Grocery Store Feasibility Study Case: A New Store in Ness City, Kansas, with a USDA B&I Loan

Feasibility Study Company prepares feasibility studies for owners, developers and their lenders, and this page shows what one looks like for a rural grocery. The subject is a hypothetical new store of 6,000 square feet on about 2 acres in Ness City, the seat of Ness County, Kansas, financed with a USDA Business and Industry guaranteed loan. If you are weighing a store like this one, you can contact Feasibility Study Company before you commit to land.

The market evidence below is real and dated, drawn from public sources. The site, the sponsor and the numbers in the model are hypothetical, and every model input that no source supports is labelled an assumption. For the wider picture, see our pages on grocery store feasibility, Kansas markets and the USDA Rural Development programs.

Residents and households. The 2020 Census counted 2,687 people in Ness County and 1,329 in Ness City, where 595 households lived [1][2]. The July 2025 estimate of 2,617 sits below that census count [1]. The five-year survey for 2020 to 2024 puts the county at 1,161 households averaging 2.23 people, and the Census Bureau's 2025 housing estimate is 1,542 units [1].

Age and income. The median age is 45.1 years in the five-year survey for 2024 [3], and 29.5% of residents are 65 or older [1]. Median household income is $68,616 and per capita income is $45,085 in the 2020 to 2024 survey [1]. Food is a larger share of an older household's budget than of a younger one, and these households buy it close to home. The mean commute is 15.6 minutes [1], which means most working residents live and shop in or near Ness City.

Language and background. Hispanic or Latino residents are 12.9% of the county in the 2025 estimate, and 14.2% of residents speak a language other than English at home [1]. The model gives that no extra revenue, because the research found no purchasing data to size it.

Jobs. Private employers in the county had 807 employees at 122 establishments in 2023, and employment fell 2.9% between 2022 and 2023 [1]. Kansas names Beutler Inc, Grisell Memorial Hospital and Ness County Hospital among its major employers [4]. The unemployment rate was 2.7% in 2024 [4]. Health care and social assistance took in $25,930,000 in 2022 [1], and the hospital district alone levied $3,046,449.62 in property tax for 2025, 23.13% of the county's ad valorem total [6]. These are employers whose staff buy lunch and groceries locally; they are also the reason a deli counter appears in the model.

The commodity base. Oil and gas property carried $23,251,523 of taxable value in 2025, 29.57% of the county's total, and agricultural land carried $16,549,938, or 21.05% [6]. Half the tax base therefore rises and falls with crude prices and crop returns. The risk to a grocer is indirect: income in a county like this follows those cycles, and a store with fixed payroll and debt service feels a downturn quickly.

Retail spending. The 2022 Economic Census recorded $12,031,000 of retail sales for the whole county, or $4,528 per resident [1]. That figure covers every store type, and it is small enough to say that the grocery market is also small. The model's food-at-home assumption sits above what that per-resident total suggests for food alone, because it counts the whole food budget and not only what stays in the county, and the inputs table says so.

The market register adds measures that the research files did not carry, for Ness County and for Kansas. The county rows show a house-price and rent level well below the state's, and the Kansas rows show how much grocery lending the state has seen under the two SBA programs. SBA volume is a context figure only, because this case uses USDA.

The hypothetical site is about 2 acres of commercial land in Ness City, on the frontage of US 283 or K-96, which meet in town [5]. US 283 runs north to I-70 and US 40 at WaKeeney, and the research did not find the distance [28]. No particular parcel is assumed. The research looked for a retail building or pad listed in Ness City and could not confirm one, so the study uses no listing, parcel or owner, and the land figure is a round placeholder.

Zoning. No Ness City zoning map, district table or approval timeline was retrieved. Whether a grocery is permitted by right on the generic pad, needs a conditional use or needs a rezoning is therefore a lender condition, as are setbacks, parking ratios and signage rules. The commercial assessment ratio, by contrast, is a matter of state law: Kansas assesses commercial real property at a fixed share of its value under the state constitution, and vacant lots at a lower share [9]. The research prints no edition date for that text, so this page prints neither share as a market figure and the model carries the commercial ratio as an assumption.

Utilities. The city operates a public water system governed by Chapter XV of its code of ordinances, which includes cross-connection rules in section 15-231 [8]. The sewer provider was not confirmed. The electric and gas utilities were not found. Refrigeration makes electric service the largest utility question for a grocery, so will-serve letters and tap, connection and impact fees are lender conditions. The research found no fee schedule, and the model carries an allowance only.

Flood and insurance. No FEMA flood zone was determined for any site, and no wind, hail or flood insurance conditions were found. Both go on the list. The lender will want a bound quote that covers wind, hail and flood.

Traffic. The state's 2019 counts, reproduced on a highway reference site, show US 283 carrying 2,450 vehicles a day between the south city limits and K-96, 38.8% of them trucks, and 3,120 a day between K-96 and the north city limits, 10.9% trucks [5]. Outside town the road carries 1,580 vehicles a day from mile post 100 to Ness City and 1,430 from Ness City to mile post 116, with truck shares of 28.5% and 31.5% [5]. The research found no 2024 or 2025 count and no count-station identifier. The high truck share means that much of the through traffic is freight. There is no evidence that it stops for groceries, and the model gives it no revenue.

