we look for things like traffic generators, national retailers and services that cater to similar clientele as us,” explained JD Prager, senior director of real estate and construction for WellBiz Brands Inc., Amazing Lash’s parent company. “After seeing those pockets of retail that overlap with our customer profiles, we get an idea of which trade areas we want to focus on. Once we get to market penetration in any given market, we can continue to evolve the exercise to figure out where there might be opportunities for next-level trade areas in between existing studios that won't create too much overlap.”

Renovation Sells*

Current units in state: 0
Growth capacity in state: 15
Total jobs created at max growth capacity: 15 plus subcontractor work

Micheal Valente, CEO of home renovation franchise Renovation Sells, notes that the brand is primed and ready for growth in Colorado.

“As we embark on franchising our opportunity, we have the benefit of a business model that fills a gap in the marketplace as well as ample territory availability across the country,” said Valente. “2020 has been an interesting year — that's for sure — and it's proven how resilient our business model is. We're excited to expand and establish a footprint in areas that are experiencing a real estate surge as millennials are reaching home-buying age. We also look at communities that have a large amount of older, dated homes that can greatly benefit from simple renovations to increase their value in the marketplace.”

Famous Dave’s*

Current units in state: 6
Growth capacity in state: 15
Total jobs created at max growth capacity: 750

"Given the recent trends over the past two years and the resiliency of the Famous Dave's brand through the pandemic, growth is the focal point for us moving forward,” said Al Hank, Famous Dave’s senior vice president of operations. “We're excited to enter new markets and into new territories by utilizing data, demographics and traffic to find the best locations possible."

Hounds Town USA

Current units in state: 0
Growth capacity in state: 10
Total jobs created at max growth capacity: 60

“When picking new markets, we first look at the vicinity to established markets. This means we’re able to increase brand awareness or recognition with a limited budget,” said Linton Dowling, marketing director at Raintree*, Hounds Town USA’s marketing agency. “Also, for an emerging brand like Hounds Town USA, franchise disclosure document registration is a serious factor. The costs, time for registration and other legal considerations are taken into account.”

Linton continued, “When we’re looking to grow our footprint in a new market, the natural first step is to look at the dog-to-human ratio. We then move into the economic prospects of that state and demographics.”