Restaurant Feasibility Study for SBA, USDA and Bank Loans

A restaurant feasibility study is the document a lender, CDC or USDA reviewer uses to decide whether a proposed, franchised, acquired or converted restaurant can carry its debt. MMCG Invest prepares lender-grade restaurant and food and beverage studies for SBA 7(a), SBA 504, USDA Business and Industry and conventional financing, built on a trade area measured from the road network, a competitive census verified unit by unit, a sales projection reconciled to the franchise disclosure document or the seller's returns, a project cost tested line by line, and a debt service coverage ratio (DSCR) schedule run through the floor the program actually applies: 1.15 times on a standard 7(a) loan, 1.10 times on a 7(a) Small loan, 1.15 times historical on a 504 loan, and 1.25 times historical on an acquisition under Appendix 15 of SOP 50 10 8.1.

A restaurant feasibility study is an independent, third-party analysis of whether a specific restaurant concept at a specific site can reach the sales, margin and cash flow needed to service a specific loan. It is distinct from an appraisal, which concludes a value, from a business valuation, which concludes a price, and from a franchisor's Item 19, which reports what other units did. The feasibility study concludes whether the capital stack works at this address.

Restaurants are not one lending situation. They are four, and the study is written for the one in front of the lender.

The first is the new unit: a free-standing drive-through, an in-line full-service build-out, a drive-through coffee kiosk on a ground-leased pad. The borrower has no operating history at the site and the file rests on projections. SBA defines a New Business as one operating two years or less and a Start-Up Business as one generating revenue one year or less, and the 504 program raises the borrower contribution to 15 percent for either. Here the study builds the projection from the trade area and tests it against the brand's disclosure document or the segment's published benchmarks. See the QSR and drive-through feasibility study and independent full-service restaurant feasibility study pages.

The second is the franchise unit, which carries the same projection problem plus a document the lender will read closely. The brand must be listed on the SBA Franchise Directory, the lender tests the sponsor's projections against the Franchise Disclosure Document, and an Item 19 system average is not a site projection. The study is what connects the two. See the restaurant franchise feasibility study page.

The third is the acquisition of an existing restaurant, which SOP 50 10 8.1 sorts into Appendix 15 and tests on historical debt service coverage at 1.25 times. Here the study normalizes the seller's earnings, documents the replacement wage, and explains the history rather than replacing it with a forecast. See the restaurant acquisition feasibility study page.

The fourth is the rural project financed under USDA Business and Industry: the brewery and taproom, the winery and tasting room, the distillery, the travel-corridor restaurant in a town under 50,000 people. The regulation names a feasibility study as a requirement for any guaranteed loan above $1 million to a new business, and the equity test is stricter than SBA's. See the brewery feasibility study, winery feasibility study and distillery feasibility study pages, and the USDA feasibility study page.

Two routing rules apply before any of this. A restaurant is not on SBA's list of special-purpose property examples, but a free-standing quick-service building with a drive-through may be classified by the CDC as limited or single purpose, and the franchisor's own disclosure document sometimes says so: Culver's 2026 FDD describes its company buildings as "single-purpose, one story, and freestanding." The classification is decided on the building, and MMCG settles it at scoping, because it moves the 504 contribution from 10 percent to 15 percent, or to 20 percent when the borrower is also a new business. The second rule concerns alcohol. No SBA or USDA rule makes a bar, brewery, winery or distillery ineligible, but the gambling and adult-entertainment tests, the liquor license, the three-tier statutes and the fire code each enter the study, and those formats have their own pages.

No federal regulation makes a restaurant study automatic. Under 13 CFR 120.160(b), SBA may require a feasibility study, and SOP 50 10 8.1, in force for loans numbered on or after October 1, 2026, leaves the decision with the lender or CDC. Lenders request one when the file rests on projections: a first unit by a new franchisee, a start-up independent, a second location without the first's history, an acquisition where the buyer will change the concept, or any file where the sponsor's pro forma sits above the brand's Item 19 median or the segment's published margins. Under SOP 50 10 8.1 an acquisition with continuity of operations cannot use projections to meet the 1.25 times floor at all, so the study's role on those files is to establish and defend the historical number.

USDA is explicit. Under 7 CFR 5001.306(a)(3)(i), a Business and Industry guaranteed loan above $1,000,000 to a new business requires an independent feasibility study prepared by a qualified third party to the components in Appendix A to Subpart D, with projections that run at least two years past full operational capacity. The Agency may require one below that amount.

The reader is a credit officer, an SBA district office, a CDC loan committee or a USDA state office. The study is written for that reader, not for the borrower, and MMCG accepts no referral fees, contingent fees or financing arrangements that would compromise that position. The method is set out in full in MMCG's feasibility study methodology.

The study is written against an industry that is growing in dollars and shrinking in customers. The National Restaurant Association projects 2026 restaurant and foodservice sales of $1.55 trillion, up 4.8 percent in nominal terms and 1.3 percent in real terms, and reports that 42 percent of operators were not profitable in 2025. Census advance monthly retail sales for food services and drinking places reached $105.07 billion in August 2026, up 5.8 percent year over year, while the food-away-from-home CPI rose 3.4 percent over the same twelve months, so roughly half the nominal growth is price. Black Box Intelligence's chain index shows same-store sales up between 0.7 and 1.8 percent in every month from January through May 2026 with traffic down between 1.1 and 2.3 percent, and its unit-closure analysis flags 9 percent of full-service units as at-risk, defined as 2025 sales at or below 70 percent of the unit's 2019 to 2025 peak, against 4 percent for limited service.

