Restaurant Franchise Feasibility Study for SBA 7(a), SBA 504 and Bank Loans

A franchised restaurant comes to the lender with a document the independent does not have, and the document is where the file is won or lost. MMCG Invest prepares restaurant franchise feasibility studies for SBA 7(a), SBA 504 and conventional financing that confirm the brand on the SBA Franchise Directory, read Items 5, 6, 7, 19 and 20 from the state franchise portal, reconcile the sponsor's projection to the Item 19 distribution and the state table rather than the system average, carry the full franchisor take through the operating projection, report the brand's SBA loss record with its denominator, and show the debt service coverage ratio (DSCR) the unit produces at the median, the bottom decile and the lender's floor.

A franchise sells a lender two things it cannot get from an independent: a disclosed sales distribution and a loss history by brand. It also adds costs the independent does not carry. Culver's takes 4 percent in royalty and 2.5 percent in advertising, with co-op advertising of up to 4 percent if a regional co-op votes it in and a reserved technology fee of $600 to $1,000 a month; Dunkin' takes 5.9 percent plus 5.0 percent; Jersey Mike's 6.5 percent; Wingstop 6 percent plus 5 percent; Taco Bell 5.5 percent plus 4.25 percent; McDonald's a 4 or 5 percent royalty, at least 4 percent advertising and percentage rent that its 2026 FDD puts between 6 and 23 percent of gross sales because the franchisor is the landlord. The study carries every line of that take, including fees the franchisor reserves but does not yet charge, and tests the sponsor's pro forma against it.

The general restaurant method, the SOP 50 10 8.1 spine and the market backdrop are on the restaurant feasibility study hub. The building and corridor questions for a drive-through are on the QSR and drive-through feasibility study page. This page covers the franchise document and the brand.

Under SOP 50 10 8, effective June 1, 2025, a brand that meets the FTC franchise definition must be listed on the SBA Franchise Directory for its franchisees to receive SBA financing, and the lender records the SBA Franchise Identifier Code in the file. From January 1, 2026 the executed SBA Franchisor Certification is required. Affiliation is determined on ownership alone; control through the franchise agreement is no longer a test. SOP 50 10 8.1, in force for loans numbered on or after October 1, 2026, keeps those rules and 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 under the Opinion of CDC Counsel. The study confirms the listing, the identifier and the certification before any market work begins, because a brand that fails that test has no SBA path. Brands that are not conventional franchises are stated as such: Raising Cane's is not awarding new U.S. franchises, Chick-fil-A owns its restaurants and takes a 15 percent service fee plus half of net profits from its operators, and Dutch Bros grows company-operated.

The study reads the FDD from a state portal, Wisconsin DFI, Minnesota CARDS or California DFPI, not from an aggregator, and states the issue date and fiscal year on every figure. The three items that matter are the investment, the sales representation and the outlet table.

Item 7 is the cost test. Culver's 2026 FDD, issued March 30, 2026, runs $3,406,350 to $10,294,100, and its low end rose about 29 percent from the 2025 document. Freddy's standalone drive-through runs $1,586,334 to $2,802,000, Zaxby's $1,460,000 to $3,810,500, Dunkin' freestanding $532,400 to $1,832,500 excluding real estate, 7 Brew $940,500 to $2,283,500 with a ten-store minimum commitment, Tropical Smoothie $275,500 to $770,500, Jersey Mike's about $204,000 to $1.3 million. Wendy's and Burger King ranges exclude real estate. The sponsor's budget is placed on that range line by line, and a budget below the brand's low end is a finding.

