Quick Service Restaurant Feasibility Study in Arizona

Arizona builds its quick service restaurants

An Arizona quick service loan is a large one. The median is $445,000, which is 1.43x what limited-service restaurants borrow at the median across the country, with the central half of Arizona deals running $250,000 to $799,000. That loan size is the measure on which this cell breaks from both Arizona's overall SBA record and the class nationally. The state approved 375 loans to limited-service restaurants between FY2017 and FY2026, totaling $232.2 million. Among states Arizona ranks just 19 of 54 for quick service, yet inside Arizona quick service ranks 2 of 39 among classes, with a location quotient of 0.85x.

Large loans in this class often mean ground up or purchased buildings, and the program mix fits: 81 loans went through SBA 504, a substantial block next to 294 under 7(a). The Mortgage Capital Development Corporation leads the 504 lenders with 35 loans for $38.4 million, and Arizona Capital Source follows with 26 for $18.0 million; Arizona Capital Source also shows up among the 7(a) lenders with 13 loans. In the 7(a) table, The Huntington National Bank shows 32 loans for $7.7 million, Live Oak Banking Company 18 for $18.3 million, Stearns Bank National Association 15 and JPMorgan Chase Bank, National Association 14 for $12.4 million. Franchise brands account for 60.3% of loans. Maricopa County holds 243 of the 375, with Pima at 47 and Pinal at 18.

Lower losses than the class elsewhere

Arizona's quick service loans have performed better than the class nationally. Of the 133 Arizona loans funded in FY2017 to FY2021, charge-offs so far total 3.0%, with 2.3% inside five years, close to Arizona's floor for all classes and below the national floor for limited-service restaurants. Cancellation after approval stood at 12.1% of FY2017 to FY2024 approvals, or 14.3% with undisbursed loans treated as cancelled. The trend has risen, from a low of 23 loans in FY2020 to 64 for $40.4 million in FY2025, before 39 in FY2026.

What an Arizona quick service study must test

When a quick service loan buys land and a building, the study has to carry the site as much as the concept. Demand should rest on traffic counts, the share of sales the drive through can take, daypart patterns and the brands already on the same corridor in Maricopa or Pima. Cost must price the pad, site work, construction and the franchise package separately. Run debt service coverage on first year unit sales below the brand's system average, because a new unit rarely opens at the mature number. The appraisal has to value the building both with the operating brand and as a vacant restaurant, since that dark value is the collateral if the unit fails.

The limited-service class has no limitation line beyond the general caveat that SBA codes each loan by the industry its borrower reports, and the rates here are floors.