The traffic loss is concentrated at the bottom of the income distribution. Wendy's reported U.S. same-restaurant sales down 7.0 percent in the second quarter of 2026 with traffic down 12.5 percent, closed 289 U.S. restaurants in the first half of the year and withdrew its 2026 outlook. McDonald's told investors in May 2026 that low-income traffic was "absolutely still declining," and its global comparable sales slowed from 3.8 percent in the first quarter to 1.3 percent in the second. Chipotle posted its first annual comparable-sales decline since 2016 in 2025 and recovered to 2.2 percent in the second quarter of 2026 by targeting households above $100,000 of income. The Cornell study of GLP-1 adoption, linking survey responses to Numerator transaction data for about 150,000 households, reports an 8.0 percent decline in spending at fast-food chains, coffee shops and limited-service restaurants that persists through the first year of use.

Costs moved the other way. USDA's Economic Research Service, in its September 25, 2026 outlook, forecasts beef and veal up 9.4 percent for 2026 and 5.1 percent for 2027, against eggs down 29.4 percent and dairy flat, on a national cattle herd of 86.2 million head at January 1, 2026, the smallest in decades. Average hourly earnings in food services and drinking places stood at $21.89 in July 2026. Florida's minimum wage rose to $15.00 on September 30, 2026, California's stands at $16.90 with no tip credit, and Michigan's reaches $15.00 on January 1, 2027. The NRA's 2025 Restaurant Operations Data Abstract puts full-service median labor at 36.5 percent of sales and food and beverage at 32.0 percent, a prime cost of 68.5 percent, with median pre-tax income of 2.8 percent for full service and 4.0 percent for limited service.

Money is dearer too. The prime rate rose to 7.00 percent after the September 16, 2026 FOMC meeting, which puts the maximum 7(a) variable rate at 10.00 percent on loans above $350,000. The 504 program's 25-year effective rate was 6.97 percent for the October 2026 debenture, up from 5.72 percent in March. Single-tenant net lease cap rates reached 6.92 percent in the third quarter of 2026, the highest in more than a decade.

A feasibility study written in this market tests DSCR against a traffic decline, not only against a margin squeeze, and reports the sales level at which coverage breaks.

Restaurants are among the most numerous borrowers in the SBA programs and the asset where lenders read a feasibility study most skeptically. In fiscal 2025, MMCG's analysis of SBA 504 loan data shows 537 restaurant approvals, 374 full-service and 163 limited-service, with $539 million in debentures and $1.2 billion of total project debt, an average debenture of $1.0 million. A quarter of full-service approvals and 23 percent of limited-service approvals were start-ups. Franchise brands appeared on 31 percent of limited-service approvals, led by Culver's, Dunkin' and Wendy's, and on 5 percent of full-service approvals. On the 7(a) side, SBA's loan-level data for October 2023 through June 2026 show 7,484 full-service loans at a median of $251,000 and 5,406 limited-service loans at a median of $330,000, with median note rates of 10.2 and 10.0 percent.

The loss record explains the scrutiny. Across the fiscal 2010 to 2019 cohort, 2.6 percent of 504 full-service restaurant loans have been charged off, with dollar losses at 2.1 percent of approvals, above the program average, while limited-service loans sit at 0.92 percent. On 7(a), the best cohort-defined figure is 3.69 percent of full-service restaurant loans approved in fiscal 2015 through 2020 charged off by count, against a sector rate of 4.2 percent for all accommodation and food services loans approved from fiscal 2010 through March 2026. Those are cumulative rates on a mixed-age book; the seasoned fiscal 2015 through 2019 vintages across all industries sit between 5.5 and 6.8 percent, and the median time from approval to charge-off is about 50 months. An older twelve-year analysis found restaurants charging off at a 10.6 percent frequency against 3.9 percent for all 7(a) loans. The spread between those figures is seasoning and window, not contradiction, and the study states the cohort it is quoting.

Brand matters more than the sector average. Third-party tabulations of SBA data show Culver's with 176 resolved loans and no charge-offs and Crumbl at zero, Dunkin' near 7.8 percent on seasoned loans, and Dickey's Barbecue Pit above 20 percent. Restaurants create jobs faster than any other asset here, about one per $58,000 of debenture against the program's $95,000 standard, so the 504 economic development test is rarely the issue. Repayment is.

The acquisition record is better than the start-up record. One analysis of fiscal 2018 and 2019 7(a) cohorts puts change-of-ownership loans at 6.88 percent charged off against 9.83 percent for all other loans, which is the empirical case behind the historical coverage test that SOP 50 10 8.1 now applies.

