Quick Service Restaurant Feasibility Study in Kentucky

Kentucky fast food: a leading class, a brand-led file

Quick service restaurants are the second-largest SBA class in Kentucky by count, at 2 of 39, and franchised concepts carry 59.8% of the loans. Together those facts define this cell. From FY2017 to FY2026 Kentucky lenders approved 174 limited-service restaurant loans worth $85.0 million; the state places 32 of 54 nationally for the class, and a 1.06x location quotient keeps the class close to its national weight. The Kentucky median of $284,100 is 0.91x the national median, with the interquartile range spanning $98,500 to $577,250. No headline figure, be it the median, cancellation or charge-off, lies far from Kentucky lending as a whole or from fast food nationally.

Who lends to Kentucky restaurants

Community Trust Bank, Inc. holds the most loans, 18 for $3.0 million, with The Huntington National Bank next at 14 for $3.4 million, Stock Yards Bank & Trust Company with 13 for $2.4 million and U.S. Bank, National Association with 10 for $2.9 million. Republic Bank & Trust Company holds only 6, yet they total $9.0 million, the larger deals in the file. Nearly everything runs through 7(a), at 167 loans, against 7 under SBA 504. Jefferson County, home to 50 of the loans, leads by a wide margin over Kenton with 16, Fayette with 15, Boone with 11 and Daviess with 7.

Every recorded failure in this cell came early. Of the 71 Kentucky restaurant loans funded during FY2017 to FY2021, 5.6% have been written off, and the five-year rate is that same 5.6%. For approvals dated FY2017 to FY2024, Kentucky's cancellation band runs from an 11.4% floor up to a 12.9% ceiling. All of these are minimums. Lending dipped to 6 loans in FY2020, then recovered to 25 loans and $13.9 million in FY2021 and 21 loans and $15.0 million in FY2025.

What a Kentucky franchise study has to test

For a franchised Kentucky unit, the study cannot lean on the brand's system averages. It has to test this site: traffic counts, visibility, access and drive-through stacking, and the fast food outlets already competing for the same lunch and dinner trade in Jefferson, Fayette or the northern Kentucky counties. Costs to verify include the pad or lease, construction to brand specification, equipment and the franchise fees. Because early losses are the whole loss record here, the cash flow test needs a careful opening year, with sales ramping from a soft start and labor and food costs at realistic shares. If the borrower buys the land and building, the value has to rest on comparable restaurant pad sales.