Item 19 is the sales distribution, and the study uses it as a distribution. Culver's reports 988 franchised units at an average of $4,142,737 and a median of $4,036,492, with 46 percent at or above the average, 99 units below $3.0 million, and state averages from $2,991,077 in Utah to $4,517,210 in Wisconsin. Wendy's reports $1,993,657 average and $1,866,652 median. Dunkin' reports $1,372,069 across 7,010 restaurants, $1,584,319 for freestanding pads and $1,250,245 for in-line. Jersey Mike's reports $1,367,578 across 2,606 units with a low of $512,332. Tropical Smoothie reports $978,298 across 1,431 units, its first disclosed decline, with the top decile at $1,709,270 and the bottom decile at $492,972. 7 Brew reports $2.658 million across 320 stores with a low of $836,418. Scooter's reports a kiosk average of $998,869 with EBITDA of $134,457 and a top quartile at $1,433,875. Where a brand makes no Item 19, as Taco Bell does by the aggregators' reading, the study says so, substitutes public-company unit volume with a label, and treats the absence as a lender risk factor. Where Item 19 reports company cost lines, the study notes what they omit: Culver's company income of 13.0 percent is before rent, real estate taxes, interest and depreciation and excludes office overhead.

Item 20 is the outlet table and the brand's own trend. Culver's began 2025 with 990 units, opened 45, closed one and recorded 20 transfers, with four franchised closures in 38 years. Scooter's recorded 24 units ceasing for other reasons in 2025 against two in 2023 as its openings fell from 209 to 85. 7 Brew recorded no closures and projected 447 openings for 2026. Wendy's expects to close 5 to 6 percent of its U.S. restaurants in 2026, and Wingstop's domestic same-store sales fell 7.5 percent in the second quarter of 2026. Transfers and closures are read for direction, and a brand whose closures are rising while its openings fall is reported as such.

SBA publishes no brand table; every brand-level rate is a third-party computation from SBA's public loan data, and the denominators disagree, so the study states the method with the number. On resolved loans in the fiscal 2010 to 2019 cohort, Culver's shows 176 loans at a $715,000 median with no charge-offs, and Biggby 72 loans at zero. On the same basis Dickey's Barbecue Pit runs from 20.4 percent on one method to 32.9 percent on another, and every method ranks it near the top. The SBA Loan Index, counting all loans approved from fiscal 2010 through March 2026 including unseasoned ones, puts the average franchise 7(a) charge-off at 4.3 percent, Dunkin' at about 7.8 percent on seasoned loans, Subway at 5.7 percent, and Crumbl, Nothing Bundt Cakes and several others at zero on young books. One resolved-loan analysis puts the national franchise rate at 16.0 percent. Those figures are not contradictory; a cumulative rate on a mixed-age book understates lifetime loss and a resolved-loan rate on an old window overstates current-vintage risk. The study prefers matured fiscal 2010 to 2019 resolved cohorts for brand risk and labels anything else. Early defaults have risen: FRANdata reported franchise defaults within 18 months at 1.4 percent against a historical 0.6 to 0.8 percent. MMCG's own reading of the data is in Best Franchises to Own in 2026: What the SBA Loan Data Actually Says.

The lender's question is whether the brand's economics still work for an operator, and 2026 answers it brand by brand. Meritage Hospitality Group, which ran 314 Wendy's in 15 states, filed Chapter 11 on September 17, 2026 after food, paper and labor reached 66.1 percent of sales, store-level EBITDA fell 48 percent, and fourth-quarter 2025 same-store sales fell more than 11 percent while beef costs rose nearly 19 percent; it had closed 60 units and dropped breakfast at about 120. Consolidated Burger Holdings, a Burger King operator, filed in April 2025 with sales down from $76.6 million to $67 million and $179,000 of cash. ARC Burger, a 77-unit Hardee's operator, filed Chapter 7 on April 20, 2026 after the franchisor terminated its agreements and sued for $6.5 million; Superior Star, another Hardee's operator, filed Chapter 11 on July 9. Twenty-three franchisee filings by eighteen operators were recorded through September 28, 2026. Remodel mandates are the clearest franchisor-driven coverage pressure in the record, and the study reads the franchise agreement's remodel and reimage clauses and carries the next required capital event in the pro forma.

