What Washington's Economic Outlook Means for Franchisors

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

By Andrea Jablonski1851 Franchise Contributor

11:11AM • 10/08/20

This summer, ALEC-Laffer published their 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 Washington, 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: 39
2008–2018 Performance Ranking: 2

The State

Like most states, Washington has seen a significant increase in its rate of unemployment since the onset of the COVID-19 pandemic. As recently as early September, 10.2% of the state was unemployed, a decline 30% greater than during the Great Recession.

The industries that have been hit the hardest have been leisure and hospitality, and since June Washington has seen a recovery rate of about 30%. Additionally, the state’s construction industry has made great strides towards recovery, with 80% of its employees having returned to regular employment. Even with these positive trends, the state likely won’t experience a full recovery until well into 2021.

Making Sense of the Data

What does this mean for Washington’s economy? To start with the Economic Performance report, the index shows that within the past ten years, Oregon has been outperformed by only one other state’s economy. The performance index is based broadly on a state’s performance within State Gross Domestic Product, Absolute Domestic Migration and Non-Farm Payroll Employment — and Oregon was ranked relatively high in all three categories. The state saw 59.1% growth in its gross domestic product and 15.6% growth in its non-farm payroll employment. The state ranked No. 7 in Absolute Domestic Migration, growing by 356,317 residents.

The Economic Outlook tells another story about the Washington 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, Washington ranked No. 39 — one of the lowest ranks it has received from ALEC-Laffer since 2013. Although it’s ranked near the back of the pack, the state’s economy still has more potential to grow than 11 other states.

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 Washington, this presents an opportunity to grow, and, in a time when the state is struggling under the pandemic, there will be people in search of new career opportunities.

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 Washington hasn’t stood out significantly in its performance, the diversification of the state’s economy could be a help in boosting that performance.

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.

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

Elements Massage

Current units in state: 12
Growth capacity in state: 5
Total jobs created at max growth capacity: 135

Lauren Wanamaker, senior director of development for Wellbiz Brands, parent company of both Amazing Lash Studio and Elements Massage, said their brands’ growth plans are strategic and that Washington hits all the right targets.

“Both Elements Massage and Amazing Lash Studio have over 200 studios open. 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. Because both brands are membership-based models, we have customer data on everyone who receives a service at all of our locations,” Wanamaker said.

“We're able to profile those individuals against demographics as well as what we call psychographics. Demographics are on the individual level versus psychographics, which are done on the household level. It factors in demographics as well as the stage of life that customers are in. For example, are they single and fresh out of college, married with young children or an older couple that are empty nesters reaching their retirement age? We then factor that in with the geography in which they're living, against credit card swipe data from Mosaic, which is a part of Experian. That offers us insight into how people are spending on services so that we can visualize heat maps to find out where the hot pockets are that meet one of our many customer profiles.”

TWO MEN AND A TRUCK*

Current units in state: 4
Growth capacity in state: 14
Total jobs created at max growth capacity: 276

Cheryl Ackley, franchise development specialist for moving franchise TWO MEN AND A TRUCK, said the brand’s growth potential is significant and sees Washington as a promising state to target.

“At TWO MEN AND A TRUCK, we look at many different pieces when defining territories, specifically using data on individual household incomes, population and ZIP codes,” said Ackley. “These reflect how the full-service moving experience will impact our communities in a positive way by moving our customers forward.”

Togo’s

Current units in state: 1
Growth capacity in state: 15+
Total jobs created at max growth capacity: 240+

John Dyer, director of franchise sales and real estate with sandwich franchise Togo’s, says that their growth strategy is based on population and proximity to existing stores — making Washington a prime target.

"We primarily look at markets where a lot of folks are moving and where there's significant population growth,” said Dyer. “We pay particular attention to metropolitan areas where Californians are relocating as well, because of our base and our heartland being in California. That's how we've arrived at some of our development markets — we know we have a built-in clientele of folks that were exposed to the brand at one point while they were growing up in California. Now, when they arrive at this new location, they are shocked to find out that Togo's doesn't have a presence there. Of course, we're also looking for a favorable business environment from a franchising standpoint."