Restaurant Feasibility Study in Texas

Texas lends more to sit-down restaurants than almost any state, 3 of 54, with 2,151 full-service restaurant loans for $1.52 billion over FY2017 to FY2026, and the class is the largest in Texas at 1 of 39. The location quotient is 0.92x, close to national weight. What sets Texas apart from its own SBA record and from the class nationally is loan size: the median is $427,500, or 1.55x the national figure for the class, with the central half of Texas loans between $170,000 and $930,500.

Large loans and a high loss floor

Bigger loans have come with heavier losses. Of 831 Texas restaurant loans disbursed in FY2017 to FY2021, 9.5% have ended in charge-off to date, and 5.4% did so within five years of approval, which leaves a sizeable part of the loss arriving after year five. That floor is above the Texas floor across classes and above full-service restaurants nationally, and it is a floor. Cancellations claimed 12.3% of the FY2017 to FY2024 approvals, 13.3% if undisbursed loans are added, near the usual pattern.

Volume, lenders and metros

Approvals fell from 269 in FY2017 to 142 in FY2020, then rebuilt to 233 in FY2023 and a peak of 322 for $261.8 million in FY2025, with 239 in FY2026. SBA 7(a) carries 1,991 of the loans and 504 carries 160. The Huntington National Bank leads with 172 loans for $94.4 million, followed by PNC Bank, National Association (121 loans, $39.7 million), Bank of Hope (71), Newtek Bank, National Association (66) and JPMorgan Chase Bank, National Association (58). Capital Certified Development Corporation heads the 504 list with 61 loans for $83.3 million, then LiftFund, Inc. (36 loans, $44.6 million). Franchise borrowers are 19.8%. Dallas (320 loans) and Harris (315) are neck and neck, ahead of Tarrant (193), Collin (184), Travis (160) and Denton (145).

What a Texas restaurant study has to carry

With the median loan this large and the loss floor this high, a Texas study cannot rest on the operator's enthusiasm. Demand has to be counted in covers and check average for the specific trade area, against the full competitive set in suburban counties like Collin or Denton as well as the urban cores. Cost must separate land or building from kitchen, bar and dining room, because a $427,500 loan can be a real estate loan as well. Debt service coverage should carry a downside case that runs past year five, given when this cohort's losses landed. The appraisal has to give the building's value without the concept in place.

The class has no limitation line. Texas restaurant loans follow the industry code their borrowers reported, and all of these rates are approval cohort floors.