SBA issued SOP 50 10 8.1 on August 14, 2026 and replaced it on September 25, 2026 with the version titled Technical Policy Updates, which governs loans receiving an SBA loan number on or after October 1, 2026. The September version is the one in force; several widely circulated summaries describe the August text and are wrong on at least six points. MMCG's analysis of the change is in SBA Stopped Lending on Projections: SOP 50 10 8.1 Closes Acquisition Loans on Last Year's Numbers.

For a new restaurant financed under 7(a), the study is written to a 1.15 times DSCR on a standard loan and 1.10 times on a 7(a) Small loan, the latter replacing the SBSS credit score for loans numbered on or after March 1, 2026. The maximum variable rate is Prime plus 3.0 percent on loans above $350,000, Prime plus 4.5 percent from $250,001 to $350,000, and Prime plus 6.0 percent from $50,001 to $250,000. For fiscal 2027 the upfront guaranty fee is 2 percent of the guaranteed portion on loans of $150,000 or less, 3 percent from $150,001 to $700,000, and 3.5 percent on the guaranteed portion up to $1 million plus 3.75 percent above it on larger loans, with a 0.55 percent annual service fee. The fiscal 2027 fee waiver reaches manufacturers, a list of food supply chain industries, and businesses in counties the Census Bureau defines as at least 30 percent rural, on loans of $700,000 or less. NAICS 722 is not on the food supply chain list, so a restaurant qualifies only through the rural test. Where $500,000 or 30 percent of loan proceeds, whichever is less, goes to leasehold improvements, the lender must obtain the lease, and the lease term including renewal options exercisable only by the borrower should equal or exceed the loan term, and must where an assignment of lease or landlord's waiver cannot be obtained. Leasehold improvements take a maturity of up to ten years plus up to twelve months to complete, with a blended maturity or 25 years where real estate is 51 percent or more of proceeds.

For a restaurant acquisition, Appendix 15 governs. An Initial Acquisition, which is any change of ownership by a buyer who was not previously an owner or employee, requires a 10 percent equity injection that cannot be reduced or eliminated, with seller debt on full standby, other standby debt and non-controlling minority investors together providing no more than half of it. The DSCR floor is 1.25 times, measured as EBITDA over total post-transaction debt service on the last fiscal year-end or the average of the last two, on a historical or adjusted historical basis; projections are reviewed but cannot cure a shortfall. A Business Expansion by an operator with two full fiscal years of history is tested at 1.15 times. The business portion amortizes over no more than ten years unless 85 percent or more of value is special-use real estate. Total acquisition debt is capped at the independent business valuation, with any excess price made up in equity. A Quality of Earnings report with a cash proof is required at a business purchase price of $3 million or more. A standby seller note must be in place and current for 36 months before it can be refinanced. Seller earnouts are prohibited; a seller transition may run 24 months. An acquisition with no clear continuity of operations may be evaluated as a start-up.

For a 504 loan, the study is written to a 1.15 times DSCR on historical EBITDA, up from the 1:1 test in SOP 50 10 8. Eligible uses are land, site improvements, buildings and fixed assets with a useful life of at least ten years; working capital, inventory, franchise fees and opening expenses are 7(a) items. The borrower contribution under 13 CFR 120.910 is 10 percent, rising to 15 percent for a business that has operated two years or less or for a limited or single purpose building, and to 20 percent where both apply. The debenture carries a 25-year term where real estate is 51 percent or more of proceeds, down from 75 percent in the August text, and the September update removed the restriction on the third-party lender's term. The fiscal 2027 504 fees are 0.50 percent upfront and 0.203 percent annually, waived for the same manufacturing, food supply chain and rural borrowers. The job opportunity standard is one job per $95,000 of debenture, or $150,000 for small manufacturers and energy public policy projects. Since July 4, 2026, a borrower may hold $5 million of 7(a) debt and $5 million of 504 debt at once, a combined $10 million.

For a franchise, the brand must appear on the SBA Franchise Directory and the franchisor's certification must be on file. The September text adds that SBA's franchise team may decline a brand whose franchisor has engaged in activity SBA determines could be detrimental to borrowers or is under a state prohibition order, and moves 504 franchise document review to the CDC's closing counsel. Affiliation is tested on ownership, not on the franchise agreement.

Every provision above is quoted from SBA's published notices and from lender association and law firm readings of the September 25 text; MMCG cites the chapter, paragraph and page of the SOP in the study itself.

USDA Business and Industry guarantees finance restaurants, breweries, wineries and distilleries in rural areas, meaning outside any city or town of more than 50,000 people and its contiguous urbanized area. The borrower ineligibility list at 7 CFR 5001.127 excludes businesses deriving more than 15 percent of gross revenue from gambling and any business with income from prurient sexual material; it says nothing about alcohol, and the project ineligibility lists at 5001.115 and 5001.118 are equally silent. A taproom with video gaming terminals must therefore keep gaming under the 15 percent line, the same test MMCG applied in its Effingham County travel center case.

