What Nebraska's Economic Outlook Means for Franchisors

This month, 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 Nebraska, 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: 36
• 2008–2018 Performance Ranking: 19

The State

As a result of the COVID-19 pandemic, Nebraska’s economic outlook is uncertain. First, the good news: Numbers released by the state’s Department of Labor as recently as September 18 show Nebraska’s unemployment rate as the lowest in the nation at just four percent, including the 340,4000 Nebraskans who have filed for unemployment since March. 

Now, the bad news: Historically, Nebraska’s economy has been deeply reliant on agriculture — a sector of the economy that has struggled consistently throughout the pandemic. Each year, farming markets contribute an average of $21 billion to Nebraska's economy. But even prior to the COVID-19 pandemic, the state’s agriculture economy was starting to struggle due to a steady decline in land value and a plunge in livestock value. Additionally, with the shutdown of the hospitality and institutional food service sectors — which accounted for 54 percent of all food consumed — a massive source of income disappeared almost overnight. According to the Nebraska Farm Bureau analysis released in June, the state’s agricultural economy could suffer  $3.7 billion in losses.

Making Sense of the Data

What does this mean for Nebraska’s economy? Let’s start with the Economic Performance report, which shows that within the past ten years, Nebraska has been outperformed by 18 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. The category that slowed the state down the most was its Non-Farm Payroll Employment status. Nebraska only grew 5.5% in this category, leaving the state with a ranking of 30 among states that further diversified their economies outside of farming. The Midwestern state’s State Gross Domestic Product, however, was ranked significantly higher, in the number eight spot, seeing 45.5% growth.

The Economic Outlook tells another story. 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, Nebraska is seated 36th. Even with a relatively low ranking, the Cornhusker State still has more potential to grow economically than 14 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 their dream franchise if they're in a market with a slower growth rate. For states like Nebraska, this presents an opportunity to grow in industries that make sense, though the dollar is projected to be stretched relatively thin.

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. Historically, Alec-Laffer has ranked Nebraska as a median state, and based on this year’s index it’s likely that the state will struggle throughout the rest of the pandemic.

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 Nebraska:

Amazing Lash

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

“Generally, we look for things like traffic generators, national retailers and services that cater to similar clientele as us,” explained JD Prager, Senior Director of Real Estate and Construction for WellBiz Brands, Inc., Amazing Lash’s parent company. “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.”

AWATfit

• Current units in state: 0
• Growth capacity in state: 10
• Total jobs created at max growth capacity: 10

Richard Decker, CEO of mobile-fitness franchise AWATfit, says that because of the nature of his business model, AWATFit is primed for growth all over the country, and with such close proximity to his home state of New York, Vermont is a key target. 

“We’ve had a number of potential franchisee requests in the past couple of months, and we’ll continue to target regions where potential franchisees are ready to take on their own business,” he said.

Renovation Sells*

• Current units in state: 0
• Growth capacity in state: 5
• Total jobs created at max growth capacity: 100

Micheal Valente, CEO of home renovation franchise Renovation Sells, notes that the brand is primed and ready for growth in Nebraska.

“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 Valente. “2020 has been an interesting year that's for sure, and it's proven how resilient our business model is. We're excited to expand and establish a footprint in areas 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.” 

Franchise Brands Headquartered in Nebraska

• HobbyTown USA
• Home Instead Senior Care
• Maids Home Services
• Glacier Restaurant Group
• Scooter’s Coffee
• Signal 88