What Rhode Island’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 Rhode Island, 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: 43
• 2008–2018 Performance Ranking: 38

The State

Rhode Island's economy was historically based overwhelmingly on industry, with agriculture, mining, forestry and fishing making only small contributions. The state's leading manufactured products were jewelry, silverware, machinery, primary metals, textiles and rubber products. Today, much of Rhode Island’s economy is based in services, particularly health care and education, and, to some extent,manufacturing. The state's nautical history continues in the 21st century in the form of nuclear submarine construction.

When it comes to COVID-19, the “Back-to-Normal Index,” created by CNN Business and Moody’s Analytics, places Rhode Island in a tie for the sixth-best economic recovery in the country. The index considers 37 national and seven state-level indicators, including unemployment claims, real estate listings and leisurely activities like box-office sales. As of Aug. 8, roughly 9 percent of Rhode Island’s labor force had ongoing unemployment claims, while Massachusetts and Connecticut were both at 12 percent. Hawaii was at 18 percent, while California, Nevada, and New York were all at 15 percent.

Making Sense of the Data

What does this mean for Rhode Island’s economy? To start with the Economic Performance report, the index shows that within the past ten years, Rhode Island has been outperformed by 37 other state economies. The performance index is based broadly on a state’s performance within State Gross Domestic Product (rank: 39th), Absolute Domestic Migration (rank: 32nd) and Non-Farm Payroll Employment (rank: 35th).

The Economic Outlook tells another story about the Rhode Island 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, Rhode Island appears at No. 43. Although they’re ranked in the low 30s as of now, the report suggests that the Ocean State’s outlook may be on the decline if things stay the same.

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 Rhode Island, this presents an opportunity for improvement. For example, the state is ranked particularly low (rank: 47th) when it comes to property tax burdens, with property owners paying $46.97 per $1,000 of personal income. The state is also ranked 50th in the nation for estate/inheritance taxation. 

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 Rhode Island may be behind in outlook, it still has plenty of benefits. The state is ranked sixth in the nation when it comes to the number of public employees per 10,000 of population.

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. 

Atomic Wings*

• Current units in state: 0
• Growth capacity in state: 5+
• Total jobs created at max growth capacity: 15+

The NYC-based Buffalo wing franchise Atomic Wings has identified Rhode Island as a prime state for franchise growth. 

"We have great brand recognition in the Northeast,” said CEO Zak Omar. “We've done a brand survey in the tristate area, and we realize that our brand awareness is strong within those states. That's why it's not a reach for us to expand up and down the East Coast. It's similar to what Dunkin' did when they first started expanding — we're going to build our base and then take on major markets to the West. We've done well in the largest city in America, so we're looking forward to taking that model and getting it up and bringing it to other metropolitan areas and suburbs as well."

AWATFit

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

Rich Decker, CEO and founder of mobile fitness franchise AWATfit, which started in Long Island, notes that the brand is growing organically throughout the East Coast.

“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,” said Decker. “We also look into new home permits, school expansion and population drivers. Finally, when identifying places to grow, we look at the average income, average home price, tourism, colleges and climate, as well.”

GYMGUYZ

• Current units in state: 0
• Growth capacity in state: 5+
• Total jobs created at max growth capacity: 35+

The New York-based fitness franchise GYMGUYZ also has its sights set on Rhode Island for further franchise expansion. Ray Reichard, Vice President of Franchise Development, notes that the team does extensive research when deciding on target markets.

Franchise Brands Headquartered in Rhode Island

• Auntie Anne's Hand-Rolled Soft Pretzels
• Launch Trampoline