Study: Nevada benefits by billions because of franchises

Michelle Swafford

Wednesday, March 10, 2004 | 11:07 a.m.

Nevada ranks among the top states when it comes to the economic impact of franchise businesses, the International Franchise Association reported Tuesday during its 44th annual convention in Las Vegas.

Although non-franchised gaming is a major contributor to the state's economy and labor pool, businesses and companies that operate with, or as a result of, franchises represented 20 percent of the private Nevada workforce, or 206,797 jobs, in 2001, the association said.

The total economic impact of Nevada franchises, including purchases by franchises and personal spending by their owners and workers, equaled $20.49 billion, the group said.

Many of the restaurants and rental-car companies in Nevada are franchises and employee thousands of people, said Don DeBolt, president of the International Franchise Association.

"Tourism is a major driver," DeBolt said.

He said Las Vegas is a good test market for new franchises because of the population growth.

The International Franchise Association commissioned PricewaterhouseCoopers to study the number of franchise businesses and their economic impact nationally and locally.

Nationally, there were 767,482 franchises in 2001, which provided 9.8 million jobs and $229.08 billion in payroll. The franchises produced $624.63 billion in output in 2001.

Nevada had 6,192 franchises, which provided 107,926 jobs and $2.66 billion in payroll.

Skip Swerdlow, professor of hotel management at the University of Nevada, Las Vegas and former franchisee of Burger King, said the study's numbers seem to be comparable with his observations.

He said Nevada has more franchises than Arizona and California partly because its a business friendly state.

"There's literally a franchise for about every kind of business concept and on every level of distribution of goods," Swerdlow said.

He said restaurants may look like the largest percentage of franchises, but it's hard to say that they are for sure in Nevada.

Franchise businesses employed about the same number of people in 2001 as manufacturers of durable goods, the study said.

The majority of the franchise businesses were business-format franchises, meaning restaurants, hotels, auto services, convenience stores and tax-preparation services. The remaining franchises were product-distribution franchises such as gas stations, auto and truck dealers and beverage bottlers and distributors.

The main difference between the two franchise types is the way business is done, DeBolt said.

He said business-format franchises provide ongoing training, marketing and a business model while product-distribution franchises do not provide a business model and are dedicated to a single type of product such as General Motors vehicles.

While many corporate companies are moving their operations overseas to save on labor and supply costs, franchises create jobs in the United States, said Sid Feltenstein, chairman of the franchise association.

He said even franchises that have locations in other countries generate money for the United States economy because the royalty payments are sent back to the states.