Liquor Store Feasibility Study in Arizona

Arizona liquor stores: rare in the program, large when present

Arizona liquor stores took 34 loans across FY2017 to FY2026, $29.7 million approved. The location quotient of 0.25x is strikingly low: the state's share is a small slice of the national share. The class is 21 of 39 within Arizona and the state is 28 of 53. When a borrower does appear, the loan is large: the median of $750,500 is 1.67x the country-wide median for the class, and that size is what distinguishes the state. The central half of loans runs from $265,325 to $1.2 million.

Programs and a Maricopa-centered file

The mix is 31 SBA 7(a) loans and 3 SBA 504 loans, and no borrower is franchised (0.00%). No lender reaches 5 loans, so credit comes from many institutions in small numbers. Maricopa County has 27 of the 34 loans, Pima 3 and Coconino 2, so the market is Phoenix and its suburbs. The high median probably reflects purchases of operating stores with real estate, or large formats. A buyer should expect lenders to examine inventory valuation and license transferability closely.

Arizona liquor cancellations start at a 20.0% floor over FY2017 to FY2024 and reach a 23.3% ceiling once loans still undisbursed are counted. A large share of approvals did not fund, at the least. A state license transfer, a seller's records or a lease can end a deal late. Arizona's seasoned liquor loans number below 30, which leaves the loss figure blank without implying zero.

What an Arizona study must test

Demand testing should cover the trade area's population, traffic, competing stores and grocery stores that sell alcohol, since the retail category is crowded. Cost must include inventory and the license, as well as the site. Coverage must be tested on gross margins and shrink, and on a downside where a nearby competitor opens. The valuation should value the real estate separately and state what the building is worth without the license. Lenders should also note that volume has been small and uneven: 10 loans and $4.2 million in FY2019 stands out against 1 loan in FY2018 and 1 in FY2026, and recent years hold at 3 loans.