What Missouri's Economic Outlook Means for Franchisors

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

By Andrea Jablonski1851 Franchise Contributor

10:10AM • 10/19/20

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 a 10-year period from 2008 until 2018. For the state of Missouri, 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: 19
2008–2018 Performance Ranking: 40

The State

Like nearly every state in the U.S., Missouri has seen a significant increase in its unemployment rate since the onset of the COVID-19 pandemic, though the state seems to be en route to recovery. In April the state reported an unemployment rate of 10.2%, however, as recently as August that number had declined to 7.0%.

Missouri’s economy is diverse — the fourth-most diverse in the country, in fact — encompassing agriculture, aerospace, manufacturing, food processing, chemicals, publishing/printing, tourism and beer production. However, even the most diverse of economies haven’t been spared, and Missouri’s tourism industry suffered a loss of $2.2 billion. Looking toward recovery, the Show-Me State is confident in the development of a clean energy infrastructure project known as the Grain Belt Express. The project will not only create an alternative energy source for the state, but also save consumers money on energy, create up to 1,500 jobs, inject more than $7 million into the economy through taxes and begin to pay landowners their share of $20 million for the space the turbines will occupy.

Making Sense of the Data

What does this mean for Missouri’s economy? To start with the Economic Performance report, the index shows that within the past ten years, Missouri has been outperformed by 39 other state’s 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 — and Missouri ranked relatively low in all three categories. The state saw 27.3% growth in its gross domestic product and only 4.0% growth in its non-farm payroll employment. The state ranked No. 35 in Absolute Domestic Migration, losing 60,137 residents.

The Economic Outlook tells another story about the Missouri 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, Missouri ranked No. 19 — the highest ranking it has received from ALEC-Laffer since 2013. Although Missouri is ranked at the middle of the pack, the state’s economy still has more potential to grow than 31 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 Missouri, this presents an opportunity to grow, 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 Missouri 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 prospective 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.

Here are a few franchise brands that are planning to grow in Missouri:

1-800-JUNKPRO

Current units in state: 2
Growth capacity in state: 3
Total jobs created at max growth capacity: 24

Mike Davis, CEO of the junk removal service franchise 1-800-JUNKPRO, says that their growth strategy is based on population and household income, making Missouri a prime target.

“When we are determining where to grow, we look at a number of data points, including population, household income and demographics,” said Davis. “1-800-JUNKPRO works best in areas with populations of 500,000 or more. If the population is high enough it will create waste, and if it creates waste, that's a good market for us to be in. We also look at household income, as well as the percentage of single family homes versus the percentage of multi-family homes in each market to determine if it is a viable market for 1-800-JUNKPRO.”

Hand & Stone Massage and Facial Spa

Current units in state: 1
Growth capacity in state: 155
Total jobs created at max growth capacity: 255

**Checkers* & Rally’s**

Current units in state: 18
Growth capacity in state: 5+
Total jobs created at max growth capacity: 575+

Robert Bhagwandat, director of franchise development for Checkers & Rally’s, said the brand’s growth potential is significant, and sees Missouri as a promising state to target.

"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. It resulted in minimal disruption, new restaurant openings with record sales and 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."