SBA 7(a) Quick Service Restaurant Feasibility Study in Arizona

A growing franchise segment in Maricopa

Arizona's limited-service restaurants hold second place among its 39 asset classes, and SBA's 7(a) program has approved 294 of them since FY2017, a total of $160.9 million. The state ranks 21 for the number of such loans. Franchised units make up 61.2% of the file, so a large part of the file is borrowers signing up with a national brand. Maricopa County dominates the geography with 192 loans, and Pima follows with 39, then Yavapai with 12, Coconino with 11 and Mohave with 10.

Pricing the ticket

The median loan is $356,000, which is 1.20x the nationwide 7(a) figure, with half of the file between $172,750 and $593,750. That is a mid-sized ticket: more than a counter-service shop in a rented space needs for equipment alone, and below what a ground-up drive-through with land costs. The lower end suits conversions of existing restaurant space, and the upper end suits new construction.

Momentum

After a low of 15 loans in FY2020, approvals climbed through 33 in FY2023 and 38 in FY2024 to 52 loans and $27.4 million in FY2025, and then fell to 30 in FY2026. Approvals in the two most recent years therefore ran well above the FY2020 low, so a borrower is entering a file with plenty of recent lending to look at.

Lenders

The Huntington National Bank has 32 loans, Live Oak Banking Company 18, Stearns Bank National Association 15, JPMorgan Chase Bank, National Association 14 and Arizona Capital Source 13. SBA lists the current holder, so this tallies holdings and tells nothing about any institution's policy.

Loss floors

Cancellation was at least 11.3% across FY2017 to FY2024 approvals, and 11.8% when undisbursed loans join the count. Among 103 loans that funded in FY2017 through FY2021, 3.9% are charged off so far, and 2.9% were charged off inside five years. These are floors, and open loans may yet change them.

Testing an Arizona counter-service unit

Begin with the franchise agreement: the brand's unit economics, its development schedule and the territory it protects. Then the site, with traffic counts, visibility, a drive-through lane that will not back onto the road and the number of the brand's own stores nearby. The study should compare build or conversion cost with a loan near the median, price the land or lease separately, and test sales under a slow ramp and a seasonal dip. Coverage of loan payments should survive a slow opening, and an appraiser will need a sales forecast that the franchisor's own data supports.