What South Carolina's Economic Outlook Means for Franchisors

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

By Sarah Baumann1851 Franchise Contributor

11:11AM • 10/12/20

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 South Carolina, 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: 23
2008–2018 Performance Ranking: 33

The State

In 2019, South Carolina’s median income was reportedly $27,909, while its state GDP was $221.69 billion. Though the state’s economy once relied predominantly on cotton, tobacco and indigo for income, the post-Civil War economy saw a shift toward manufacturing and textiles. South Carolina’s tourism industry additionally has flourished in recent years with destinations like Myrtle Beach, Charleston and Hilton Head growing in popularity. The aerospace, automotive and life sciences industries have also found a place within South Carolina’s economy, further diversifying the state’s line of income.

Like every state in the union, South Carolina’s economy has been affected by the COVID-19 pandemic. In June, the Palmetto State ranked 19th in exposure to COVID-19 disruptions. From March to May, tax revenue was down 25%in South Carolina compared to last year and state colleges and universities are bracing for possible reductions. Though the past two years of the state’s economy have been strong, South Carolina is struggling to come out from under the pandemic.

Making Sense of the Data

What does this mean for South Carolina’s economy? To start with the Economic Performance report, the index shows that within the past 10 years, South Carolina has only been outperformed by seven 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 ranked within the top 12 in all three of these categories, with Absolute Domestic Migration being their highest ranking at No. 6. The past 10 years have been lucrative for South Carolina as the state makes efforts to further diversify its economy.

The Economic Outlook tells another story about the South Carolina 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, South Carolina is ranked No. 32. This is a big fall from their No. 7 rank in performance, and is likely due to shifting economic policies in the state. South Carolina ranked 42 in Recently Legislated Tax Changes, their lowest ranking after Personal Income Tax Progressivity.

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 South Carolina, this presents an opportunity to grow. The dollar is projected to stretch further in South Carolina than in most other states and will likely continue to be in the coming years.

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 South Carolina has been ahead in performance, their growth potential is likely on the decline. This, however, does not mean that the right opportunity cannot go far in the South Carolina 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.

**Checkers* & Rally’s**

Current units in state: 8
Growth capacity in state: 16
Total jobs created at max growth capacity: 400

Director of Franchise Development Robert Bhagwandat said at present, the fast casual burger concept’s 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, resulting 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."

Atomic Wings*

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

Zak Omar, CEO of New York-based wing franchise Atomic Wings said growing concentrically within the region makes the most sense for their brand to capitalize on brand recognition.

"We have great brand recognition in the Northeast,” said Omar. “We've done a brand survey in the tri-state 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."

Home Clean Heroes*

Current units in state: 0
Growth capacity in state: 3
Total jobs created at max growth capacity: 21

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. States like Virginia, North Carolina, South Carolina, Georgia, Florida and Texas are some of the areas we're excited about expanding into.”

1-800-JUNKPRO

Current units in state: 0
Growth capacity in state: 4
Total jobs created at max growth capacity: 32

CEO of junk removal franchise 1-800-JUNKPRO Mike Davis said data is key to their strategy and drives the brand’s growth in most regions.

“When we’re determining where to grow, we look at a number of data points including population, household income and demographics,” said David. “For population, 1-800-JUNKPRO works best in populations of 500,000 or more. If the population is high enough and if it creates enough waste, that's a good market for us to be in. We also look at household income, as well as the percentage of single-family homes versus the percentage of multi-family homes in each market to determine if it’s a viable market for 1-800-JUNKPRO.”