What Maine's Economic Outlook Means for Franchisors

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

By Sarah Baumann1851 Franchise Contributor

7:07AM • 10/07/20

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 Maine, 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: 41
2008–2018 Performance Ranking: 35

The State

Though Maine’s economy has historically relied on the paper and paper products industry, the state has become heavily dependent on the services industry in recent years. Fishing, forestry, mining and agriculture are secondary sectors that keep the economy moving. Tourism also plays an important role in Maine’s economy throughout the summer months.

Since the onset of COVID-19, the hospitality and tourism industries have been two of the hardest hit across the country. Being two of the Lobster State’s biggest income drivers, Maine’s lost nearly $400 million since the start of the summer due to the pandemic. Additionally, with the state’s top industries failing, unemployment has skyrocketed. The Maine Department of Labor said as recently as September 3 that it handled some 3,200 initial unemployment claims in that week alone— up 800 claims from the previous week.

Making Sense of the Data

What does this mean for Maine’s economy? To start with the Economic Performance report, the index shows that within the past 10 years, Maine has been outperformed by 34 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 agriculturally driven state down was its Non-Farm Payroll Employment status. Maine only grew 1.8 percent in this category, ranking it 45th among states that further diversified their economies outside of services. The state’s State Gross Domestic Product was ranked No. 36, seeing 29.8 percent growth.

The Economic Outlook tells another story about Maine’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, Maine is No. 41. Although its ranked low, The Pinetree State still has more potential for economic growth than nine other states.

The report indicates that, generally speaking, states that spend and tax less experience higher growth rates than states who 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 Maine, potential franchisees can expect higher tax rates than others but, with the right opportunity for Maine’s population, opportunities can still be incredibly lucrative.

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 Maine is consistently ranked low for outlook and in performance, good business opportunities still have the potential to grow in its economy.

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.

Right At Home

Current units in state: 0
Growth capacity in state: 3
Total jobs created at max growth capacity: 150

Eric Little, Chief Development Officer of senior care franchise Right At Home, said that typically their team decides on where to expand the brand after extensive research.

“When we identify target markets, the first thing we look at it are markets where we don’t currently have a presence,” said Little. “It’s important for us to plant Right at Home* flags in new MSA’s so we can increase our market share, and to help us provide market coverage for our national and regional referral partners. We also consider household income, population density, and other standard demographics.”

Sylvan Learning*

Current units in state: 0
Growth capacity in state: 5
Total jobs created at max growth capacity: 50

John McAuliffe, Sylvan Learning CEO, seconded the notion of strategic growth. According to the early education franchisor, the state has opportunities for the right businesses that currently fit the needs of the population.

“We choose areas to focus our franchise development efforts based on demographic data we receive from our mapping system provider,” said McAuliffe. “We look for areas with a high concentration of families with school age children whose annual income is $50k or above. We also look at some other factors like shopping centers, where tutoring centers can be located, schools and competition.”

Atomic Wings*

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

New York-based chicken franchise Atomic Wings’ CEO Zak Omar said growing concentrically within the region makes the most sense for their brand to capitalize on brand recognition.

"We have great brand recognition in the Northeast,” said Omar. “We've done a brand survey in the tri-state area, and we realize that our brand awareness is strong within those states. That's why it's not a reach for us to expand up and down the East Coast. It's similar to what Dunkin' did when they first started expanding — we're going to build our base and then take on major markets to the West. We've done well in the largest city in America, so we're looking forward to taking that model and getting it up and bringing it to other metropolitan areas and suburbs as well."

TWO MEN AND A TRUCK*

Current units in state: 1
Growth capacity in state: 1
Total jobs created at max growth capacity: 23

TWO MEN AND A TRUCK Franchise Development Specialist Cheryl Ackley says that a state's regional data drives their decision to develop.

“We look at many different pieces when defining territories, specifically using data on individual household incomes, population and ZIP codes,” said Ackley. “These reflect how the full-service moving experience will impact our communities in a positive way by moving our customers forward.”