Nevada: An Ideal Home For Franchisors

President Obama’s recent remarks about Las Vegas have inspired criticism from a variety of Nevada’s political and business leaders (Mayor Goodman’s comments being the best example).  And rightfully so: Las Vegas is dependent on tourism as the engine for the city’s economy.  A dip in tourism can mean lost jobs for Nevadans – adding insult to injury to a state that has suffered as the epicenter of the foreclosure shockwaves that have been sweeping the country.

The President’s remarks, and the reaction they provoked, also serve as a stark reminder to those of us who live and work in Las Vegas as to how dependent our economy still is on the gaming and entertainment industry.  Which necessarily begs the question: how do we diversify our economy so that it is not so dependent on tourism?  The current economic recession (or, as some would say, depression) has disproportionately affected Nevada, completely shattering the myth that our economy is recession-proof.  One of the positive effects of the downturn, however, is that it has re-invigorated interest in economic diversification.

In my view, diversification is something our civic leaders should have focused on more closely during the boom Nevada experienced in 2004 and 2005.  Of course, the Nevada Development Authority disagrees.  According to Somer Hollingsworth, executive director of the NDA, growth in the non-tourism related sectors of our economy have significantly outpaced the resort and gaming sectors over the last ten years.  Regardless of your perspective on that issue, however, most of us can agree that tourism still accounts for the majority of Nevada’s economic activity.  Given the current recession, now seems like the right time to reenergize and refocus our efforts on growing non-core industries in Las Vegas and Reno.

A variety of ideas about the “right” industries for expansion have been circulated for years now.  These industries include sustainable energy (in particular, solar, wind, and geothermal); medicine (capitalizing on the development of the Nevada Cancer Institute and the Lou Ruvo Center for Brain Health); and technology / data storage.  The problem, however, is that Nevada is not doing the job it needs to in order to truly attract these industries; unlike other states, Nevada does not focus on offering incentives.  This means that we have to rely less on incentives and more on the other aspects of our state that make it so attractive to businesses in the first place.

As a Nevada franchise attorney, I am unquestionably biased, but my view is that Nevada is an ideal home for franchise companies wishing to relocate their corporate headquarters.  First, Nevada has no corporate tax and no personal income tax.  This means that right off the bat, a franchisor relocating from a high-tax state like California will realize a significant increase in net income on an annual basis.  Not only that, but the franchisor’s employees that choose to relocate also will see an increase in their paychecks. 

Second, a franchisor moving to Las Vegas will have access to McCarran International Airport, which is still one of the busiest airports in the country.  It’s easy to find nonstop flights from Las Vegas to just about anywhere in the country or, indeed, the world.  This makes access to Las Vegas easy for prospective and new franchisees, who will need to fly to the franchisor’s headquarters for discovery day and for initial franchise training.  Moreover, the city’s plentiful (and currently, cheap) hotel rooms make finding accommodations for those franchisees and prospects a snap

Third, even in this down economy, Las Vegas is still the entertainment center of the universe.  Corporate employees and franchisees alike will enjoy access to five-star restaurants, world-class golfing, first rate shows, and, of course, the best gaming the industry has to offer.  Those that enjoy outdoor activities find that there are plenty of opportunities for that, too, with Red Rock Canyon, Lake Mead, the Valley of Fire, and what may soon be known as Fossil Beds National Monument all nearby.  These are the very same reasons that most franchise systems still choose to hold their annual conventions in Las Vegas.  Reno has many of the same indoor activities (although on a smaller scale), and boasts proximity to some of the best skiing, hiking, hunting, and boating areas in the country.

Of the many regional and national franchisors that are already based in Nevada, a small but significant percentage moved here from other states (or, in one case, from another country).  Those franchise companies have enjoyed all of the benefits that Nevada has to offer.  These companies are evidence that our state is a great place for franchisors to call home.

Of course, the biggest problem that Las Vegas in attracting non-gaming companies is its image.  Its reputation as “Sin City” is both well-known and well-earned.  But there is another side to the city, too – the part that is away from the Strip.  Las Vegas is home to almost 2 million people who find that our city’s many bedroom communities are wonderful places to raise a family.  This is the side of Las Vegas that attracted me and my wife when we decided to move here from suburban Washington, D.C.  We have lived here for more than seven years now, and we have no plans to leave.

I hope that the publicity surrounding President Obama’s remarks about Las Vegas causes Nevadans to focus more closely on the issue of economic diversity.  And, as part of that focus, civic and political leaders should work to entice franchisors to relocate to Nevada.

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