What Texas’ Economic Outlook Means for Franchisors

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

By Luca Piacentini1851 Franchise Managing Editor

Updated 8:08AM • 07/07/23

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 Texas, 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: 13
2023 Economic Performance Ranking: 7

The State

Texas has the ninth largest GDP in the world and is only expected to grow in the future. Texas’ rapid population growth makes it an excellent place for businesses and entrepreneurs to expand. Since 2010, the population has increased 16%, with markets like Dallas and Houston leading the nation in metropolitan growth for four consecutive years.

The state is continually ranked one of the best for businesses and was recently ranked first for its growth prospects by Forbes, thanks to strong employment and income growth forecasts for the next five years. Large companies like Amazon, Tesla and HP are moving their operations to Texas, and many others are expected to follow in the coming years, bringing millions of families and limitless opportunities.

Making Sense of the Data

What does this mean for Texas’ economy? To start with the Economic Performance report, the index shows that within the past 10 years, Texas has been outperformed by only six 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. Texas has seen an Absolute Domestic Migration of a whopping 1.3 million, the second highest number in the country.

The Economic Outlook tells another story about Texas’ 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, Texas appears at No. 1 for its Top Marginal Personal Income Tax Rate of 0% and at No. 5 for its Top Marginal Corporate Income Tax Rate of 2.60%.

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.

MOOYAH Burgers, Fries & Shakes*

Current units in state: 21
Growth capacity in state: 50+
Total jobs created at max growth capacity: 1,000
Total unit count: 100
Investment range: $477,918 to $989,793

MOOYAH Burgers, Fries & Shakes, the nearly 100-unit “better burger” concept, is planning to sell out in its home state by partnering with franchise owners across the state. The franchise is aiming to close out remaining key markets in its home state with the goal of opening 15 locations in Austin, 15 in Houston and three in Waco over the coming years.

“We’re born in Texas, so it makes sense to expand in major metros in Texas,” said Doug Willmarth, president of MOOYAH. “It’s a natural time to go in and leverage the strength, experience and power that we have within the state. Because the brand and market are growing, there are great sites in Texas where there’s an opportunity to put a MOOYAH that didn’t exist five years ago. We’re experiencing unprecedented interest in these territories.”

The Melting Pot

Current units in state: 6
Growth capacity in state: 5
Total jobs created at max growth capacity: 50+
Total unit count: 94
Investment range: $1.3 to $1.5 million

The Melting Pot, the fondue franchise, is pursuing franchise expansion in 2023, starting with Texas. The franchisor is specifically targeting Dallas, southeast Houston, southern San Antonio, Lubbock and Spring, Texas.

“Between our forecasting and support from AI technology, we’ve determined that five more locations can be added to the state of Texas,” said Collin Benyo, franchise growth strategist at The Melting Pot. “Texas markets are extremely franchise-friendly. The Melting Pot franchisees get a lot of opportunity to come into Texas markets and work well because there is just so much untapped population.”

Pool Scouts*

Current units in state: 6
Growth capacity in state: 20
Total jobs created at max growth capacity: 75+
Total unit count: 109
Investment range: $70,950 to $88,350

Pool Scouts, the pool cleaning franchise based out of Virginia Beach, is honing in on efforts to grow in Texas. The state has proven to be an excellent market for the brand, which already has franchise operations in Austin, Plano-Frisco, Sugarland, Kingwood, Dallas and Houston.

“More and more people are moving to the area,” said Michael Wagner, brand president. “Many residences have pools that need to be serviced, especially as we get into the hot Texas summers. Our other territories in the state have created a name for Pool Scouts there, and we are excited to grow the brand and bring our services to more Texans.”

Lightbridge Academy*

Current units in state: 0
Growth capacity in state: 25
Total jobs created at max growth capacity: 625
Total unit count: 70
Investment range: $621,233 to $824,150

Lightbridge Academy, the innovator in early education and child care, is expanding into the Lone Star State with plans to open 15 locations in Dallas and 10 in Houston. The brand recently signed a three-unit deal in Houston.

“We see a high demand in Texas and are concentrating our efforts on serving the expansive markets of that state,” said Jim DiRugeris, Lightbridge Academy’s senior vice president of franchise sales. “There has been an increase in the number of people moving to Dallas-Fort Worth and Houston, and there’s not enough quality child care providers currently in the area to support working parents. Young families are continuing to move from other states to Texas. So it's a great opportunity to enter the market and serve these Houstonian families.”