The equity test is stricter than SBA's. Under 5001.105(d), an existing business needs 10 percent balance sheet equity or 10 percent of project cost invested; a new business needs 20 percent balance sheet equity or 25 percent of total eligible project cost invested, and 25 percent either way if the guarantee is to be issued before construction is complete. The Agency may raise the requirement for higher-risk industries. Part 5001 sets no universal DSCR floor for new loans; the only numeric coverage minimums in the entire Part are eligibility tests for refinancing at 5001.102(d): 1.1 times historical where the majority of the loan refinances existing debt, and 1:1 on current income to demonstrate recovery, and the lender must otherwise document adequate debt coverage in its credit analysis. Appraisals are required for real estate collateral above $250,000, must give both as-is and prospective values on construction, and must strip business or going-concern value before the lender applies its discounts. The term is the justified useful life capped at 40 years, with no balloons. Owners of 20 percent or more give unsecured personal guarantees.

Fiscal 2026 terms, published March 9, 2026, are an 85 percent guarantee on loans under $5 million and 80 percent from $5 million to $25 million, a 3.0 percent initial fee, a 0.55 percent annual retention fee, and a 0.50 percent fee for a guarantee issued before construction completion. No fiscal 2027 notice had been published as of October 9, 2026, and the program's fiscal 2027 appropriation is unresolved under a continuing resolution to December 11, 2026. MMCG tracks the program in its USDA Financing and Grant Monitor. The Value-Added Producer Grant funds planning at up to $50,000 and working capital at up to $200,000 in fiscal 2026 for producers of agricultural products, which includes a distiller's feasibility study: Bozeman Spirits received $50,000 for exactly that in January 2022.

A restaurant trade area is drawn from the road network and the generator, not from a radius. For a drive-through quick-service unit the generator is the corridor, and the study names the state DOT count station, the direction of the peak flow and the access configuration, because the ITE Trip Generation Manual assigns a fast-food restaurant with drive-through 467 daily trips per 1,000 square feet with 49 percent of them pass-by, and a coffee or donut shop with drive-through 534, so the site's sales come from traffic already on the road. For a full-service unit the generator is the residential and daytime population within the drive time the concept's check average supports, and the study reports both. For a destination format, a brewery, a winery tasting room, a food hall, the generator includes visitors, and the study adds a visitor-spending line from the state tourism office or the lodging inventory rather than overstating the resident count.

Demand is measured in dollars and in occasions. The study carries restaurant spending per household from the Consumer Expenditure Survey adjusted to the trade area's income, and it carries the occasion data that bears on the format: 65 percent of fast-food sales ran through the drive-through in 2025; nearly 75 percent of all restaurant traffic is now off-premises by the NRA's count, with off-premises a larger share of sales than in 2019 for 58 percent of limited-service and 41 percent of full-service operators; 66 percent of American adults drank coffee the prior day and 38 percent of them bought it out of home, 55 percent of those at a drive-through; 54 percent of adults drink alcohol, a record low. Third-party delivery is modeled at the platform's commission net of the local cap where one exists, 15 percent in San Francisco, Seattle and, for the base delivery fee, New York City.

Saturation is measured against the trade area, not against the state. The 2022 Economic Census reports establishments and sales for NAICS 722 and its subsectors by state and county, and County Business Patterns updates the establishment count annually; the study divides both by population and compares the trade area to its county and metropolitan area, and it adjusts for visitors where the state's density is tourism-driven, as in Montana, Oregon, Hawaii and Vermont. A per-capita density above the metropolitan figure is a finding, not a verdict, and the study says which units are taking the share.

The competitive census is built by segment and verified unit by unit. The study lists every limited-service, fast-casual, full-service and beverage operator in the trade area that competes for the subject's occasions, with its brand, format, seat or lane count, hours, check average, and opening date, and it lists closures by date for the prior three years. Each entry is verified against the operator's own site, the state license record or the local permit, and the study states which entries are verified and which are carried from a licensed listing.

The pipeline is treated as supply. Drive-through coffee is the clearest example: Dutch Bros plans at least 185 openings in 2026 on a base of 1,225, 7 Brew projects 447 and has bid against Dutch Bros for sites, and Scooter's has 242 signed units not yet open. The study reads the municipal permit record for the trade area and counts every approved drive-through as competition from its expected opening date.

The chain record is read for direction. Wendy's U.S. restaurant count fell from 5,967 to 5,724 in a year. Starbucks closed 627 company stores in the fourth quarter of fiscal 2025 and announced about 250 more in September 2026 while cutting its 2026 opening plan to about 440. Twenty-three restaurant franchisee bankruptcy filings by eighteen operators were recorded through September 28, 2026, including Meritage Hospitality, the 314-unit Wendy's operator whose food, paper and labor reached 66.1 percent of sales in 2025 and whose store-level EBITDA fell 48 percent before it filed on September 17, 2026. A closure in the trade area is demand released; a closure in the brand is a warning the study reports.

The sales projection is the study. For a franchise unit it starts from the Item 19 distribution, not the average. Culver's 2026 FDD reports a franchised average of $4,142,737 and a median of $4,036,492 across 988 units open the full year, with 99 units below $3.0 million and a low of $1,103,114, and it reports state averages that range from $4,517,210 in Wisconsin and $4,287,146 in Florida to $3,480,360 in Texas and $2,991,077 in Utah. A first unit in a new market is underwritten against the state table and the bottom decile, and the study reports DSCR at the median, at the state average and at the $3.0 million line. For a coffee kiosk the brand decides the case: 7 Brew's 2026 FDD reports an average of $2.658 million across 320 stores, Scooter's reports a kiosk average of $998,869 with EBITDA of $134,457, The Human Bean $896,744 and Biggby's drive-through format $756,742, and the same $1.5 million project pencils at the first volume and not at the others. Dutch Bros, which is not a conventional franchise, reports a systemwide average unit volume of $2.193 million and a shop contribution margin of 30.6 percent.