The study builds the site projection from the trade area and reconciles it to the Item 19 distribution at the median, the state average and the bottom decile, then runs the brand's cost structure through it. For a Culver's-class unit that is food 30.5 percent, paper 3.0 percent, wages 31.7 percent, benefits 5.9 percent, royalty 4 percent, advertising 2.5 percent, local advertising 1 percent, with the reserved technology fee and about $3,200 a month of required supplier subscriptions carried as real costs. Where the franchisor is the landlord, as at McDonald's, the percentage rent is the largest single line and the study models it at the rate the franchise agreement states. The total franchisor take for a Culver's unit reaches about 10.5 percent of sales before technology fees; for McDonald's it can exceed 30 percent with rent.

Operating leverage is reported explicitly. Culver's seven company stores ran from 8.7 percent income at $2.91 million of sales to 15.9 percent at $5.15 million, about three points per million dollars. A franchisee's margin sits below the company figure by the overhead the company excludes, and the study applies that haircut in the downside case. The ramp is an assumption wherever the brand excludes new units from Item 19, and the study presents it as a sensitivity grid rather than a sourced percentage.

An owned-land drive-through unit is a 504 project; the limited-purpose classification and contribution tiers are set out on the QSR and drive-through feasibility study page and the SBA 504 feasibility study page. A unit in leased space, a kiosk on a ground lease, or a brand with a sub-$1 million investment is a 7(a) project at a 1.15 times floor, 1.10 times for a 7(a) Small loan, with the franchise fee, training, opening inventory and working capital as eligible uses, leasehold improvements on a ten-year maturity plus up to twelve months to complete, and the lease term including borrower-only options matching the loan term. Multi-unit development commitments are a structuring issue: Culver's development agreements carry a $50,000 per-restaurant territory fee refundable on schedule, and 7 Brew sells ten-store commitments, so the study states what the sponsor has committed to beyond the subject and whether the first unit's coverage supports the schedule. The programs are compared on the SBA 7(a) feasibility study page.

The net lease market prices the brand as well as the building. A franchisee-guaranteed QSR lease asked a 6.87 percent cap rate in the third quarter of 2026 against 5.90 percent for a corporate guarantee; with twenty or more years remaining, 6.00 against 5.00 percent; Chick-fil-A and McDonald's ground leases 4.15 to 4.65 percent; Raising Cane's 4.90 to 5.20 percent; Starbucks 6.50 percent. The 100 basis point franchisee discount at long term means a franchisee sale-leaseback realizes about 17 percent less value per dollar of rent than a corporate one, and the study uses the franchisee column for collateral and exit. Equipment is carried at orderly liquidation value, and the franchise agreement's transfer clause, the franchisor's right of first refusal and the transfer fee are reported because they decide what a lender can do with the unit in a default.

A MMCG franchise study includes the Directory and certification check, the FDD read with Items 5, 6, 7, 19 and 20 cited to the state portal, the trade area and competitive census, the projection reconciled to the Item 19 distribution and state table, the operating projection on the brand's cost lines and full franchisor take, the capital stack by program, the DSCR schedule with break-even and sensitivities, the brand's loss record with method stated, the collateral discussion and a signed conclusion. Standard delivery is nine to sixteen business days; expedited delivery in five to seven is available. Fees begin at $4,900 for a single-unit 7(a) study and run $7,500 to $12,500 for a 504 study or a multi-unit development schedule. Revisions required by the lender or agency are made at no additional cost under MMCG's written acceptance guarantee. See MMCG's feasibility study methodology and where we work.

Franchise drive-through on owned land, SBA 504: a $5.1 million Culver's-class first unit in Polk County, Florida, not feasible as proposed at 20 percent contribution (1.09 times at stabilization), feasible as restructured on the Metro M prototype at 25 percent contribution, 1.28 times at the system median and 1.50 times at the Florida state average. The coffee-brand version is the drive-through coffee kiosk case, and the resale of a franchised unit is covered on the restaurant acquisition feasibility study page.