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Brainiest cities are good bets for franchisors


My childhood was more Teenage Mutant Ninja Turtles than Friday Night Lights, so I’ve always enjoyed that Bill Gates quote about being nice to nerds, lest you find yourself working for one.

Judging from the anecdata that is my Facebook feed—filled with back-home friends and acquaintances—the brainiest seem to be running ahead of the jocks, at least in terms of wealth creation.

And where have my fellow nerds ended up? Whether it’s careers in academia or living the high life at tech companies, the go-getters tend to have settled in big cities and college towns—and that makes perfect sense. Retail follows rooftops, but GDP and good jobs follow the brainpower.

My recent visit to Ann Arbor, Michigan, provided the consummate illustration of this trend. Home to more than 40,000 students, the University of Michigan has a gigantic campus. I was impressed by the vine-covered classrooms, massive sports infrastructure and lush walkways, but truly dazzled by what’s happening in the adjacent central business district—Ann Arbor is hopping.

Without a vacancy sign in sight, I spent several days wandering downtown Ann Arbor, and found it shooting far beyond its population of 110,000 might suggest. Something is going very right in this brainy, beautiful little city.

With $2 billion in recent development, Ann Arbor is the consummate example of the wealth-creating power of cities anchored by universities. Its large downtown district is a charming mix of chain and independent brands, with few vacancies in sight.

The cure for the malaise

A recent study by the Brookings Institution for The Wall Street Journal confirms that college towns are doing far better than their non-universitied equivalents. Among 16 of the smaller towns the study identified as “surprisingly resilient,” half are home to major universities.

“Better educated places with colleges tend to be more productive and more able to shift out of declining industries into growing ones,” said Mark Muro in the report, an urban specialist at Brookings. “Ultimately, cities survive by continually adapting their economies to new technologies, and colleges are central to that.”

On foot in downtown, every storefront is filled with a mix of local and national retail. Next to Noodles & Company, and caddy corner from Walgreens and Piada, is the old-fashioned Nickels Arcade that’s home to Van Boven Shoes, Arcadian Antiques, Comet Coffee, even a barber and tailor. Strolling the arcade underneath a domed glass ceiling felt like time travel, especially because it was bustling with shoppers willing to venture off State Street.

Just off campus, State and Liberty streets are lined with back-to-back retail. Passersby might not realize many of the upper floors are filled with tech companies lured to the area’s diverse and well-educated workforce. Barracuda Networks recently announced it was doubling its workforce in downtown Ann Arbor, and it’s been joined by many others including Toyota, Expedia and Google.

Walking westward toward the heart of downtown, I was further impressed by graffitied alleyways, tree-lined streets, artfully restored 1800s architecture and an array of retail including a Shinola store selling watches far beyond my pay grade. Upscale signage and historical placards remind newcomers this town’s roots go back more than 150 years, and many of its three- and four-story buildings remain in mint condition.

Everything blends together so well, the high-income programmers intermingling with students, retail workers, nurses and doctors, suit-wearing professionals and the usual cast of street performers and sidewalk merchants. There’s interesting stuff to see around every corner, a true variety of uses, greenery and art softening the impact of cars, generous pedestrian spaces and clear signage guiding the way—this is urban studies 101 and Ann Arbor has it in spades.

Success that’s no accident

Everything happening here is no accident, as Paul Krutko attests. He’s CEO of Ann Arbor SPARK, a public-private organization working with the university and local government to encourage the formation of new companies and attract companies that add to the city’s GDP. Recruited from Silicon Valley six years ago, Krutko said SPARK has helped attract $2 billion in private-sector investment that has powered Ann Arbor’s recent growth spurt.

“It’s not hubristic to say … we’re comparable to levels of activity that you might see in major city technology centers around the United States,” he said. Between 2010 and 2015, the city added 11,000 new jobs, and the CBD now has nearly 3,000 tech workers trickling down their lunch dollars and fun money to the healthy retail scene on the streets.

“This notion of innovation districts that are domiciled in what looks like an ordinary, simple downtown versus a science park is something you’re seeing more of,” Krutko said. “The young millennial talent doesn’t want to work in science parks.”

While most of the city’s central retail and office space are filled to capacity, he added rents are swelling to the point where speculative construction may soon happen to add more square footage to the downtown market. Krutko said the Plymouth Road and southern suburbs near I-94 are two of several fast-growing areas outside of the core.

Whether it’s Domino’s, Toyota, Hyundai/Kia or one of the many tech companies, Krutko added that the human diversity provided by the university’s student body is another brick in the wall aiding attraction, especially in the tech industry that tends to recruit from across the globe.

SPARK doesn’t focus on attracting service or franchised businesses, but rather works a top-down approach where larger, high-paying firms are lured in, which inevitably brings the service jobs to serve those workers.

Due to SPARK’s success in bringing in jobs, the city of Ann Arbor doesn’t have a formal economic development team, but Krutko said his office assists franchised businesses looking for opportunities in the area with research and site selection intelligence.

“What we’re looking to support with our efforts is companies that are selling goods and services around the world and bringing income and revenue and wealth back here,” he said.

“That then creates customers for the other parts of the economy—the service industry, the food industry, business support kind of uses.”

There are infinite places for ‘zors and ‘zees to invest these days as the economy continues its longest postwar expansion on record. Knowing all good things come to an end—or at least momentary setbacks—placing your bets on the brainiest cities seems like a lock.

College towns, especially those near major research universities, bring a diverse supply of workers, high-income customers and the ability to defy the convention that top-tier cities are the only places worthy of top-level talent and investment.

Tom Kaiser, shown above left striding the skyways in Minneapolis, is associate editor at Franchise Times, and writes this column about urban tales in franchising in each issue. Send citified real estate and retail story ideas to tkaiser@franchisetimes.com.

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