Where a brand's Item 19 excludes new units, as Culver's does for the 45 franchised restaurants opened in 2025, the first-year ramp is an analyst assumption and the study labels it as one, with a sensitivity grid, rather than presenting a percentage as sourced. No public cohort table was found for any of the brands named above.

For an independent, the projection is built from seats, turns, check average and days, and tested against sales per square foot: the published rules of thumb place break-even for full service between $150 and $250 per square foot and a 5 to 10 percent net margin between $250 and $325, which on 5,000 square feet is $1.25 million to $1.63 million of annual sales. The cost structure is then applied from the published medians rather than the sponsor's budget: full-service labor at 36.5 percent, food and beverage at 32.0 percent, occupancy at a median of 5.7 percent, and the balance of operating expense that leaves the 2.8 percent median pre-tax income the NRA reports. A sponsor's pro forma that shows a 15 percent restaurant-level margin for a first-year independent is reconciled to those medians line by line, and the study says where the sponsor's number comes from.

For a franchised quick-service unit the cost lines come from the brand. Culver's company restaurants ran food at 30.5 percent, paper at 3.0 percent, wages at 31.7 percent and benefits at 5.9 percent of sales in 2025, a prime cost of 71.0 percent, and reported income of 13.0 percent before rent, real estate taxes, interest and depreciation, with the lowest-volume company store at 8.7 percent on $2.91 million of sales and the highest at 15.9 percent on $5.15 million. That operating-leverage curve, about three points of margin per million dollars of sales, is the sensitivity the lender reads first. Public company restaurant-level margins give the direction of travel: Wendy's U.S. company margin fell to 11.4 percent in the first quarter of 2026 from 14.8 percent, Jack in the Box guided fiscal 2026 to 17 to 18 percent from 19.6 percent, and Chipotle and Shake Shack hold the high end at 25.2 and 22.6 percent.

For an acquisition, the projection is the history. The study reconciles the seller's point-of-sale reports to bank deposits and to the tax returns, documents each add-back, and substitutes a market manager wage for the owner's draw: the BLS median for food service managers was $69,390 in May 2025, and whether the replacement wage is $50,000 or $65,000 is often what decides the 1.25 times test. Unreported cash and unreported tips are never accepted as add-backs, because the lender ties earnings to IRS transcripts.

Project cost is tested line by line against the brand's Item 7 and the published cost record. Culver's 2026 Item 7 runs from $3,406,350 to $10,294,100: land $225,000 to $2,400,000 on a 45,000 to 70,000 square foot site, site work $356,000 to $2,193,000, building $2,047,000 to $4,391,000, furniture, fixtures and equipment $458,000 to $584,000, signs $88,000 to $300,000, point of sale $42,350 to $56,100, and three months of additional funds at $65,000 to $120,000 that exclude hourly labor, food and rent. The franchisor requires 20 percent of the projected investment in cash or liquid assets, which means a 504 structure at 15 percent does not reduce the borrower's cash at closing. Lower-cost drive-through formats run $1.5 million to $2.8 million for Freddy's standalone and $1.46 million to $3.81 million for Zaxby's, and 7 Brew's 2026 Item 7 runs $940,500 to $2,283,500 on a 510 square foot modular building. Dutch Bros reported average capital expenditure of $1.3 million per new shop in the fourth quarter of 2025 and first quarter of 2026.

For an independent build-out in leased space, the space condition is the swing variable. Published 2026 contractor ranges run $125 to $250 per square foot for verified second-generation restaurant space, $200 to $400 for a conversion from another use, and $250 to $500 and above for gray or cold shell, before kitchen equipment, furniture, signage and pre-opening. On 5,000 square feet that is $750,000 to $2.25 million of construction alone, and only the first scenario clears a 1.25 times DSCR on a ten-year leasehold-improvement maturity at the margins the NRA reports. The study presents all three scenarios, with the landlord's tenant improvement allowance, typically $80 to $180 per square foot on a seven to ten year restaurant lease and $10 to $30 for second-generation retail, amortized into the rent.

The capital stack is then built by program. For a $5 million owned-land drive-through at October 2026 rates, a 7(a) loan of $4.5 million at the 10.00 percent cap over 25 years costs about $490,700 a year and clears 1.10 times on a stabilized Culver's-class EBITDA of about $538,600, below the 1.15 times standard floor. A 504 structure at 15 percent contribution, with a $2.5 million first mortgage at an assumed 8.0 percent and a $1.75 million debenture at 6.97 percent, costs about $379,500 a year and covers at 1.42 times; at 20 percent contribution and a $1.5 million debenture, about $358,400 a year and 1.50 times. The 7(a) upfront fee on the $4.5 million loan is about $124,000; the 504 debenture fee at 0.50 percent is under $9,000. The study shows the stack both ways and names the equity the sponsor must bring at each.

