Restaurant Feasibility Study in Tennessee

Larger Tennessee restaurant loans, more fallout

Tennessee's sit-down restaurants borrow more than the class does nationally. The median Tennessee full-service loan was $350,000, 1.27x the national figure, and it lies beyond our distinctness margin from both Tennessee's lending across all classes and full-service restaurants nationally, so loan size leads this page. Half of Tennessee's restaurant approvals sit between $125,000 and $760,900. Restaurants are 2 of 39 Tennessee classes by loan count, but the location quotient of 0.87x shows their weight in Tennessee is a little below the national norm; the state ranks 29 of 54, with 289 approvals worth $175.3 million from FY2017 to FY2026.

Approvals are rising fast: 34 loans in each of FY2024 and FY2025 and 50 for $25.8 million in FY2026, against 20 in FY2017. SBA 7(a) funded 279 of the loans and SBA 504 just 10, and franchised restaurants take 18.7%. Pinnacle Bank holds 32 Tennessee restaurant loans worth $32.1 million, the large deals; The Huntington National Bank holds 27 worth $7.3 million, while U.S. Bank, National Association's 26 add up to only $1.1 million, a small-loan book. Newtek Bank, National Association holds 18 and Old National Bank 13. Davidson County leads with 64 approvals and Shelby has 52, then Knox with 26 and Williamson with 23.

Tennessee's cancellation and loss floors

Tennessee's floors are high on both counts. At least 16.1% of FY2017 to FY2024 Tennessee restaurant approvals were cancelled, and the ceiling is 18.5% with undisbursed loans included. Losses are heavy too: of the 94 Tennessee restaurants funded in FY2017 to FY2021, 7.4% are written off so far and 4.3% inside five years, so failures have kept coming after the opening years. Each Tennessee figure here is a floor.

Proving a Tennessee restaurant project

A Tennessee restaurant study has to justify a larger loan in a market where many approvals fail to close and many funded loans fail later. Demand testing means the specific site's residents, office workers and visitors, set against the Tennessee restaurants already in the trade area, which reads differently in Davidson or Williamson County than in Blount or Montgomery. Costs for the build-out or purchase, the kitchen, opening inventory and working capital need current Tennessee quotes. The restaurant must cover its debt service from realistic covers and check averages across the full term, and a loan near $760,900 needs a far stronger case than one at the $350,000 median. With so few 504 loans, most deals have no real estate, so the appraisal values the business and the lender will lean on the owner's equity and track record.