What West Virginia's Economic Outlook Means for Franchisors

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

By Victoria CampisiStaff Writer

9:09AM • 07/14/23

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 West Virginia, 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: 28
2023 Economic Performance Ranking: 47

The State

A recent report from WalletHub says that West Virginia has the worst economy in the country. West Virginia ranked 51st in innovation potential, 48th in economic activity and 47th in economic health for a final score of 24.12. In 2022, West Virginia's gross domestic product (GDP) reached $71.7 billion, representing an increase of 0.1% from 2021. However, West Virginia's GDP declined at an annualized rate of -1.1% over the five years to 2022.

Additionally, West Virginia’s population has declined an annualized -0.5% for the past five years, ending in 2022. Reasons for leaving vary, but common themes included a lack of opportunity; low pay; not enough to do; the political climate; and poor cell phone/internet service.

Meanwhile, businesses in West Virginia employed a total of 644,784 people in 2022, with average annual employment growth over the past five years of -0.4%. The unemployment rate across the state in 2022 was 4%. The top three sectors by total employment are mining, health care/social assistance and manufacturing.

Making Sense of the Data

What does this mean for West Virginia’s economy? To start with the Economic Performance report, the index shows that within the past 10 years, West Virginia has been outperformed by 46 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. West Virginia has seen an absolute domestic migration of -47,517, making it the 32nd worst in the country.

The Economic Outlook tells another story about West Virginia’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, West Virginia appears at No. 28, with a top marginal personal income tax rate of 6.5% and a top marginal corporate income tax rate of 6.5%.

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

Layne’s Chicken Fingers*

Current units in state: 1
Growth capacity in state: N/A
Total jobs created at max growth capacity: 20-25 per location
Total unit count: 11
Investment range: $656,000 to $1,280,500

Layne’s Chicken Fingers, the Soon to be Famous™ fried chicken restaurant, is targeting West Virginia for expansion as it grows beyond its home state of Texas. The franchise is opening in Morgantown this summer. Chief Operating Officer Samir Wattar said that Layne’s is, “more of a suburban brand, appealing to middle to higher incomes, attracting families and doing well near colleges, such as near the University of North Texas in Dallas and University of West Virginia, when it opens in Morgantown.”

Paris Baguette*

Current units in state: 0
Growth capacity in the state: N/A
Total jobs created at max growth capacity: 15 to 20 per location
Total unit count: 4,000+
Investment range: $652,565 to $1,750,900

West Virginia is one of the states that bakery café concept Paris Baguette is targeting for development as it continues to eye the 1,000-unit mark within the United States by 2030.

“We are on track to enter new markets and open a total of 64 units by the end of 2023,” said TJ Rogers, franchise sales manager.

Atomic Wings*

Current units in state: 0
Growth capacity in state: N/A
Total jobs created at max growth capacity: N/A
Total unit count: 23
Investment range: $155,900 to $338,500

In April, Atomic Wings, the brand specializing in flavorful chicken wings, announced it had an additional 10 locations under construction, with plans to open throughout the year in new states across the country, including West Virginia.

“Growth has been tremendous over the past year, and we are excited to maintain that momentum with new grand openings across the country, “ said CEO Zak Omar.