For a rural USDA project the stack starts from the 25 percent new-business injection. A $2.5 million brewery and taproom at 25 percent equity carries a $1.875 million guaranteed loan, a 3.0 percent initial fee of about $47,800 on the guaranteed portion, and an independent feasibility study by regulation.

The study reports DSCR as EBITDA over total post-transaction debt service, by year, against the floor the program applies: 1.15 times on a standard 7(a) loan, 1.10 times on a 7(a) Small loan, 1.15 times historical on a 504 loan, 1.25 times historical on an Appendix 15 acquisition, 1.15 times on a Business Expansion, and the lender's covenant on a USDA loan, where the regulation sets no floor. For a start-up it reports projected DSCR in years one through three, the year the floor is first met, the breakeven sales line, and the funded debt service reserve or interest-only period that carries the project to that year. For a 504 restaurant it reports coverage at both 15 and 20 percent contribution until the CDC rules on the building. For any file it shows the result with and without the fiscal 2027 rural fee waiver where the site might qualify.

Sensitivities are calibrated to the public record rather than chosen for symmetry. Sales are tested at 10, 20 and 30 percent below the base case: Wendy's posted a 7.0 percent comparable decline in a single quarter of 2026, Meritage an 11 percent decline in the fourth quarter of 2025, and industry sales fell 54.3 percent from February to April 2020 against only 2.4 percent peak to trough in 2008 and 2009, so the recession test and the shutdown test are different tests and both appear. Food cost is tested at three points above base, which is the beef-led inflation of 2026 applied to a burger or steak concept. Wages are tested at 10 percent above base, which is three years of the current 3 percent wage trend or a single state minimum-wage step. Rates are tested at 100 basis points above base, which is less than the 125 basis point rise in the 504 rate between March and October 2026. Each sensitivity reports the DSCR and the sales shortfall at which coverage breaches the floor; on the Culver's-class 504 case above, a 7.4 percent sales miss breaches 1.15 times and a 10.5 percent miss breaches 1.00 times.

The study also reports the three-month shock: revenue at 50 percent for a quarter, tested against the working capital line in the project budget, because a 2020-style interruption is a liquidity test rather than a coverage test.

Under SOP 50 10 8.1, when the lender requests a going-concern value the appraiser must allocate separate values to land, building, equipment and intangible assets, and a restaurant acquisition without real estate is a business valuation, not a real estate appraisal, performed by an accredited appraiser holding the ASA, ABV, CVA, CBA or BCA credential and ordered by the lender. The study is written to support that work, and MMCG's view of the division of labor is in When the Appraisal Isn't Enough.

Real estate value is tested on a go-dark basis. The net lease market prices a franchisee-guaranteed quick-service building at a 6.87 percent cap rate in the third quarter of 2026 against 5.90 percent for a corporate guarantee, a 97 basis point spread, and at 6.00 percent against 5.00 percent where twenty or more years of lease term remain. A first-unit franchisee on its own real estate has neither a lease nor a guaranty to sell, so the study capitalizes a market rent of 6 to 7 percent of sales to reach a leased-fee cross-check and reports the dark value separately, because conversion and de-branding costs appear as functional obsolescence once a branded building goes dark. The Appraisal Institute's restaurant guidance treats highest and best use as the central question for that reason.

Furniture, fixtures and equipment are carried at orderly liquidation value. Used restaurant equipment brings 10 to 30 cents on the dollar at auction and 50 to 70 cents in a private sale, so most of an acquisition price lands in Class VII goodwill under IRS Form 8594 and the loan is a cash-flow loan. A food truck is titled personal property under a lien noted on the certificate of title; a modular coffee kiosk on a ground lease is equipment unless permanently affixed, which decides whether its maturity is ten years or twenty-five. A liquor license is a Class VI intangible whose pledge is governed by state law and whose market value runs from the state fee to the quota price: Pennsylvania's June 2026 auction averaged $284,394.50 a license, a Boston full-bar license has sold for $600,000, and a Florida 4COP in Duval County was asking $710,000.

Quick-service and drive-through restaurants are the format lenders see most. Sixty-five percent of fast-food sales ran through the drive-through in 2025, the 2026 drive-thru report timed AI-assisted lanes at 5 minutes 16 seconds against 5 minutes 25 seconds without, and the building is a stacking problem before it is a kitchen: most municipal codes require four to six queued cars per lane, St. Paul adopted a 14-space standard for coffee shops on March 4, 2026 after measuring queues of 16, and a traffic study required 37 spaces at one 7 Brew site. See the QSR and drive-through feasibility study page.

Restaurant franchises carry the Item 19 question and the brand's loss record. The study reads Items 5, 6, 7, 19 and 20 from the state franchise portal, tests the sponsor against the state table, and reports the brand's SBA charge-off rate with its denominator. Burger King's average unit profitability fell to about $185,000 in 2025 from $205,000 on beef costs up more than 20 percent; Chick-fil-A is company-owned with a 15 percent service fee and half of net profits and is not SBA-financeable; Raising Cane's is not selling new franchises. See the restaurant franchise feasibility study page.

