Quick Service Restaurant Feasibility Study in Indiana

Indiana quick service is a franchise market

Brands carry Indiana's counter-service lending. Franchised units account for 58.2% of the state's SBA quick service loans, and limited-service restaurants are Indiana's second-largest class, 2 of 39 by loan count. The state approved 534 such loans for $226.2 million from FY2017 to FY2026 and ranks 14 of 54 among states for the class, while a location quotient of 1.22x tells us quick service takes a larger bite of Indiana's SBA lending than it does across the country. Loan size is a little under the national norm: the median is $274,750, or 0.88x the class median nationwide, and the interquartile band is $102,300 to $499,375. Nothing in this cell differs from both Indiana lending and the class nationally by enough to be flagged, so its risk sits near what both comparators would predict.

SBA 7(a) carried 489 loans and SBA 504 carried 45. The Huntington National Bank is the largest lender, with 84 loans and $22.1 million, followed by Centier Bank with 39 loans and $6.9 million, Merchants Bank of Indiana with 16 and $7.5 million and Horizon Bank with 14. The 504 loans come from Regional Development Company, at 18 loans and $9.8 million, Indiana Statewide Certified Development Corporation, at 11 loans and $12.9 million, and Business Development Corporation (BDC), at 7. Those 504 deals are owners buying land and building, a step that changes the collateral picture for a lender.

Indiana floors and the volume record

Cancellations took 10.7% of loans approved in FY2017 through FY2024, or 11.8% with undisbursed loans added. Among the 241 loans that funded from FY2017 to FY2021, charge-offs reach 5.0% to date and 2.9% inside the first five years, so a meaningful share of losses came after the franchise's opening years. The busiest year was FY2021, with 73 loans and $30.9 million; the quietest was FY2018, with 38 loans and $13.1 million; FY2026 brought 41 loans worth $23.4 million. For a borrower, a familiar brand helps with the lender's first look, but the credit will still turn on the unit's location and the operator's experience.

Underwriting an Indiana franchise unit

Lake and Marion counties hold 65 loans each, Hamilton 61, Allen 35 and Porter 32, which spreads the lending across the Indianapolis area, the northwest corner of the state and Fort Wayne. A study for a franchise unit there has to test the specific pad: traffic counts, daypart demand, visibility, drive-through stacking and the other units of the same brand that could cannibalize sales. Cost needs the franchisor's current build-out and equipment requirements, plus site work. The coverage ratio should be run on sales below the brand's disclosed averages and should carry the royalty and advertising payments the franchise agreement requires. Where 504 money buys the real estate, the appraisal must support the pad and building as a property a different brand could reuse.