What Indiana’s Economic Outlook Means for Franchisors

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

By Luca Piacentini1851 Franchise Managing Editor

8:08AM • 10/29/20

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 Indiana was ranked fourth among the 50 states for outlook, but 28th for performance.

2020 Outlook Ranking: 4
2008–2018 Performance Ranking: 28

The State

Prior to the pandemic, Indiana expected to experience sustained growth of 1.25% was expected for GDP and employment, largely due to continued strong consumer spending. A high percentage of Indiana's income is from manufacturing. Indiana has been the largest steel-producing state in the U.S. since 1975, with the Calumet region of northwest Indiana being the largest single steel-producing area in the U.S., accounting for 27% of all U.S. steel production. Indiana is also the second-largest auto manufacturing state. Indiana's other manufacturers include pharmaceuticals and medical devices, automobiles, electrical equipment, transportation equipment, chemical products, rubber, petroleum and coal products, and factory machinery.

It could be a year or more before Indiana’s economy fully recovers from the coronavirus-related recession that put one in six people out of work. Indiana had the country’s fifth-highest unemployment rate for April at 16.9%, topping the national rate of 14.7%. Still, Indiana’s unemployment rate of about 3% before the pandemic is cause for optimism about a potential economic rebound.

The Data

What does this mean for Indiana’s economy? To start with the Economic Performance report, the index shows that within the past ten years, Indiana has been outperformed by 27 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. For Cumulative GDP Growth, Indiana was ranked 28th, for Cumulative Domestic Migration it was ranked 37th and for Non-Farm Employment Growth it was ranked 21st.

The Economic Outlook tells another story about Indiana’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, are influenced directly by state lawmakers through the legislative process.

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 are in a market with a slower growth rate. For Indiana, this means a moderate corporate (22nd) and personal (15th) tax burden, a state minimum wage that matches the federal floor (1st), low average workers’ compensation costs (2nd) and recently legislated tax changes (11th).

Franchise Growth Plans

Should franchisors expand in Indiana? Though most franchisors take a shotgun approach — meaning wherever the prospect is that inquires they will 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.

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 Indiana has been behind in performance, their potential for growth is improving exponentially. Ranked 4th in the country, there is no doubt that franchisors would be wise to analyze how their brand could succeed in Indiana.

Hand & Stone Franchise Corp

Current units in state: 3
Growth capacity in state: 5+
Total jobs created at max growth capacity: 125+

Nicole Alburger, senior director of franchise development for Hand & Stone — the massage and wellness brand — noted that Indiana is a strong target market.

“Our spas in Indiana experience a quick return on investment,” said Alburger. “There is also an ease in recruiting employees in the state. We look at these data points, as well as established membership bases, when finding places to grow, and prospects seem to really respond in Indianapolis. In smaller metropolitan areas, our strategy is to dominate leads with collaborative, multi-unit owners. Indianapolis is not massive like New York, so it allows us to target consumers easily.”

Workout Anytime

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

Terri Harof, director of franchise development for Workout Anytime, also discussed the fitness brand’s strategy for expansion in Indiana.

“Indiana is a great market, we recently signed a multi-unit franchise deal in January, and they are actively looking for real estate to open at least three locations,” said Harof. “They are an example of established business owners in the area who have a great infrastructure. When we analyze where to grow, we look at the clubs that we already have that are doing well, and the Indiana market is one where we are definitely positioned for success.”

Buffalo Wings & Rings

Current units in state: 6
Growth capacity in state: 5+
Total jobs created at max growth capacity: 440+

Currently, the wing franchise, Buffalo Wings & Rings, has six restaurants across the state of Indiana.

“We reached saturation in Cincinnati and want to continue to grow in the closest big cities outside of our home market, and we see great potential in Indiana,” Philip Schram, Chief Development Officer of Buffalo Wings & Rings told 1851 Franchise. “We have already established a strong presence in southern Indiana and hope to continue growth as part of our strategic expansion plan.”