What Illinois’ Economic Outlook Means for Franchisors

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

By Victoria CampisiStaff Writer

9:09AM • 07/24/23

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 Illinois, 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: 46
2023 Economic Performance Ranking: 44

The State

Over the year leading up to February 2023, Illinois was one of the Midwest's stronger performers, with job growth outpacing that of the region. The Chicago metro division led this growth, with most major private-sector industries moving in a positive direction. The state’s unemployment rate has been relatively flat for the past few quarters, but it is still higher than the national average. Additionally, the labor force was up from a year earlier, but it remains down compared with a few years earlier. Overall, the job market in Illinois is improving, but there is still some room for growth. The industries with the strongest job growth in Illinois in 2022 were professional and business services, leisure and hospitality, and transportation and warehousing.

The Illinois economy is expected to grow more slowly in 2023 than it did in 2022. The state's lead on the Midwest will diminish, as other states in the region see faster growth. White-collar industries, manufacturing and logistics will hold off on adding significant jobs. Payrolls are on track to return to their pre-pandemic peak in 2024 but later than in the U.S. as a whole.

Meanwhile, about 12.58 million people lived in Illinois in 2022. This was a decline from the previous 2021, when about 12.69 million people lived in the state.

Making Sense of the Data

What does this mean for Illinois’ economy? To start with the Economic Performance report, the index shows that within the past 10 years, Illinois has been outperformed by 43 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. Illinois has seen an absolute domestic migration of a whopping -1,016,236, ranking it 48th in the country.

The Economic Outlook tells another story about Illinois’ 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, Illinois appears at No. 46, with a top marginal personal income tax rate of 4.95% and a top marginal corporate income tax rate of 9.5%.

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.

Fitness Premier 24/7 Clubs

Current units in state: 17
Growth capacity in state: N/A
Total jobs created at max growth capacity: N/A
Total unit count: 18
Investment range: $295,000- $500,000

Fitness Premier 24/7 Clubs, the 18-unit fitness club concept, has identified its home state as a target market for growth in 2023. With multiple successful franchisees already established in the state, brand awareness is strong. Fitness Premier is excited to add locations that will serve even more communities.

“We saw incredible growth in 2022, and we’re excited to carry those changes into this year,” said Jason Markowicz, CEO of Fit For You Franchising. “With investments in tools to support franchisees and plans to expand member offerings, we continue to differentiate ourselves as a franchisor. Now, as we look toward 2023 growth, we’re honing in on our home state of Illinois.”

Atomic Wings*

Current units in state: 1
Growth capacity in state: 25+
Total jobs created at max growth capacity: N/A
Total unit count: 23
Investment range: $155,900 to $338,500

Kavita Venkatesh signed with Atomic Wings, an emerging New York-style Buffalo chicken wing franchise, to open 25-plus units in Illinois. She is confident that the Illinois community will embrace the concept.

“Illinois is very diverse, which works well for Atomic Wings, as opposed to other concepts, because everyone loves wings,” said Venkatesh. “The brand has proven itself in other diverse locations, so I have no reservations about bringing it here. I know it will do well.”

A&W Restaurants*

Current units in state: 9
Growth capacity in the state: N/A
Total jobs created at max growth capacity: N/A
Total unit count: 1,000+
Investment range: $871,000 to $1,469,554 for a freestanding restaurant; $401,000 to $1,051,088 for an inline restaurant; and $276,000 to $704,000 for a captive restaurant.

A&W Restaurants, the iconic American restaurant franchise, said it was targeting Illinois for expansion in 2022. John Palumbo, the brand’s senior director of franchise development, said that A&W has been eyeing growth in the market for a while.

“The truth is, with a brand so popular across the country, we could easily set up shop just about anywhere and find a rock-solid customer base, but we're looking for more than that,” he said. “We’ve seen incredibly high demand in Illinois. That will ensure our franchisees launch their business in a booming market.”