What Connecticut’s Economic Outlook Means for Franchisors

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

By Luca Piacentini1851 Franchise Managing Editor

9:21PM • 11/10/20

This summer, ALEC-Laffer published their 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 Connecticut, these rankings reveal a lot about where the state economy is going and where there is opportunity for their economy to grow.

2020 Outlook Ranking: 40
2008–2018 Performance Ranking: 50

The State

Connecticut’s economy shrunk by 4.6% in the first quarter of 2020 but fared better than other states in the region, according to a report from the U.S. Bureau of Economic Analysis. Connecticut was the 18th-best state in terms of its economic decrease and fared better than any other state in the Northeast. Connecticut and its nearly $288 billion economy saw its most significant gross domestic product decrease in health care and social assistance (-0.77%) and accommodation and food services (-0.73).

Historically, Connecticut's per capita personal income has been the highest of any state. There is, however, a great disparity in incomes throughout the state; after New York, Connecticut had the second-largest gap nationwide between the average incomes of the top 1% and the average incomes of the bottom 99%. Finance and insurance is Connecticut's largest industry, according to the U.S. Census Bureau, generating 16.4% of gross domestic product (GDP) in 2009. There are 106 insurance companies based in Connecticut. While agriculture no longer holds its once-prominent position in Connecticut's economy, farming is still important to the state.

Making Sense of the Data

What does this mean for Connecticut’s economy? To start with the Economic Performance report, the index shows that within the past ten years, Connecticut has been outperformed by 49 other state economies. The performance index is based broadly on a state’s performance within State Gross Domestic Product (rank: 48), Absolute Domestic Migration (rank: 43) and Non-Farm Payroll Employment (rank: 48).

The Economic Outlook tells another story about the Connecticut 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, Connecticut appears 40th. Although they’re ranked dead last in terms of performance, it is clear that Connecticut still has more potential to grow economically.

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 states like Connecticut, this presents an opportunity to grow. For example, the state is ranked 22nd in terms of Personal Income Tax Progressivity, with $7.67 change in tax liability per $1,000 of income.

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. Although in the past Connecticut has been behind in performance, its potential for growth is improving exponentially.

Franchise Growth Plans

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

MOOYAH Burgers, Fries & Shakes*

Current units in state: 4
Growth capacity in state: 5
Total jobs created at max growth capacity: 125

The fast casual, “better burger” franchise MOOYAH Burgers, Fries & Shakes recently opened Connecticut's fourth location in Guilford, and is hoping to continue expansion.

“We are thrilled to be opening a new location with another set of new Franchise Owners,” said MOOYAH President Tony Darden. “We are looking forward to growing our presence by adding our fourth location in Connecticut and further strengthening our presence in the Northeast. We plan to continue to serve communities in the state by adding five additional locations and 125 jobs across Connecticut.”

AWATfit

Current units in state: 0
Growth capacity in state: 5+
Total jobs created at max growth capacity: 5+

Rich Decker, CEO and founder of mobile fitness franchise AWATfit, which started in Long Island, notes that the brand is growing organically throughout the East Coast.

“Aside from expanding in our home state of New York, we are looking to grow in other states like Texas, Florida, Arizona where the population grows exponentially daily,” said Decker. “We also look into new home permits, school expansion and population drivers. Finally, when identifying places to grow, we look at the average income, average home price, tourism, colleges and climate, as well.”

Wild Birds Unlimited*

Current units in state: 7
Growth capacity in state: 5+
Total jobs created at max growth capacity: 35+

Thanks to several successful franchisees, Connecticut has been a competitive market for the Wild Birds Unlimited brand.

"We currently have seven stores in Connecticut, and we’re looking at some internal growth opportunities. Connecticut has some population-dense markets and plenty of bird activities, and that’s all we need for a strong market." said Chief Development Officer Paul Pickett.

Atomic Wings*

Current units in state: 0
Growth capacity in state: 5+
Total jobs created at max growth capacity: 75+

The NYC-based Buffalo wing franchise Atomic Wings has also identified Connecticut as a prime state for franchise growth.

"We have great brand recognition in the Northeast,” said CEO Zak Omar. “We've done a brand survey in the tristate area, and we realize that our brand awareness is strong within those states. That's why it's not a reach for us to expand up and down the East Coast. It's similar to what Dunkin' did when they first started expanding — we're going to build our base and then take on major markets to the West. We've done well in the largest city in America, so we're looking forward to taking that model and getting it up and bringing it to other metropolitan areas and suburbs as well."