What Wisconsin’s Economic Outlook Means for Franchisors

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

By Luca Piacentini1851 Franchise Managing Editor

7:07AM • 10/23/20

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 Wisconsin, 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: 12
2008–2018 Performance Ranking: 34

The State

Wisconsin's economy is driven by manufacturing, agriculture and healthcare. The state is well-known as the nation's leading producer of cheese and is nicknamed "America's Dairyland." Manufacturing (especially paper products), information technology (IT), cranberries, ginseng and tourism are also major contributors to the state's economy.

Wisconsin's economy shrunk by an annual rate of 5 percent in the first three months of 2020 compared to the last quarter of 2019, according to the U.S. Department of Commerce. Wisconsin's first-quarter gross domestic product totaled close to $349 billion, down from nearly $352 billion in the last three months of 2019, according to the data. (The losses are calculated at an annual rate, meaning that if the current pace of Wisconsin's economic slowdown continues through the end of the year, the state's economy would have contracted by 5 percent.) The industries that contributed the greatest gains to the state's first-quarter GDP were construction, agriculture and forestry. Three-quarters of Wisconsin employers have said that COVID-19 has negatively impacted their business, according to new survey results from Wisconsin Manufacturers and Commerce (WMC), the state's business lobbying group.

Making Sense of the Data

What does this mean for Wisconsin’s economy? To start with the Economic Performance report, the index shows that within the past ten years, Wisconsin has been outperformed by 33 other state economies. The performance index is based broadly on a state’s performance within State Gross Domestic Product (rank: 22nd), Absolute Domestic Migration (rank: 39th) and Non-Farm Payroll Employment (rank: 38th). The category that most negatively impacted the agriculturally driven state’s performance was their Non-Farm Payroll Employment status — Wisconsin only grew 4.2 percent in this category.

The Economic Outlook tells another story about the Wisconsin 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, Wisconsin is listed as 12th. Although Wisconsin has been ranked in the middle of the pack in the past, the report predicts that the state’s future is bright.

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 Wisconsin, this presents an opportunity to grow. The state has been ranked third for recently legislated tax changes, with a decrease of $1.18 per $1,000 of personal income over the past two years. The state is also ranked particularly high (10th) for public employees per 10,000 of population, coming in at 488.8.

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 Wisconsin has been behind in performance, its potential for growth is improving exponentially.

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.

The Brass Tap*

Current units in state: 1
Available units: 5+
Total jobs created at max growth capacity: 35+

Jamie Cecil, vice president of franchise development at sports-bar franchise The Brass Tap notes that it is an exciting time for craft beer in Wisconsin.

“Bringing The Brass Tap to Wisconsin will give craft beer aficionados another reason to celebrate the unique flavors and local brews being produced in the region,” said Cecil. The right multi-unit franchisee would be an important asset in building out the Wisconsin market. There’s room for a multi-unit developer to come in and open up as many as three to four locations — that really says a lot about our potential here. We also have a lot of franchisees that have already made the decision to reinvest in the brand, and that says a lot about the kind of unparalleled opportunity we offer to our franchisees, too.”

Sylvan Learning*

Current units in state: 4
Growth capacity in state: 26
Total jobs created at max growth capacity: 260

Supplemental education franchise Sylvan Learning has recognized Wisconsin as a prime area for franchise growth.

“We pick areas to focus our franchise development efforts on based on demographic data we receive from our mapping-system provider,” said CEO John McAuliffe. “We look for areas with a high concentration of families with school-age children whose annual income is $50k or above. We also look at some other factors such as shopping centers, where tutoring centers can be located, schools and competition.”

Amazing Lash Studio

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

While the eyelash extension franchise, Amazing Lash Studio, does not have any locations in Wisconsin yet, the team has identified the state as a market with potential for expansion.

“To determine our top development markets, we did a white space analysis and found that both brands have a growth potential of 1,000 or more units,” said JD Prager. “That leaves a lot of geography to tackle. So, we took a two-pronged approach. Seeing as though both brands are membership based models, 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. 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. We then overlay that with physical retail in those markets. 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.”