SBA 504 Quick Service Restaurant Feasibility Study in Arizona

Arizona quick-service restaurants financed through 504

In Arizona's class ranking limited-service restaurants stand 2 of 39, while the state takes fifth place nationally for 504 loans to them. SBA approved 81 loans from FY2017 to FY2026, worth $71.3 million in gross dollars. The loans are larger than usual: the median of $768,000 is 1.20x the nationwide 504 midpoint, and the central half spans $590,000 to $1.1 million, a narrow band. The brand share is the other distinguishing metric. Franchised units are 56.8% of the loans, so most financed restaurants in this cell sit within a franchisor's system, with its prototype building and equipment package.

Who services the second loans

As 504 packages combine a bank loan with a development-company loan, the rows name companies, not banks. Leading is The Mortgage Capital Development Corporation with 35 loans worth $38.4 million, Arizona Capital Source 26 worth $18.0 million, and CDC Small Business Finance Corp. 15 worth $12.1 million. The rows follow SBA's current-holder records. Maricopa County accounts for 51 of the loans, with Pinal at 9, Pima at 8, Mohave at 5, Yuma at 4 and Coconino at 3, so the loans follow the Phoenix area heavily. Annual dollars climbed from $3.4 million in FY2017 to $9.2 million in FY2022 and $13.0 million in FY2025.

Cancellation versus performance

Cancellation is the soft spot: at least 15.0% of approvals through FY2024, and as much as 23.3% should undisbursed loans be added. The funded early cohort holds 30 loans, where the charge-off rate reads 0.00% now and also 0.00% five years out; with so few loans and others still open, that zero is a floor and no verdict.

What an Arizona study has to test

Franchise systems publish their own assumptions, but a study must test them against the specific site. Count traffic on the corridor, drive-through stacking space, nearby competing brands and the household income in the trade area. The franchise agreement's fees and development obligations should be set against projected sales, with the payment covered after royalties, rent or occupancy cost and labor. Since the central loan band is narrow, a deal outside it should say why, whether for a larger building, extra land or a multi-unit commitment. The 504 structure often funds real estate and long-lived equipment, so the appraisal of land and building, and the allocation between them, is part of the work. High cancellation says sites fall through, so zoning, access permits and utility capacity need documenting before sizing. Finally, heat affects demand patterns in Arizona and monthly sales modelling should reflect it.