What Nevada’s Economic Outlook Means for Franchisors

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

By Sarah Baumann1851 Franchise Contributor

8:08AM • 10/28/20

This summer, ALEC-Laffer published its annual Economic Competitiveness Rankings that 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 backward-looking measure based on a state’s performance over the past 10 years.

2020 Outlook Ranking: 6
2008–2018 Performance Ranking: 14

The State

All 50 states were hit hard by the advent of COVID-19, though some fared worse than others. A recent report ranked Nevada 29 in state economies in the COVID-19 era, demonstrating that its economy is in the lower echelon of recovery. The Silver State’s annualized gross domestic product growth ran at 2.8 percent in the first quarter of 2020, and its poverty rate came in at 12.9 percent. Perhaps unsurprisingly, the industries hardest hit by COVID-19 in Nevada were tourism and extraction of petroleum

According to Business Insider, Nevada’s economy was one of the hardest hit because two out of five jobs in the state were in the leisure, retail and hospitality industries. Nevada’s unions are in talks of a “Right to Return” ordinance — aimed at rehiring employees in the entertainment industry that were laid off or furloughed at the beginning of the pandemic, there is no promise jobs will be there for people to return to. The Wall Street Journal predicted an "existential threat to Las Vegas's business model based on bringing people together for gambling, entertainment and conventions." With COVID-19 cases oscillating, the state has yet to see a promising uptick in public health and in the overall economy.

Making Sense of the Data

What does this mean in tandem with the ALEC-Laffer findings for Nevada’s economy? To start with the Economic Performance report, the index shows that within the past ten years, Nevada has only been outperformed by 13 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 state has seen an uptick in its number of citizens, adding 178,026 citizens to its population. This spike in the past 10 years landed the state at the 11 ranking among population growth. Nevada has also seen a 14.5 percent increase in Non-Farm Payroll Employment, ranking them ninth in the country.

The Economic Outlook tells a similar story about Nevada’s economy. The ranking is based on the 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. Nevada ranked sixth overall for economic outlook and growth potential, telling a much different story from the state’s decline during COVID-19. If the state’s economy can make a comeback in the next several months, it can be put back on track for growth potential.

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 Nevada, a lack of entertainment jobs means laborers will have to find other means of income. This points to a need for the economy’s diversification, and business opportunities could arise in front of that need.

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.

MOOYAH Burgers, Fries & Shakes*

Current units in state: 0
Growth capacity in state: 8
Total jobs created at max growth capacity: 200

Tony Darden, MOOYAH Burgers, Fries & Shakes’ president, seconded the notion of strategic growth through careful planning and attention to regional trends.

“When looking to expand, at a macro level we look at population growth, the health of the economy, supply chain availability and the state of both the residential and commercial real estate markets,” said Darden. “Once through that we then take a more granular approach in terms of understanding the workforce, density of the population and the number and competitive seats.”

Famous Dave’s*

Current units in state: 6
Growth capacity in state: 10
Total jobs created at max growth capacity: 500

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: 3
Growth capacity in state: 5+
Total jobs created at max growth capacity: 25+

Director of Franchise Development Robert Bhagwandat said at present, their 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."