What Utah's Economic Outlook Means for Franchisors

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

By Andrea Jablonski1851 Franchise Contributor

8:08AM • 10/30/20

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 Utah, 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: 1
2008–2018 Performance Ranking: 3

The State

Like every other state in the country, Utah’s economy has suffered a great deal under the COVID-19 pandemic — losing $16 billion from its gross domestic product. But Utah’s recovery has been faster and stronger than most other states'. Unemployment claims in the state peaked at 126,192 in May and have been declining since. And though the economy still has a long way to go, only 35,649 claims have been filed since mid-September.

The road to recovery is paved with Utah’s retail shoppers. While restaurants and clothing stores have suffered due to shutdowns and limited capacity restrictions, grocery stores and outlets like Target and Costco have been in high demand — so much so that some stores are struggling to keep up with demand. Even seven months into the pandemic, Utah’s culture of preparedness is stocking up and emptying the shelves.

Making Sense of the Data

What does this mean for Utah’s economy? To start with the Economic Performance report, the index shows that within the past 10 years, Utah has outperformed 48 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. Utah experienced a significant increase in its gross domestic product rate of 52.6% and 23.6% increase in non-farm payroll employment. Over the last 10 years, the state saw an increase in its domestic migration rate, welcoming 77,933 new residents since 2009.

The Economic Outlook tells another story about Utah’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, Utah is No. 1. ALEC-Laffer has ranked Utah as the state with the No. 1 economic outlook since 2013 with more potential to grow economically than every other state in the country.

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 Utah, this presents important opportunities for growth across several industries.

Franchise Growth Plans

So what should franchisors do with this information? Though most franchisors take a shotgun approach — meaning wherever a prospective 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.

Here are a few franchise brands that are planning to grow in Utah:

Hand & Stone Massage and Facial Spa

Current units in state: 3
Growth capacity in state: 5+
Total jobs created at max growth capacity: 75+

“Salt Lake City is one of our prime target markets. We like markets like Salt Lake City because there are pockets where we can get a couple of multi-unit operators who can really own the market together,” said Nicole Alburger, senior director of franchise development for health and wellness brand Hand & Stone Massage and Facial Spa. “We think we could get a couple of owners to open 11 spas in Salt Lake City. Together, they can strategize and share marketing dollars, staff and resources. And, because the market has a great cost of living, a lot of families are moving there. We’re seeing a lot of interest from the market recently.”

Amazing Lash Studio

Current units in state: 5
Growth capacity in state: 5+
Total jobs created at max growth capacity: 50

“To determine our top development markets, we did a white space analysis and found that both brands have a growth potential of 1,000+ units. That leaves a lot of geography to tackle. So, we took a two-pronged approach. We have customer data on everyone who receives a service at all of our locations. We're able to profile those individuals against demographics as well as what we call psychographics,” said Lauren Wanamaker, senior director of development at WellBiz Brands, Amazing Lash Studio’s parent franchisor. “Generally, we look for things like traffic generators, national retailers and services that cater to similar clientele as us. After seeing those pockets of retail that overlap with our customer profiles, we get an idea of which trade areas we want to focus on. Once we get to market penetration in any given market, we can continue to evolve the exercise to figure out where there might be opportunities for next level trade areas in between existing studios that won't create too much overlap.”

Property Management Inc.*

Current units in state: 12
Growth capacity in state: 5
Total jobs created at max growth capacity: 25

Renovation Sells*

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

“As we embark on franchising our opportunity, we have the benefit of a business model that fills a gap in the marketplace as well as ample territory availability across the country,” said CEO Michael Valente of the home renovation brand Renovation Sells. “2020 has been an interesting year, that's for sure, but it's proven how resilient our business model is. We're excited to expand and establish a footprint in metros that are experiencing a real estate surge as millennials are reaching home-buying age. We also look at communities that have a large amount of older, dated homes that can greatly benefit from simple renovations to increase their value in the marketplace.”