What Iowa’s Economic Outlook Means for Franchisors

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

By Sarah Baumann1851 Franchise Contributor

8:08AM • 10/06/20

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 Iowa, 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: 27
2008–2018 Performance Ranking: 25

The State

Iowa is a state that is known throughout the United States for its agricultural and manufactured goods. Since the advent of COVID-19, Iowa’s economy has had its ups and downs. After a difficult April, unemployment rolls decreased and consumer activity increased in the month of June. Fast forward to September when the state started to see another slump. According to the Creighton University Rural Main Street Index, Iowa’s rural economy dipped slightly in September due to a slumping farmland price index.

In spite of the downturn in rural communities, unemployment in the Hawkeye State has dropped to 6 percent in early September — the lowest it has been since the start of the pandemic. Iowa is, at present, ranked 27 for economic recovery by 24/7 WallSt. Although at the middle of the pack, Iowa is faring better than 23 other states, and if it can stabilize, opportunities for growth will be more prominent.

Making Sense of the Data

What does this mean for Iowa’s economy? To start with the Economic Performance report, the index shows that within the past ten years, Iowa has been outperformed by 24 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. The category that slowed the agriculturally-driven state down was their Non-Farm Payroll Employment status. Iowa only grew 4.5 percent in this category, leaving them with a ranking of 34th among states that further diversified their economies outside of farming. The heartland state’s GDP hit 38.9 percent growth, which ranked them 18th among the 50 states.

The Economic Outlook tells another story about Iowa’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. In this ranking, Iowa is seated at 27th. Though Iowa is once again at the middle of the pack from a ranking perspective, this indicates some stability in the state’s legislative practices. The state ranked high for state minimum wage, debt services, and recently legislated tax changes, and broke even in most other categories.

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 their dream franchise if they're in a market with a slower growth rate. For states like Iowa, this presents an opportunity to grow. The dollar isn’t necessarily projected to stretch as far in Iowa as other states, and Iowa’s reliance on agriculture leaves room for diversification of their economy.

When it comes to deciding where franchisors should develop their brand, it’s always important to look at the whole picture when considering what the region has to offer. Although in the past, Iowa has been middle of the road for performance, diversifying its economy with businesses that are interesting to Iowans could help stimulate activity.

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.

Famous Dave’s*

Current units in state: 4
Growth capacity in state: 50
Total jobs created at max growth capacity: 750

Senior Vice President of Operations of Famous Dave’s Al Hank said strategy is key to growth, particularly in the time of the pandemic.

"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 Hank. “We're excited to enter new markets and into new territories, by utilizing data; demographics and traffic to find the best locations possible."

**Checkers* & Rally’s**

Current units in state: 2
Growth capacity in state: 5+
Total jobs created at max growth capacity: 25+

Director of Franchise Development Robert Bhagwandat said, at present, the brand’s 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."

Brass Tap*

Current units in state: 1
Growth capacity in state: 5+
Total jobs created at max growth capacity: 35+

Chief Executive Officer Chris Elliott told 1851 that keeping and maintaining the brand experience is a big part of the brand’s growth.

“We’re excited to expand our footprint into new areas with great multi-unit franchise owners,” said Elliott. “As we continue to elevate the brand experience through new developments in our food and beverage offerings, the decision only becomes more clear that the time to franchise with The Brass Tap is now. Our recent growth can attest to that fact and we are looking forward to see what the future has in store for us.”