Quick Service Restaurant Feasibility Study in the Los Angeles-Long Beach-Anaheim, CA Metro Area

Second of 779 areas for counter-service lending

Of the 779 areas in SBA's loan files, Los Angeles-Long Beach-Anaheim stands 2nd for limited-service restaurant loans, and inside the area this class sits second of the 39 classes counted locally. The file holds 1,063 approvals across FY2017 to FY2026, worth $501.4 million gross. At 0.98x, the location quotient shows quick-service concepts taking almost exactly the share of area loans that they take nationally, so the rank is not matched by a tilt toward the class. Los Angeles County supplies 754 of the loans and Orange County 309.

The median loan is $295,400, or 0.95x of the class median nationwide, with the central half of loans spanning $125,000 to $549,500. SBA 7(a) accounts for 1,006 loans and SBA 504 for 57. Franchise flags appear on 31.0% of loans, so a study has to decide how far to trust a brand's unit model.

Who holds the loans

The lender tables follow SBA's habit of naming whoever holds a loan now, which can differ from the original lender. Under 7(a), Bank of Hope holds 138 loans worth $41.1 million, The Huntington National Bank 49 worth $13.7 million, U.S. Bank, National Association 42 worth $8.4 million, United Business Bank 41 worth $16.0 million and PCB Bank 40 worth $17.2 million. The 504 list is led by California Statewide Certified Development Corporation (14 loans, $10.1 million), then The Mortgage Capital Development Corporation (12 loans, $11.3 million); next is CDC Small Business Finance Corp. (10, $7.3 million), Business Finance Capital 8 worth $8.4 million and AMPAC Tri-State CDC, Inc. 5 worth $5.3 million. These are holdings, not a statement of what any holder would decide on a new request.

Cancellation after approval ran at least 13.7% for FY2017 to FY2024 approvals, and 14.6% once Los Angeles-area loans not yet disbursed are also treated as cancelled. Looking at the 460 Los Angeles-area loans that were disbursed in FY2017 to FY2021, charge-offs stand at no less than 8.0% overall and 4.3% inside the first five years. Treat each rate as a floor, since Los Angeles-area losses can still be booked later. Annual approvals moved from 131 in FY2017 to 65 in FY2020, then to 132 in FY2024 and 86 in FY2026, the last worth $37.7 million.

What a study for this area has to test

A drive-through or counter-service site lives on traffic counts, frontage and the pull of nearby anchors, so the trade area must be measured street by street, not across the whole area. The study should compare the operator's projected sales with the cost of a build-out and equipment package, then stress debt service coverage against a sluggish opening year. Where a franchise is involved, royalties and required remodels belong in the cash flow. One counting rule matters: a loan joins the area only if its project county can be placed in the July 2023 delineation, so Los Angeles counts understate rather than overstate activity.