What Oregon’s Economic Outlook Means for Franchisors

This month, 1851 is taking an in-depth look at ALEC-Laffer’s 16th annual “Rich States, Poor States” Economic Competitiveness Index and how it can be useful to franchisors as they expand their footprints. The report ranks all 50 states based on two criteria: 1) Economic Outlook, a state’s current standing in 15 state policy variables; 2) Economic Performance, a retrospective measure based on a state’s performance over the past 10 years.

For the state of Oregon, these rankings reveal a lot about where the state economy is going and where there is opportunity for their economy to grow. 

• 2023 Economic Outlook Ranking: 43
• 2023 Economic Performance Ranking: 13

The State

The economic recovery in Oregon following the COVID-19 pandemic has been robust. Household incomes and financial conditions have also improved, surpassing pre-pandemic levels. However, as the economy approaches full employment, the pace of growth is expected to decelerate. In the upcoming 2023-25 period, economic expansion will likely reach its potential, determined by the availability of labor and capital within the state. The key drivers of economic growth are the number of workers and their productivity levels.

The pandemic recession caused unprecedented job losses in Oregon. In two months, one out of seven jobs were lost and unemployment reached a record high of 13.3%. However, by April 2022, about nine out of 10 jobs that were lost during the recession had been regained. The unemployment rate in Oregon was 3.7% in May 2023, slightly higher than the national unemployment rate of 3.6%.

Meanwhile, the most recent population estimates from the U.S. Census Bureau revealed that Oregon experienced a population decline for the first time in many years. According to the 2022 estimates, which were released in late December, the state lost approximately 16,000 residents between July 1, 2021, and July 1, 2022. This decline represents about 0.4% of Oregon's total population, ranking the state among the top 10 fastest-shrinking states in the United States. However, it is important to consider that other measures of population present a slightly different perspective on the situation.

Making Sense of the Data

What does this mean for Oregon’s economy? To start with the Economic Performance report, the index shows that within the past 10 years, Oregon has been outperformed by 12 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. Oregon has seen an absolute domestic migration of 249,928 ranking it 11th in the country. 

The Economic Outlook tells another story about Oregon’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, is influenced directly by state lawmakers through the legislative process. In this ranking, Oregon appears at No. 43, with a top marginal personal income tax rate of 14.69% and a top marginal corporate income tax rate of 15.73%.

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 businesses, it shouldn’t discourage them from investing in their dream franchises if they're in a market with a slower growth rate. 

Franchise Growth Plans

So what should franchisors do with this information? 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. 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, findings within the report should not be the deciding measure for franchisors, but they should play a role in the decision. 

Big Blue Swim School* 

• Current units in state: 0 
• Growth capacity in state: 5
• Total jobs created at max growth capacity: 150 to 200
• Total unit count: 27  
• Investment range: $4,351,100 to $3,124,900

Big Blue Swim School, one of the nation’s fastest-growing swim school franchises, has set its sights on Portland as a top market for franchise development. 

“We’ve identified Portland as an ideal market for growth because it has a dense population of kids and families,” said CEO Scott Sanders.

Anchored Tiny Homes

• Current units in state: 0
• Growth capacity in state: N/A
• Total jobs created at max growth capacity: N/A
• Total unit count: 4
• Investment range: $136,250 to $262,000

With multiple territories already in the works, Anchored Tiny Homes, the tiny home franchise that focuses intently on the construction of accessory dwelling units, continues to focus on establishing itself in major metros.

“We’re pretty open to markets nationwide; the need is pervasive almost everywhere,” said Colton Paulhus, co-founder and CEO. “However, we’re aware that the major metros host an even higher demand. Places like Southern California, Oregon, Washington, Texas, Florida, New York and New Jersey have already proven to be promising.”

Paris Baguette*

• Current units in state: 1
• Growth capacity in state: N/A
• Total jobs created at max growth capacity: N/A
• Total unit count: 4,000 worldwide, 150 in the United States
• Investment range: $652,565 to $1,750,900

Bakery cafe franchise Paris Baguette is focusing on building out communities where Paris Baguette is already established, but with a lower concentration, such as in Oregon. In markets like these, it is possible that guests have experienced Paris Baguette before, or they decide to take a chance on a new bakery café in town and quickly become a loyal customer, says Paris Baguette CEO Mark Mele. 

Franchise Brands Headquartered in Oregon:

• Pizza Schmizza
• Weed Man
• Billy Sim's BBQ
• The Human Bean
• Cafe Yumm!