Minnesota Lawyer
Preston Luman plans to open his sixth Sport Clips franchise next month in Apple Valley.
The chain caters to men and boys by promising sports broadcasts on flat-screen TVs throughout the premises. Luman is opening the store in a commercial development near the intersection of Cedar Avenue and County Road 42 that will also include Chic-fil-A and Smashburger outlets.
“I think there’s a reasonably good demographic there in terms of age and affluence and a number of other factors,” Luman said. “It’s one of the busiest intersections in Minnesota.”
Luman’s fledgling Sports Clip franchise was among 4,661 new business filings in September, according to statistics compiled by the Minnesota Secretary of State’s office. That’s an 11 percent increase over August and the highest level of business creation since May.
But the numbers appear less impressive when the entire year is taken into consideration. In the first nine months of this year, there were 44,454 new business filings. That’s off nearly 6 percent from a year ago. But the number of new business filings in the first nine months of this year is 11 percent ahead of the 2011 pace.
Luman’s expansion plans have less to do with optimism about the economic recovery that’s struggled to take hold over the last four years than a belief in the strength of the Sports Clip concept.
“I think it’s a great concept,” he said. “We’re having success with it.”
The numbers are less rosy than other recent indicators of economic strength in Minnesota. In August, the state added 12,200 jobs, according to the Minnesota Department of Employment and Economic Development, bringing the total number of jobs above the pre-recession peak. The unemployment rate was at 5.1 percent, the lowest level since 2008 and well below the national average.
Jeanne Boeh, an economics professor at Augsburg College, points out two long-term trends in the new business filings. In 2006, the number of limited liability companies (LLCs) created topped the number of corporations for the first time. But by last year there were nearly five times as many LLCs created as corporations. The chief attraction of LLCs is that they allow business income to be reported on individual tax returns.
“I don’t think it was [a] surprise to see the number of LLCs increasing as we headed into the downturn,” Boeh noted in an email. “LLCs would allow someone to work as a consultant rather than declaring themselves completely unemployed while still protecting their home and other assets.”
Boeh points to a decline in the acquisition of assumed names as another sign that the economy is still struggling to recover. Such transactions declined every year between 2006 and 2011, but increased by 11 percent last year. Now they’re on pace to decrease again.
Boeh described the current economic trajectory as “still positive but not gangbusters growth,” and worries that some individuals are starting businesses because they can’t find salaried positions. “The decline in assumed names suggests that there is less reason to buy a name because the value of good will and customer lists is not worth the purchase price,” she wrote.
Not all new business filings necessarily indicate that another entrepreneur is hanging out a shingle for the first time. For five years, Randy Waldorf has operated a gym that specializes in power-lifting and physical rehabilitation in northeast Minneapolis. But he has decided to change the name from Waldorf’s Power Fitness to Power Cave Gym and recently filed the papers with the Secretary of State’s office.
“It’s more descriptive of what we’re doing,” said Waldorf. “I think it’s going to be good. It’s always a marketing game anyhow.”
