What Kentucky’s Economic Outlook Means for Franchisors

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

By Victoria CampisiStaff Writer

10:10AM • 07/13/23

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 Kentucky, 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: 27
2023 Economic Performance Ranking: 26

The State

In 2022, Kentucky's gross domestic product (GDP) reached approximately $201 billion. The manufacturing sector played a significant role in contributing to the state's gross domestic product, adding around $38.9 billion in real value. Another notable industry was professional and business services, which contributed approximately $20.21 billion to Kentucky's GDP during the same year. Meanwhile, Kentucky’s unemployment rate stands at 3.8% as of May 2023, compared to 3.7% in April and 3.8% from a year ago. This is lower than the long term average of 6.59%.

Kentucky has experienced minimal population growth over the past two years. Estimates show that the state had a population of 4,512,310 on July 1, which only saw an increase of less than 5,000 individuals compared to the July 2020 estimate. This represents a growth rate of 0.1%, ranking Kentucky 31st among all states and the District of Columbia in terms of population change. In contrast, 19 states experienced population declines during this period. While Kentucky's population growth has been relatively stagnant during the pandemic, its neighboring states have seen more significant gains or losses in population.

Making Sense of the Data

What does this mean for Kentucky’s economy? To start with the Economic Performance report, the index shows that within the past 10 years, Kentucky has been outperformed by 25 other state economies.

The performance index is based broadly on a state’s performance within state GDP, absolute domestic migration and non-farm payroll employment. Kentucky has seen an absolute domestic migration of -17,607, ranking it 25th in the country.

The Economic Outlook tells another story about Kentucky’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, is influenced directly by state lawmakers through the legislative process. In this ranking, Kentucky appears at No. 27, with a top marginal personal income tax rate of 6.7% and a top marginal corporate income tax rate of 7.2%.

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.

MOOYAH Burgers, Fries & Shakes*

Current units in state: 0
Growth capacity in state: 10
Total jobs created at max growth capacity: 200+
Total unit count: 90
Investment range: $477,918 to $989,793

MOOYAH Burgers, Fries & Shakes, the fast casual, “better burger” franchise, is aiming to add 10 locations in Kentucky by 2024. Specifically, the size and demographics of the Louisville and Lexington markets make them prime areas for MOOYAH expansion.

“Both cities are great MOOYAH-sized markets,” said Mike Sebazco, vice president of operations. “The amount of income people are willing to spend in restaurants fits our wheelhouse. As of right now, we’re looking at six restaurants in Louisville and four in Lexington over the next few years. Northern Kentucky has a few options as well.”

Heating + Air Paramedics

Current units in state: 0
Growth capacity in state: N/A
Total jobs created at max growth capacity: 3 per location
Total unit count: 5
Investment range: $130,075 to $237,425

Heating + Air Paramedics, a fast-growing HVAC franchise backed by multi-brand home services franchisor Threshold Brands, has identified Kentucky as a strong target market for franchise expansion.

“Kentucky is a logical next step for us, and we’re excited about continuing growth of the brand there,” said Ryan Carpenter, brand president. “Heating + Air Paramedics would be a new addition to the state, leaving territories wide open for investment.”

Griswold

Current units in state: 0
Growth capacity in state: 1-2 units per year until market fills out
Total jobs created at max growth capacity: N/A
Total unit count: 170+
Investment range: $95,850 to $174,100

In 2022, Griswold, the leading non-medical home care franchise, revealed it was looking to expand in Louisville and Lexington, Kentucky.

“We’re excited to expand the Griswold Home Care footprint into the Louisville and Lexington markets,” said Brian Hill, franchise development manager of Griswold Home Care. “We do not have any franchisees currently in the state, but nearby states like Tennessee, North Carolina and South Carolina have proven to be hugely successful for our business model.”