What Delaware’s Economic Outlook Means for Franchisors

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

By Sarah Baumann1851 Franchise Contributor

7:07AM • 10/15/20

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 the past 10 years. The state of Delaware was ranked 23rd among the 50 states for outlook and 24th for economic performance.

2020 Outlook Ranking: 24
2008–2018 Performance Ranking: 23

The State

Before the COVID-19 pandemic and the resulting recession, the state of Delaware had been adding jobs to the economy over the past five years. From 2015 to 2019, employment in the state was reported to have climbed every year, according to June employment reports. The employment numbers from June 2020 tell a much different story, however. Nearly 42,000 fewer people were working in the First State than the previous year. Since June 2019, unemployment has spiked from 3.7% — a percentage that was on par with the national rate at the time — to a whopping 12.5%, which is well above the national average of 11.1%. The state’s swift decline in Gross Domestic Product (GDP) decline by 5% represents the second-largest decline of any state in the union.

Making Sense of the Data

What does this mean for Delaware’s economy? The Economic Performance report shows that within the past 10 years, Delaware’s economy has been outperformed by those of 22 other states. The performance index is based on a state’s performance within State Gross Domestic Product, Absolute Domestic Migration and Non-Farm Payroll Employment. Delaware rose 34.1% in Gross Domestic Product from 2008 to 2018, which suggests that the state will perform well in the coming years in spite of the current crisis. The state also ranked 17th in Absolute Domestic Migration over the 10-year span and grew 7.0% in Non-Farm Payroll Employment.

The Economic Outlook tells a similar story about the Delaware 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, are influenced directly by state lawmakers through the legislative process. Maintaining its position at the middle of the pack, Delaware ranked 24th for Economic Outlook. Though the state’s economy has stalled because of COVID-19, projections are likely to continue at an upward rate if the state can manage to get back on track.

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. While these numbers show that Delaware’s growth rate is average, the state has an opportunity to grow their economy, making it an ideal spot for a new business to grow.

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.

Sylvan Learning*

Current units in state: 3
Growth capacity in state: 4
Total jobs created at max growth capacity: 40

John McAuliffe, Sylvan Learning CEO, seconded the notion of strategic growth. According to the early education franchisor, the state has opportunities for the right businesses that currently fit the needs of the population.

“We pick 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.”

**Checkers* & Rally’s**

Current units in state: 4
Growth capacity in state: 5+
Total jobs created at max growth capacity: 100+

Director of Franchise Development Robert Bhagwandat said at present, their model is attractive to potential franchisees because it has proven pandemic-proof.

"The Checkers & Rally's franchise opportunity has proven to be a strong and resilient investment throughout the COVID-19 pandemic,” said Bhagwandat. “Our drive-thru model and well-integrated delivery system, has allowed our brand to thrive during a difficult time for many restaurant brands, which has resulted in minimal disruption; new restaurant openings with record sales; a lift in both drive-thru and delivery sales and several new franchisee signings. There are a lot of great things in the works and we're looking forward to partnering with strong franchise owners as we continue to grow our brand."

TWO MEN AND A TRUCK*

Current units in state: 2
Growth capacity in state: 5+
Total jobs created at max growth capacity: 100

TWO MEN AND A TRUCK Franchise Development Specialist Cheryl Ackley says that a state's regional data drives their decision to develop.

“We look at many different pieces when defining territories, specifically using data on individual household incomes, population, and ZIP codes,” said Ackley. “These reflect how the full-service moving experience will impact our communities in a positive way by moving our customers forward.”