What North Dakota’s Economic Outlook Means for Franchisors

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 North Dakota, 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: 11
• 2008–2018 Performance Ranking: 5

The State

North Dakota has a predominantly agricultural economy with a strong hand in the petroleum, food processing and technology industries as well. With agriculture being one of the hardest-hit industries under COVID-19, the state’s economy has suffered greatly and U.S.News & World Report recently named it as on the states that’s tax revenue was hit the hardest amid the pandemic. North Dakota’s economy has also been affected by falling oil prices, causing a great deal of anxiety for laborers in the industry. Roughly 80% of oil rig workers are still unemployed as a result of the pandemic, a number that is not likely to change anytime soon.

The economy has not been helped by the recent spike in cases of COVID-19 among North Dakota residents. Although the state has reopened for business, the fact that the virus is spreading at such a rapid rate makes North Dakota susceptible to future shutdowns. The Peace Garden State has, however, made efforts to diversify its economy in the past few years. North Dakota’s economy isn’t quite as diversified as it should be, indicating that there is room for improvement.

Making Sense of the Data

What does this mean for North Dakota’s economy? To start with the Economic Performance report, the index shows that within the past ten years, North Dakota has been outperformed by only 4 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. With North Dakota officials making efforts to diversify the economy, the agriculturally driven state boasts 17.4% in this category, ranking them number five among states that have diversified their economies outside of farming. The Midwestern state’s State Gross Domestic Product growth was perhaps the most impressive at 76.8% and locked them in at the number one spot for all 50 states. If these stats tell us anything, it's that North Dakota’s long-term economy has been on a steady upward trajectory.

The Economic Outlook tells a similar story about the North Dakota 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, North Dakota is seeded 11th. Although it didn’t rank not quite as high as it did for performance, The Roughrider State still has more potential to grow economically than 39 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 their dream franchise if they're in a market with a slower growth rate. For states like North Dakota, this presents an opportunity to grow. The dollar is projected to stretch further in North Dakota than in most other states, and, in a time when the agricultural-driven state's top source of income is struggling under the pandemic, there will be North Dakota residents looking for 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 North Dakota has been a top-performing state, its potential for growth is still improving exponentially and is likely to continue upward if the state can recover from the pandemic. 

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. 

Sylvan Learning*

• Current units in state: 2
• Growth capacity in state: 1
• Total jobs created at max growth capacity: 10

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 pick 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 such as shopping centers, where tutoring centers can be located, schools and competition.”

AWATfit

• Current units in state: 0
• Growth capacity in state: 5+
• Total jobs created at max growth capacity: 1

Richard Decker, founder and CEO of AWATfit, says population and demand play a big role in the brand’s expansion process.

“Aside from expanding in our home state of New York, we are looking to grow in other states like Texas, Florida, Arizona where the population grows exponentially daily. We also look into new home permits, school expansion and population drivers,” said Decker. “Finally, when identifying places to grow, we look at the average income, average home price, tourism, colleges and climate, as well.”

BeBalanced Hormone Weight Loss Centers*

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

David Cutillo, CEO of BeBalanced Hormone Weight Loss Centers, said careful and strategic planning is critical to the brand’s growth.

“Our growth strategy has always been very deliberate — very strategic,” Cutillo said. “We’ve been careful to make sure every aspect of our operations has been perfected and that we have strong brand awareness before breaking into a new market. Right now, everything is aligned for us, and we’re excited to take full advantage.”

Franchise Brands Headquartered in North Dakota

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