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

A low cancellation floor beside a franchise majority

In Minnesota the 446 quick-service restaurant loans approved under SBA 7(a) between FY2017 and FY2026, $177.5 million gross, went mostly to franchisees: 52.7% of the loans carry a franchise brand. Nationally the state sits at 15 for this program and class, while limited-service restaurants hold the number 2 place among 39 classes at home. The $250,000 median loan is 0.84x what these restaurants borrow elsewhere under 7(a), and the typical spread of loans is $100,000 up to $466,775.

Banks and counties

BankVista leads with 46 loans and $23.3 million. Sunrise Banks National Association has 25 loans and $5.6 million, The Huntington National Bank 21 and $3.5 million, Hiawatha National Bank 19 and $9.0 million, and Old National Bank 14 and $12.5 million. The names come from the holder field SBA publishes, which says nothing of anyone's lending rules. Hennepin County accounts for 123 loans, Ramsey 53 and Anoka 49, with Saint Louis at 26, Dakota and Washington at 24 each, Scott and Wright at 16, Carver at 15 and Stearns at 13. Hennepin County leads the record, and the study should place the site within the county and name its neighbours. Annual approvals peaked at 61 in FY2017 and slid to 26 by FY2026.

How these loans have turned out

The cancellation floor sits at 6.6% for approvals from FY2017 to FY2024 and could be as high as 7.2% if every loan still undisbursed were counted as cancelled. On the other side, among 216 loans funded in FY2017 to FY2021, 7.4% are charged off so far, and 3.2% by the fifth year. Open loans may yet fail, so none of these is final.

What a Minnesota quick-service study has to test

The study should begin with the franchise agreement: the sales a comparable unit produces, the fee schedule that comes out of those sales, the development obligations and the territory. Then comes the site. Count competing brands along the corridor, the traffic that passes at breakfast, lunch and evening, and the daytime population around the address. Build-out and equipment should be priced beside the $250,000 median, with the franchisor's required package itemised. The loan must be serviceable through a slow first year, and wage increases. The lease and the remaining franchise term matter to the appraisal.