Independent full-service restaurants are the highest-failure format and the one where the build-out decides the file. The Cornell study of Columbus, Ohio restaurants found 26.16 percent closing in the first year and 59.74 percent within three; a later study of a national sample found a 17 percent first-year rate and a median lifespan of 4.5 years. The study is written as second-generation space wherever the market offers it. See the independent full-service restaurant feasibility study page.

Coffee shops and drive-through coffee are the fastest-growing restaurant format and the one most exposed to a single commodity. Arabica reached an all-time high of 440.85 cents a pound in February 2025 and traded between about $3.20 and $3.87 through 2026, roughly double its pre-2024 norm, and the coffee CPI rose 18.5 percent in the year to April 2025. The study models three volume tiers and both a ten-year and a twenty-five-year maturity, because the kiosk's classification as equipment or real estate changes DSCR by about 45 percent. See the coffee shop feasibility study page.

Bars and nightclubs are underwritten on the license and the format. Neighborhood bars grew 0.4 percent and sports bars 5.1 percent in the first quarter of 2026 while casual nightclubs fell 3.4 percent and premium bars 26.9 percent; bar spending on Bank of America cards rose 4 percent in 2025 while at-home alcohol fell 5 percent. SBA ineligibility turns on gambling above one-third of revenue and prurient content above 5 percent, USDA on gambling above 15 percent. Distance rules from churches and schools, dram shop exposure, late-hour permits and the quota price of the license each enter the study. MMCG's industry analysis is in its U.S. Bars and Nightclubs Industry outlook. See the bar and nightclub feasibility study page.

Breweries, brewpubs and taprooms are financed on the taproom. The Brewers Association counted 9,578 craft breweries at the end of 2025, down 2.9 percent, with 300 openings and 481 closings, and craft production fell 4 percent to 22.0 million barrels; taprooms and brewpubs are about three-quarters of breweries and about 15 percent of volume, and they were the best-performing model again in the first half of 2026. The association's benchmarking data put direct-to-consumer beer at $1,276.14 per barrel against $602.02 distributed, which is the whole underwriting case. Federal excise is $3.50 a barrel on the first 60,000, TTB brewer's notices were issued in a median of 34 to 43 days in mid-2026, and the wastewater surcharge is a line item. See the brewery feasibility study page.

Wineries and tasting rooms are the one restaurant-adjacent format on SBA's special-purpose list. Silicon Valley Bank's 2026 report puts 2025 U.S. wine volume at about 329 million cases, down from 336 million, expects the market to bottom in 2027 and 2028, and reports nearly 45 percent of wineries with excess inventory; direct-to-consumer shipments fell 15 percent by volume in 2025, the worst year on record, and California growers removed 38,134 vineyard acres in the year to August 2025 with about 40,000 more expected in 2026. Tasting room visitation fell about 5 percent in the year to March 2026. The study builds revenue from visitation, conversion and club retention and values vineyard collateral on income, not on statewide cropland averages. See the winery feasibility study page.

Distilleries carry a fire code question before a market question. The American Craft Spirits Association counted 2,131 active craft distillers in August 2026, down 6.6 percent, with closures exceeding openings for the first time and case volume down 8 percent. Under the 2021 and 2024 International Building Code, distilling and barrel storage no longer count toward the hazardous-occupancy quantity limits provided the F-1 and S-1 areas are sprinklered; under the 2018 code and earlier, 120 gallons in closed use or 30 in open use triggers Group H. The adopted edition is a site-selection test. Federal excise is $2.70 a proof gallon on the first 100,000, TTB plant permits were issued in a median of 47 to 49 days in mid-2026, and direct shipping is allowed in only eleven states. See the distillery feasibility study page.

Food halls are multi-tenant real estate with an operating overlay. The count reached 458 in January 2026 from 343 in early 2023, and the closures cluster in high-rent office districts: Time Out Market Boston and Chicago in January 2026, three New York halls in 2025, and Seattle's Asean StrEAT, evicted in February 2026 owing $842,209 on a $26,000-a-month lease. The published stall economics show vendors paying 28.4 percent of sales in occupancy charges and netting 18.6 percent, with the master-lease operator netting about 9 percent without a bar and most of its margin with one. The study underwrites the operator on bar and common-area cash flow with vendor license income haircut for turnover. See the food hall feasibility study page.

Ghost kitchens and commissaries are valued as flex industrial space. Kitchen United exited physical locations in 2023, Reef closed its New York facilities, Wendy's ended its 700-unit plan, Local Kitchens fell from 13 units to 6 by October 2025, and CloudKitchens' tenant turnover ran about 65 percent a year. Shared kitchens rent for $15 to $45 an hour. The study treats hoods, grease interceptors and walk-ins as having little contributory value to a next user. See the ghost kitchen and commissary feasibility study page.

Food trucks and food truck parks are a permit and commissary question and, for the park, a land question. Texas moved mobile food licensing to the state on July 1, 2026 at $876 plus a $500 inspection for a full-cook unit, Los Angeles County charges $761 a year, and Multnomah County licenses carts at $760 to $920 and pods at $540 to $720. Every jurisdiction reviewed requires a commissary. The Census counts 12,487 employer establishments in mobile food services; modeled estimates run far higher. See the food truck feasibility study page.

