Restaurant Feasibility Study in Maryland

Maryland restaurant lending is rising

Maryland's sit-down restaurant lending has been climbing. Approvals went from 36 loans and $9.7 million in FY2019 to 56 loans and $28.1 million in FY2023, 64 loans and $32.0 million in FY2024 and 70 loans worth $49.5 million in FY2026. Across FY2017 to FY2026 the state approved 471 full-service restaurant loans for $246.0 million. The class is Maryland's largest, 1 of 39 among its classes, while the state places 21 of 54 nationally. The median loan, $250,000, sits at 0.91x the national figure, and a 0.94x location quotient is close to par. The middle of the market sits between $70,000 and $581,000. Maryland's numbers are read here as plain figures.

One bank holds far more of these loans than any other. Manufacturers and Traders Trust Company holds 175 of them for $32.0 million, far ahead of Northeast Bank with 23, Newtek Bank, National Association with 18 and $7.5 million, Readycap Lending, LLC with 15 and $7.6 million and Fulton Bank, National Association with 13 and $10.0 million. SBA 7(a) carried 445 loans and SBA 504 only 26, with Business Finance Group, Inc. at 13 loans and $14.5 million and Chesapeake Business Finance Corporation at 7. Franchised restaurants make up 9.6% of loans. For a borrower, that lender concentration means one bank holds a large share of the loans listed here.

A cancellation floor worth planning for

Cancellation is the soft point: the floor is 16.6% of Maryland approvals from FY2017 to FY2024, rising to 17.5% at the ceiling. Charge-offs among the 156 loans paid out from FY2017 to FY2021 are 5.8% to date and 3.2% within five years. A Maryland restaurant approval is therefore not the finish line. The rising volume means more recent loans whose performance is not yet known.

Testing a Maryland dining concept

Montgomery County leads with 96 loans and Baltimore City follows with 86, then Baltimore County with 45, Anne Arundel with 43, Howard with 41 and Prince Georges with 38, with Worcester on the coast at 12. A study has to fit the concept to the specific trade area: the households, offices and visitors within reach, the restaurants already serving them, and the evening and weekend demand the menu depends on. Cost needs bids for the kitchen and dining room and a working capital reserve. Coverage should be run on covers and average check the location can support, with food and labor costs priced at today's levels. If the deal includes the building, the appraiser must show the value holds even if the restaurant fails, which is the question a lender will ask first.