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May 2023 | Phoenix MSA Market Updates

May Exec Desk Phoenix Blog

Arizona Ranked Among The Highest States for Franchise Growth, Business, Innovation, and Living

Arizona is still coming out on top as it ranked among the highest states across the country for franchise growth, business, innovation, and living. Read about new businesses coming into the Valley, how the manufacturing sector keeps growing and improving employment prospects, and what Arizona is doing up in space.

Tempe Arizona Skyline Over Buildings
Arizona ranks among top in the nation across multiple categories

In its annual Franchising Economic Outlook report, the International Franchise Association ranked Arizona the No.8 best state for franchise growth this year according to James Cannon and Jeff Gifford with Phoenix Business Journal. In 2023, Arizona is expected to add 421 new franchised businesses which will create about 6,610 new jobs, despite economic uncertainty across all industries. In comparison, the nation is expected to add 15,000 new franchise establishments at an increase of 1.9% which will create 254,000 new jobs.

Additionally, the report stated that economic output by franchisees increased by 5.7% to $18.5 billion in 2022 and is expected to grow by 4.7% to $19.4 billion in 2023. Overall, quick-service restaurants and service-based industries are expected to experience higher growth than other industries.

In an assessment from the Consumer Technology Association, Arizona was ranked No.5 most innovative states in the country. Jeff Gifford with Phoenix Business Journal shared that Arizona was among 13 states considered “innovation champions”, which is the report’s highest designation. The states were evaluated on policies in emerging technologies, broadband, and education in science, technology, engineering and mathematics (or STEM). Arizona’s highest three grades (A or above) were in drones and advanced air mobility, self-driving vehicles, and telehealth.

CTA President Gary Shapiro said, “States that allow businesses to grow and create new competition and even new industries bring benefits to their own residents and to people all over the world. Our innovation champions show that smart policy paired with big ideas can deliver huge rewards for us all.”

Researchers at CoWorking Cafe ranked Scottsdale No.6 among best mid-sized cities for recent college graduates to start a career, as reported by AZ Big Media. Rankings of three main factors—employment, financial, and lifestyle— were combined to give an overall score to each city, as Scottsdale ranked No.8 in employment and No.10 in lifestyle. Scottsdale had the 6th largest share of young people holding a Bachelor’s degree at 56.6%, boasting 438 leisure amenities and 8.7 coworking spaces per 100,000 residents. Overall, Arlington, VA took the top spot for best mid-sized cities to start a career, followed by Sunnyvale, CA and Durham, NC.

Cactus in Arizona Mountains

Lastly, for the second year in a row, Arizona ranked in the top five across the nation on Chief Executive Magazine’s list of “Best States For Business”. According to the Arizona Commerce Authority, the list is based on a survey of nearly 700 CEOs and business owners across all 50 states. Arizona’s innovation ecosystem contributed to its ranking and continues to grow as a global innovation platform, Plug and Play, will soon launch and is aimed to accelerate startup growth and fuel innovation in advanced manufacturing.

“Arizona is widely recognized as a top place in the country for business and innovation,” said Sandra Watson, President and CEO of the Arizona Commerce Authority. “With our world class universities and community colleges, modern infrastructure, low cost of doing business, and vibrant innovation ecosystem, Arizona is where good ideas and dynamic entrepreneurs can thrive.”

Arizona Papago Park
Manufacturing and employment continues to grow in the Valley

A new report by the Common Sense Institute Arizona (CSI) showed that Arizona’s manufacturing industry is up almost 40% from 2017 with an astounding $77.6 billion in sales for 2022. Michael Kittilson with Chamber Business News shared that manufacturing now accounts for about 6% of total employment and 9% of the state’s GDP, with Arizona’s manufacturing sector making up 16% of the total workforce which equates to 633,565 workers.

“Policy is paramount when it comes to the manufacturing sector,” said Steve Macias, CSI board member and CEO of Pivot Manufacturing. “Our industry has a significant impact on the Arizona economy, with indirect and induced effects that far exceed what you might expect. We punch above our weight, and that’s why we need to pay close attention to the policies that govern our operations.”

Arizona’s bustling manufacturing sector continues to attract heavy-hitters as Ashley Furniture Industries Inc. is building a new 1 million-SF manufacturing and distribution facility in Avondale. Audrey Jensen with Phoenix Business Journal reported that the new facility will contain a warehouse space for distribution as well as mixed-use space for a retail showroom, office, and 200-person call center. The facility will also support over 500 jobs and bring in around $40 million in annual retail sales. Ashley Furniture acquired 84 acres of land from Avondale Holdings LLLP in 2021 for $32.8 million in cash. In 2022, the Wisconsin-based retailer had a yearly revenue of $10.3 billion and 3,400 total employees.

Another new manufacturing plant is coming to the Valley as Rehrig Pacific Co. is building a 260,000-SF facility in Buckeye. According to Audrey Jensen with Phoenix Business Journal, the reusable container manufacturer based in Los Angeles recently broke ground on what will be its largest injection molding manufacturing plant which is expected to be operational by April 2024.

Will Rehrig, CEO of Rehrig Pacific, said in a statement, “It was essential that we chose a location that worked well for both our current and future customers and one that supported our team members. We found incredible partners in Buckeye that helped make this build-out a reality, as well as phenomenal support from state officials and local development. We look forward to growing our Rehrig Pacific Family in Buckeye.

