Quick Service Restaurant Feasibility Study in Iowa

A leading Iowa class with a heavy loss record

Quick-service restaurants rank 2 of 39 among Iowa asset classes, and their 1.21x location quotient shows them taking a bigger slice of Iowa lending than of the nation's. In national terms the cell is small: 173 approvals worth $83.3 million from FY2017 to FY2026, ranking 33 of 54. The Iowa median of $309,000 sits at 0.99x the limited-service median nationally, essentially at par, and none of the screened measures clears our margin on both comparisons, Iowa's record across classes and quick-service restaurants nationwide. The loss figures are the part of this page a lender should read twice.

Charge-offs early and late

Of the 90 Iowa quick-service loans funded over FY2017 to FY2021, 12.2% are charged off to date, and 6.7% failed within five years of approval, so losses came both in the opening years and after them. Separately, cancellation claimed 12.3% of Iowa's FY2017 to FY2024 approvals, and the ceiling matches. These are floors, and the charge-off figure in particular may rise as open loans age.

Franchises and development companies

Franchised units account for 64.2% of Iowa loans, so most of these credits are brand systems with set build-outs and royalties. SBA 504 carried 36 loans against 137 under 7(a), a sizeable property share: Iowa Business Growth Company has 19 worth $10.9 million and Siouxland Economic Development Corporation 11 worth $4.9 million. The 7(a) side is fragmented, with Wells Fargo Bank National Association at 8, Northwest Bank and Farmers State Bank at 7, and Lincoln Savings Bank and Cedar Rapids Bank and Trust Company at 6. Iowa's central band of approvals runs from $148,200 to $542,000. Polk County has 46 approvals, and Black Hawk, Linn and Scott have 13 each. FY2022 was the busiest year with 27 loans and $13.9 million; FY2026 shows 6.

With a charge-off floor of 12.2%, an Iowa quick-service feasibility study has to be sceptical. It must test drive-through and counter traffic at the specific site, the competing brands within the same trade area, and sales per unit for the brand in comparable Iowa towns rather than the system average. It should cost the build, equipment and royalties against a ticket near $309,000, and show debt service coverage through a sales dip, since losses arrived both early and late. If the building comes through a 504 loan, the Iowa appraisal must treat it as real estate a different operator could use.

We hold no coding caveat for limited-service restaurants; the Iowa figures rest on each loan's coded industry.