What Ohio's Economic Outlook Means for Franchisors

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

By Sarah Baumann1851 Franchise Contributor

11:11AM • 10/13/20

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 Ohio, 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: 29
2008–2018 Performance Ranking: 36

The State

The Ohio state economy has had its share of ups and downs with COVID-19. As of October 1, 18,000 new unemployment claims were reportedly filed during last week of September, with 300,000 roughly still unemployed within the state. As of September 28, the manufacturing sector — the state’s driving industry — was estimated to have lost tens of thousands of jobs as a result of the pandemic. The state's factories lead the nation in the production of plastics and rubber, fabricated metals, electrical equipment and appliances. And, with the supply chain disrupted by COVID-19, factory jobs have been heavily impacted.

Ohio is seeing positive results from the solar industry, however, and many anticipate the sector will aid the economy in coming back. The defense and aerospace industry — another critical sector for the Buckeye State — is also reportedly trying to grow amid the pandemic. With opportunities in these industries, among others, the state is slowly making progress toward economic recovery.

Making Sense of the Data

What does this mean for Ohio’s economy? To start with the Economic Performance report, the index shows that within the past 10 years, Ohio has been outperformed by 35 other state economies. The performance index is based broadly on a state’s performance within State Gross Domestic Product (GDP), Absolute Domestic Migration and Non-Farm Payroll Employment. The category that slowed the Buckeye State most was migration, with a ranking of 45 at a 277,941 population loss. Ohio also ranked No. 26 and No. 31 in state GDP and Non-Farm Payroll growth, seating them comfortably in the middle of the pack among the 50 states for competitiveness.

The Economic Outlook tells a slightly more optimistic story about the Ohio 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, Ohio is seated 29. Although they’re still ranked in the bottom 25 states, the report indicates that the state has room for growth due to their recent legislative policies.

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 Ohio, potential franchisees can expect higher tax rates than others but, with the right opportunity for Ohio’s population, 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 Ohio is consistently ranked in the middle for outlook and in performance, good business opportunities still have potential to grow in their 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.

Renew Crew

Current units in state: 0
Growth capacity in state: 25
Total jobs created at max growth capacity: 125

Brand Lead at Renew Crew Will Faulkner said that typically their team decides on where to expand the brand by taking note of housing data in specific areas of a state.

“All over the country, the $885 million outdoor living industry has shown significant growth as more and more homeowners want to expand their living space by taking it outside," said Faulkner. “Noting that Renew Crew takes the number of owner-occupied housing units and dual-income households, as well as weather, into consideration when determining target markets.”

Sylvan Learning*

Current units in state: 19
Growth capacity in state: 31
Total jobs created at max growth capacity: 310

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.”

Home Clean Heroes*

Current units in state: 16
Growth capacity in state: 16
Total jobs created at max growth capacity: 112

President of Home Clean Heroes franchise Joe Delatte says building out the brand concentrically and regionally where the brand is already known is critical to its growth projection.

“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,” said Delatte. “We’ve gained great traction in the Southeast and are looking to build out neighboring territories to existing locations. We look at income and household numbers in these markets and along with website analytics, we can zero in on markets where the need matches the want.”

Buffalo Wings & Rings

Current units in state: 15
Growth capacity in state: 5+
Total jobs created at max growth capacity: 275

Buffalo Wings & Rings Director of Franchising Dan Doulen says that the wing brand’s strategy is to provide opportunities for potential franchisees in areas that would best benefit the economy.

“We are always looking to create more efficiencies for franchisees and ways to increase unit-level economics,” said Doulen “Not only with construction and design, but also when it comes to operations and procedures. The smaller footprint restaurant that we're working on will both reduce the initial investment and the ongoing operational costs while maintaining our high level of quality. The new layout is designed to encourage more guests to visit us, as well as to accommodate larger group sizes. In addition to evolving what customers already love about us, we’re also focusing on the profitability for our franchisees. Everything we do is about creating VIP service, chef-inspired food, crave-worthy wings and rings and a fun place to hangout with friends and family.”