Why the Valley is going crazy for chicken

A chicken craze is sweeping the Valley as four chicken-focused, fast-casual restaurants will be entering or expanding into the Valley within the next year. Eric Edgemon with Phoenix Business Journal shared that the Crack Shack, a Southern California-inspired restaurant, will be opening two new locations in the Phoenix metro in early 2024. Based in San Diego and founded in 2015, the Crack Shack offers classic comfort food like fried chicken, sandwiches, bowls, desserts, biscuits, and fries. The chain also partners with local bakeries and creameries in their communities by hosting campaigns centered on giving back as well as investing in local schools and sports teams.

The private equity firm that invested in the chicken restaurant chain back in 2020, Savory Fund, has plans to open up 50 more locations in five to seven new markets around the country. As of last year, Savory now holds a majority share in the Sicilian Butcher and Sicilian Baker restaurant brands from the Scottsdale-based Maggiore Group. In 2021, Savory also purchased a majority share in Maggiore’s brunch concept, Hash Kitchen, with plans to expand to several more locations.

Daddy’s Chicken Shack, another chicken-centered restaurant, recently opened its first Arizona location in Scottsdale. Acquired by Dave Liniger, founder of the real estate franchise RE/MAX, the fast-casual chicken chain is under contract to open 10 franchised locations in the Phoenix metro area.

Shaq Big Chicken Location GIlbert Arizona

Additionally, Phoenix Business Journal reported that Big Chicken, a restaurant chain owned by NBA Hall of Fame star Shaquille O’Neal, opened its first Valley location in Gilbert.

Continuing the craze, Chik-fil-A is planning to add five more locations to the Phoenix metro area this year, which is expected to create about 520 new jobs. In addition to its current 37 locations, the chicken-based franchise that began in Atlanta, Georgia also plans to open another 15 locations in the Valley over the next five years. The five upcoming Valley locations will be opened by Valley-based franchisees, a position that is hard to come by as Chik-fil-A only accepts about 1% out of the nearly 60,000 applications they receive each year.

Todd Grubbs, Chick-fil-A’s West Region director, said, “We are gearing up to celebrate Chick-fil-A’s 20th anniversary in Phoenix and, as we prepare to hit this milestone, we are energized by the continued demand for our great-tasting food and signature hospitality. This community means so much to us and our local operators, and we look forward to continuing to give back in meaningful ways as well as serving even more guests at these new locations.”

Healthcare and tech trends in AZ

The bustling Arizona economy has placed it at No.11 in the country when assessing an individual’s disposable income, which is estimated to be about $49k for the average Arizona resident. One of the top contributors to the AZ economy is healthcare, according to Mark Bradford with AZ Big Media. The healthcare industry is estimated to generate $29.8 billion annually, but as it has continued to grow over recent years, so has the burnout experienced by nurses. To help offset the shortage, the Arizona state government is offering grants to nurses with a goal of adding an additional 900 nurses to the healthcare system. 

The intent is to train new nurses to fill the gap while continuing to support existing nurses in their work and maintaining their credentials. One of the key components that will help Arizona keep its competitive edge in healthcare is additional training and certification in respiratory therapy, particularly for elderly snowbirds who reside in Arizona during winter and the novel illnesses that create more strain on healthcare workers.

In the tech sector, the State of the Tech Workforce report published by CompTIA showed that the estimated median annual tech wage for the state in 2021 was $88,355, while the Phoenix metro area was $90,197—112% higher than the median state wage. Overall, the direct economic impact of the tech sector in the Phoenix-Mesa-Chandler area is estimated to be 9.3% of the area’s overall economic impact at $29.4 billion; while it is estimated to be 8.2% of Arizona’s overall economic impact at $33.4 billion.

Arizona hiking trail
Why the sky is no longer the limit for AZ

Arizona is upping its presence in the space industry as a private space company, Blue Origin, has just opened a new 43,288-SF office in Phoenix as reported by the Arizona Commerce Authority. The office, which has already hired 100 people, will provide support to avionics, systems engineering, and supply chain management across the company’s programs. Some of the employment positions include engineering functions, mission design, integration, and software across launch vehicle and space system programs.

A major contributing factor in the decision to open in Phoenix was the state’s strong aerospace presence and workforce as well as its encouraging business environment which focuses heavily on investment and growth.

“Phoenix is known as a major development hub of the most cutting-edge aerospace technologies, and I am excited that Blue Origin has decided to be a part of it,” said Phoenix Mayor Kate Gallego. “Blue Origin’s new office will create great engineering jobs for Phoenicians while developing the space technology of the future.”

Additionally, Virgin Galactic, a space tourism company founded by Sir Richard Branson, is constructing a spaceship manufacturing facility in Mesa that is expected to become operational by 2024. Jacob Maranda with Phoenix Business Journal reported that the facility will host two buildings, one at 35,896 square feet and the other at 115,200 square feet, with the company expecting to hire hundreds of engineering and manufacturing employees.

Michael Colglazier, Virgin Galactic’s CEO, said “We are finally at the cusp of what will be a defining moment for our company — commercial spaceline operations.”

Virgin Airlines plane

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