What Michigan’s Economic Outlook Means for Franchisors

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

By Jeff DwyerStaff Writer

Updated 8:08AM • 07/11/23

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 Michigan, 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: 16
2023 Economic Performance Ranking: 33

The State

Michigan’s economy appears to be up in the air as the state could potentially see an economic slowdown by the end of 2023, as economists predict a “mild recession” may be on the horizon. However, according to Bridge Michigan, the state will have a cushion of about $9.2 billion in surplus to help alleviate some of the impact of a potential recession.

A report from Michigan’s House Fiscal Agency also says the state’s economy and revenue have been significantly affected as a result of the status of the national economy. The agency notes that while Michigan’s wage and salary income is expected to increase by the end of 2023 by 5.8%, inflation is also expected to increase by 4.4%, and the state’s unemployment rate is predicted to see a slight increase from 4.3% to 5% by the end of the year. An Economic Outlook and Budget review from the Senate’s Fiscal Agency echoed a similar sentiment.

“The Michigan economy will mirror the path of the national economy,” the review notes. “Employment growth will remain weak, although the unemployment rate will remain relatively stable.”

The state’s overall population also continues to decline. Although Michigan is home to about 10 million residents, reports claim nearly 43,200 people left the state from 2020 to 2022. In order to address the steadily declining population, Michigan Governor Gretchen Whitmer signed an executive order to establish a council aimed at growing the state’s population.

Making Sense of the Data

What does this mean for Michigan’s economy? To start with the Economic Performance report, the index shows that within the past 10 years, Michigan has been outperformed by 32 other state economies.

The performance index is based broadly on a state’s performance within state gross domestic product (GDP), absolute domestic migration and non-farm payroll employment. Michigan has seen a decline in absolute domestic migration of about 266K, placing the state at 46th in the country.

The Economic Outlook tells another story about Michigan’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, Michigan appears at No. 16, with a top marginal personal income tax rate of 6.65% and a top marginal corporate income tax rate of 8.0%.

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 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, findings within the report should not be the deciding measure for franchisors, but they should play a role in the decision.

BIGGBY® COFFEE

Current units in state: 230+
Growth capacity in state: N/A
Total jobs created at max growth capacity: N/A
Total unit count: 340+
Investment range: $246,305 to $564,626

BIGGBY® COFFEE, the East Lansing, Michigan-based coffee concept continues to grow in its home state and across the country. The brand has seen significant momentum over the last couple of years and is leveraging its growth to continue its expansion efforts in existing and brand-new territories.

“We have had a strong year of openings because of the momentum we built from 2020 and into 2021,” explained Tony DiPietro, VP of emerging market development at BIGGBY® COFFEE. “Despite the issues most have been facing with inflation, labor shortages, real estate challenges and supply chain impact, we have not been slowing down on our growth.”

Plumbing Paramedics

Current units in state: 0
Growth capacity in state: N/A
Total jobs created at max growth capacity: N/A
Total unit count: 4+
Investment range: $102,250 to $205,800

Plumbing Paramedics, the emerging plumbing service concept that operates under the franchise umbrella of Threshold Brands, is continuing to grow around the United States and is targeting Michigan’s largest city for expansion.

“We are looking to expand in Detroit due to both the opportunity that exists in the community and the potential for further regional expansion,” explained Ron Bender, chief growth officer of Plumbing Paramedics’ parent franchisor Threshold Brands. “Once Plumbing Paramedics establishes a strong foothold in the Detroit market, it will be positioned well to increase brand awareness throughout the region.”

Mold Medics

Current units in state: 0
Growth capacity in state: N/A
Total jobs created at max growth capacity: N/A
Total unit count: 2 corporate locations
Investment range: $83,049 to $158,999

Mold Medics, the emerging indoor environmental health concept that operates under the Threshold Brands franchise network, is looking to expand into a number of new markets. The brand, which recently began offering franchise opportunities, is targeting states such as Michigan, Tennessee, Ohio, Pennsylvania and New Jersey for expansion.

“We have a lot of complete markets that are available for somebody to come in and begin growing and expanding at their own pace,” said Mold Medics CEO Tim Swackhammer. “We’re looking to grow concentrically so we can have a good support system in place for onboarding franchises. That overlap is definitely something that makes our target markets appealing from a franchising perspective.”

Franchise Brands Headquartered in Michigan:

*This brand is a paid partner of 1851 Franchise. For more information on paid partnerships please click here.

What Michigan’s Economic Outlook Means for Franchisors

BIGGBY® COFFEE

Plumbing Paramedics

Mold Medics

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