What Louisiana's Economic Outlook Means for Franchisors

Franchisors looking to expand their footprints in Louisiana must consider the state’s policy variables and growth rates as they strategize development.

By Andrea Jablonski1851 Franchise Contributor

10:10AM • 10/05/20

This month, 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 Lousisana, these rankings reveal a lot about where the state economy is going and where there is opportunity for their economy to grow.

2020 Outlook Ranking: 30
2008–2018 Performance Ranking: 44

The State

Prior to the COVID-19 pandemic, Louisiana’s economy was already shaky. As the pandemic has raged on, the Bayou State has experienced significant unemployment and job losses. In June, the state’s rate of unemployment was at 9.7%, and over the last five years, Louisiana has seen an employment growth of -2.3%.

Historically, Louisiana’s economy has been reliant on tourism and oil — both of which are industries that have taken a hit since the onset of the pandemic. In 2018 the state welcomed a record-breaking 18.5 million visitors into the state who spent more than $9.1 billion. Now, with festivals cancelled and many people still fearful of traveling, the streets of New Orleans are empty. In terms of the oil sector, low gas prices have been exciting for consumers, but troubling for the industry’s workers. With many workers laid off, the $72 million revenue the industry normally brings to the economy will likely amount to less this year.

Making Sense of the Data

What does this mean for Louisiana’s economy? To start with the Economic Performance report, the index shows that within the past ten years, Louisiana has been outperformed by 43 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. The category that slowed the state down was its State Gross Domestic Product. Louisiana had low growth in this category (19.6%) and was ranked 46th among the states. The state’s Absolute Domestic Migration was ranked at No. 33, reflecting the fact that Louisiana has seen a 50,043 in drop in population over the last 10 years.

The Economic Outlook tells another story about the Louisiana 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, Louisiana ranked No. 30 — the lowest it has been since 2013. Although it’s ranked near the middle of the pack, the state’s economy is growing and still has more potential to grow than 20 other states.

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. For states like Louisiana, this presents an opportunity to grow. The dollar is projected to stretch further in Louisiana than in most other states, and, in a time when the state is struggling due to the pandemic, there will be people in search of new career opportunities.

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 Louisiana hasn’t stood out significantly in its performance, the diversification of the state’s economy could be a help in boosting that performance.

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.

Home Clean Heroes*

Current units in state: 0
Growth capacity in state: 10
Total jobs created at max growth capacity: 70

Joe Delatte, president of home cleaning service franchise Home Clean Heroes, said the brand’s growth potential is significant and sees Louisiana as a promising state to target.

“It’s no secret — we aren’t the first residential cleaning business model, but we are excited to bring a fresh approach to markets in states where this particular model and franchise opportunity haven't been available. We look at income and household numbers in these markets along with website analytics, and we can zero in on markets where the need matches the want.”

Amazing Lash

Current units in state: 2
Growth capacity in state: 5+
Total jobs created at max growth capacity: 75+

Elements Massage

Current units in state: 0
Growth capacity in state: 5+
Total jobs created at max growth capacity: 75+

Lauren Wanamaker, senior director of development for Wellbiz Brands, parent company of both Amazing Lash Studio and Elements Massage, said their growth plans are strategic, and Louisiana hits all the right targets.

“Both Elements Massage and Amazing Lash Studio have over 200 studios open. To determine our top development markets, we did a white space analysis and found that both brands have a growth potential of 1,000+ units. That leaves a lot of geography to tackle. So, we took a two-pronged approach. Because both brands are membership-based models, we have customer data on everyone who receives a service at all of our locations,” Wanamaker said.

“We're able to profile those individuals against demographics as well as what we call psychographics. Demographics are on the individual level versus psychographics, which are done on the household level. It factors in demographics as well as the stage of life that customers are in. For example, are they single and fresh out of college, married with young children or an older couple that are empty nesters reaching their retirement age? We then factor that in with the geography in which they're living, against credit card swipe data from Mosaic, which is a part of Experian. That offers us insight into how people are spending on services so that we can visualize heat maps to find out where the hot pockets are that meet one of our many customer profiles. We then overlay that with physical retail in those markets.

Generally, we look for things like traffic generators, national retailers and services that cater to similar clientele as us. After seeing those pockets of retail that overlap with our customer profiles, we get an idea of which trade areas we want to focus on. Once we get to market penetration in any given market, we can continue to evolve the exercise to figure out where there might be opportunities for next-level trade areas in between existing studios that won't create too much overlap.”