Nevada appears on course to build on its record as one of the nation's hot spots for franchise businesses, though some observers warn that more business regulation could dim the fortunes of the state's “formula entrepreneurs.”
A 2018 report from the International Franchise Association (IFA) predicted Nevada would have the fastest franchise growth in the nation. The state was poised to see 5.1 percent growth in franchise employment in 2018 and 7.8 percent growth in franchise output, according to the report.
“Nevada is also one of the seven states with no state income tax, which should help to further boost the attractiveness of Nevada relative to states with an income tax under the recently passed Tax Cuts and Jobs Act,” the report said.
Robert Cresanti, the IFA's president and CEO, said Nevada's low taxes and reasonable business regulations have made it easier for franchise businesses in the state to expand and hire more people.
“The franchise business has been growing year over year very strongly and outgrowing every other sort of measurable business in the U.S. significantly since 2010,” Cresanti told Watchdog.org. “The growth trends are stronger in states like Nevada that have a favorable business climate.”
Franchise businesses in Nevada, such as Orangetheory Fitness, Little Ceasars and Baja Fresh, were projected to support 78,800 jobs and a $3.4 billion total payroll through the end of 2018, according to IFA numbers. And the number of franchise locations in Nevada was projected to reach 6,400.
“Obviously, Nevada's travel and tourism industry is great for franchise businesses because people know and recognize those brands when they come to town,” he said.
Nevada has also been among the states with the fastest-growing populations in recent years, according to the U.S. Census Bureau. That Nevada also has a relatively young population makes it a good fit for expansion of franchise businesses, according to Cresanti.
Compared to franchise investments in the nation as a whole, Nevada franchise investments are 10 percent higher, which helps to prime growth, he said.
Unlike more than 20 other states, Nevada has not signed on to the idea codifying labor practices, such as regional minimum wage laws, predictive scheduling regulations and treating franchises as big businesses rather than small enterprises, according to Cresanti. Such regulations can kill existing franchises and start-ups, he said.
“It's a very bad nanny-state sort of engagement on regulation,” Cresanti said.
His advice to regulators is to avoid knee-jerk reactions to perceived economic problems and not to react with regulatory overkill.
“Really pay attention – measure twice and cut once,” Cresanti said.
Michael Schaus, communications director of the Nevada Policy Research Institute in Las Vegas, said the reported level of franchise business growth makes sense in light of how Nevada's public policies compare to neighboring California.
“Part of this growth is undoubtedly attributable to the fact that Nevada continues to be a relatively low-tax environment, especially compared to its western neighbor,” Schaus said in an email. “Combined with substantial population growth over the course of the last several years, it only makes sense that there is opportunity for business owners, franchise owners and entrepreneurs.”
But he warned that Nevada state lawmakers have been discussing increases in spending and policy changes that could place additional burdens on taxpayers in the future – something Schaus said might cool the state's economic expansion.
“If we want to see this economic growth continue, Nevada lawmakers need to stop treating it as a way to fund the never-ending expansion of government control over our economy,” he said.
Randi Thompson, state director of the National Federation of Independent Business-Nevada, agreed that Nevada elected officials could choke off business growth, including manufacturing, franchises and other kinds of enterprises. The state legislature now has Democratic majorities in both houses and a governor, Stephen Sisolak, who wants to increase the minimum wage, Thompson said.
“Most of the job growth we're seeing is companies moving from other states,” she told Watchdog.org, adding that about 40 percent of the people moving to Nevada are from California.
Cara Clarke, spokeswoman for the Las Vegas Metro Chamber of Commerce, said the chamber doesn't track the numbers of franchise businesses in the region, but the effects of the state's pro-business climate have been visible.
“Anecdotally we're seeing a lot of new business growth in all sectors,” Clarke told Watchdog.org. “... There's a relatively low threshold for starting a business here.”
More national-brand outlets have been opening in the Las Vegas region as the population passed the 2 million mark, she said. The regional economy remains robust and the cost of living affordable, attracting an influx of people from Southern California, according to Clarke.