Restaurant acquisitions trade small and cheap. BizBuySell's five-year record puts restaurants at 2.18 times seller's discretionary earnings and 0.39 times revenue on a $220,000 median price, with median revenue of $718,271 and owner earnings of $120,355, half of sales between 1.34 and 2.53 times, and 178 days on market; restaurant transactions fell 12 percent in the second quarter of 2026 and the median price fell 12 percent to $205,000. Ninety percent of buyers expect seller financing and 29 percent of sellers plan to offer it. In Texas a liquor permit does not transfer and the buyer applies anew; in New York a temporary retail permit costs $640 for 180 days; in California a quota license transfers through escrow. See the restaurant acquisition feasibility study page.

Eatertainment and competitive socializing, the bowling, mini-golf and driving-range venues with a full bar, are special-purpose property under SBA rules and carry the 15 and 20 percent tiers. Dave & Buster's cut its year-one cash-on-cash target to 30 percent in its fiscal 2025 10-K, Topgolf's same-venue sales fell 8.6 percent in 2024 before its majority sale at a $1.1 billion valuation, Lucky Strike's same-store revenue fell 3.7 percent in fiscal 2025 on about $3.2 million per location, and Puttshack reports an $11 million to $12 million unit volume at a 25 percent margin with more than half its build cost from landlords. An independent venue without that landlord support carries the full stack.

Convenience store foodservice is covered on the gas station feasibility study page; it was 28.5 percent of inside sales and 38.9 percent of inside gross profit in 2025 at a 56.6 percent margin on prepared food.

SBA 7(a) finances restaurant start-ups, build-outs in leased space, equipment, working capital, franchise fees and acquisitions, with a $5 million cap, a guarantee of 85 percent on loans of $150,000 or less and 75 percent above, a maximum variable rate of Prime plus 3.0 percent on loans above $350,000, and the Appendix 15 tests on acquisitions. It is the program for the leased-space independent, the coffee kiosk and the acquisition. See the SBA 7(a) feasibility study page.

SBA 504 finances owned restaurant real estate and long-life equipment through a fixed-rate debenture of up to $5 million, or $5.5 million for a public policy project, paired with a third-party first mortgage of at least 50 percent of project cost, at a borrower contribution of 10, 15 or 20 percent under 13 CFR 120.910. It is the program for the free-standing drive-through on owned land and the brewery that buys its building, and the October 2026 debenture rate of 6.97 percent is about three points under the 7(a) cap. Both programs require the borrower to occupy at least 51 percent of an existing building or 60 percent of new construction under 13 CFR 120.131. See the SBA 504 feasibility study and SBA feasibility study pages.

USDA Business and Industry finances rural restaurants and beverage producers to $25 million at an 85 percent guarantee under $5 million, with the equity, appraisal and feasibility rules described above and fiscal 2027 terms pending. REAP grants to breweries and wineries for solar have been made, but the program's 2026 suspension and rule changes mean the study leaves REAP out of the capital stack. See the USDA feasibility study page.

Conventional lenders underwrite restaurant real estate and franchisee portfolios to a DSCR of 1.20 to 1.35 times and, for net lease product, to the franchisee or corporate guaranty, and they read the same study.

MMCG illustrates its restaurant method through model engagements, each built from public benchmarks and written in the register of the study itself. The engagements are illustrative; the brand disclosures, program rules, cost data and market evidence are real, and none of it is drawn from any client file. Each case is published as its own page and follows the order of the study: site, market, cost, capital stack, projection, DSCR by year, break-even, sensitivities, conditions and determination.

A MMCG restaurant feasibility study runs between 80 and 130 pages and includes the trade area and generator analysis with the DOT count station named, the demand analysis in dollars and occasions, the verified competitive census by segment with openings and closings by date and the permitted pipeline, the site, access and stacking analysis, the sales projection reconciled to the FDD or the seller's returns, the operating projection on the published medians, the project cost estimate or acquisition analysis line by line, the capital stack by program with the contribution tier stated, the DSCR schedule by year, the break-even and sensitivity tables, the collateral discussion, and a signed conclusion. Every competitor, every demand figure and every program rule is cited to its own published source, and the study states which figures are primary-verified and which are carried from licensed or older sources.

Standard delivery is nine to sixteen business days from engagement and receipt of the project file. Expedited delivery in five to seven business days is available. Fees begin at $4,900 for a single-site SBA 7(a) restaurant study and range from $7,500 to $15,000 for SBA 504, acquisition and USDA studies depending on the program, the number of scenarios and the alcohol and licensing work. Payment is 50 percent at engagement and 50 percent at delivery. MMCG has offered a written acceptance guarantee on every study since founding: revisions required by the lender or agency are made at no additional cost.

Engagements are led by Michal Mohelsky, J.D., FMVA, Practicing Affiliate of the Appraisal Institute, from the firm's San Francisco office at 27 Maiden Lane, Suite 625. The same study is prepared to the lender requirements of the state the project sits in; see where we work.

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