Property tax. The tax line is the best-documented cost in the model. The county's 2025 average mill levy was 167.502 mills on $78,626,942 of taxable value, producing $13,169,019 of ad valorem tax [6]. Commercial real property made up $8,167,824 of that value, 10.39% of the county's total [6]. The levy for the Ness City tax unit specifically was not found; the Department of Administration publishes county levy sheets that give it [24], and the lender should pull the unit's levy. The school district's own levies for 2025 were 20.000 mills general and 18.224 mills supplemental general [7]. The model applies the county average to land, building and site work at cost, a cautious basis, since the appraiser's value will not equal cost.

The table below shows who receives the county's 2025 ad valorem tax. It makes the point that the largest payees are the county itself, the hospital district and the school districts, and that the tax on a new store flows to those bodies [6].

Sales tax. Kansas stopped charging its state sales tax on food and food ingredients on January 1, 2025, while the full local sales tax on food still applies [10]. The research found conflicting reports on whether Ness City's local rate is a city or a county levy, and it recommends confirming the rate against the Department of Revenue's published rate list, so this page prints none. It matters to a grocer because a shopper compares shelf prices to the incumbent's after tax, and the local rate applies equally to both.

Gross profit is $496,057 in Year 3, after cost of goods, and operating costs are $563,216, leaving net operating income of ($67,159), a margin of -3.5%. The research held no operating expense benchmark for Kansas grocers, so every ratio below is a labelled assumption, and a lender can replace them with an operator's actual statements.

Margins. The model uses a gross margin of 24.0% on grocery, meat, produce and dairy and 50.0% on deli. A single independent store buying through a wholesaler has less purchasing scale than a regional chain, so the grocery margin is a middle-of-the-road figure and the wholesaler's cost schedule should replace it. The sensitivity grid moves it up and down by a fifth.

Payroll starts at $270,000 and grows 3.0% a year. It pays about eight full-time equivalents, enough to staff a manager, a meat cutter, deli, cashiers and stocking for evening and Sunday hours. The county's unemployment rate of 2.7% [4] suggests a tight labor pool. Utilities start at $60,000 because refrigeration never stops. Card and EBT processing, supplies and repairs and advertising and administration are shares of sales. Insurance starts at $30,000 and is a placeholder; the research found no insurance terms, and a bound quote must replace it.

Property tax applies an assumed assessment ratio of 25.0% [9] and the county average levy of 167.502 mills [6] to land, building and site work at cost, and grows 2.0% a year. It is one of the larger lines in the table. The USDA annual retention fee of 0.55% is shown as a pass-through cost on the guaranteed balance, which the model lowers each year to approximate amortization [15]. The terms sheet does not print the base, so the lender must confirm it. The replacement reserve of $15,000 a year keeps compressors and cases from becoming new debt.

The guarantee. For fiscal 2026 the Business and Industry program guarantees 85% of a loan under $5,000,000 and 80% of a loan from $5,000,000 to $25,000,000, with an initial fee of 3.0%, an annual retention fee of 0.55% and a 0.50% fee for a guarantee issued before construction is complete [15]. A reduced-fee category charges 1.0% and 0.50% but guarantees only 80% [15]. The 85% tier replaced 80% in a notice published on March 9, 2026, effective October 1, 2025, and USDA announced it on March 27 [15][19]. The loan of $1,989,861 is well inside the 85% tier.

Eligibility. The terms sheet behind this page prints no eligible or ineligible purposes for grocery stores. The only exclusion it records is wind and solar projects, from August 2025 [27]. The research took the program as the fit for a privately owned grocery and Community Facilities as the route for a public body or nonprofit [13][25]. The project site must lie in a rural area, meaning outside a city or town of more than 50,000 people, with the site and not the headquarters governing [19]. Ness City counted 1,329 people in the 2020 Census [2], well under the line. A city under 25,000 earns 5 priority points under the scoring rule [16]. The research did not retrieve USDA's eligibility map result for any Ness City parcel, so a determination for the actual site is a lender condition.

Rate and term. The lender and borrower negotiate the rate, fixed or variable, and the term runs to the useful life of the project or collateral, up to 40 years or the state-statute limit, whichever is less [14][17]. The model carries 8.00%, which is Prime of 7.00% on October 9, 2026 [26] plus 1.00 point for a start-up with no operating history, and it amortizes over 20 years because refrigeration and fixtures wear out well before a building does.

What the terms sheet leaves open. The USDA terms in the research print no equity minimum and no coverage ratio for B&I, and no separate maximum term for real estate or equipment. The study therefore tests two lender-style parameters and labels both as assumptions: 25.0% equity and a 1.25x coverage floor in Year 3. Neither is a USDA requirement. The regulation asks for projections through at least two years at full capacity or stable operations [16], which is why Year 3, the first stable year, is the test year. The lender's credit evaluation must include a written evaluation of the feasibility study [18].

The feasibility study. A guaranteed loan of more than $1,000,000 to a new business requires a study prepared by an independent qualified consultant acceptable to USDA [16]. The loan of $1,989,861 is over that line, and for a loan of $1,000,000 or less USDA may still require one if the lender's analysis is insufficient [16]. This page shows the market and financial sections that such a study contains; USDA sets the scope case by case.

The program's own risks. The fiscal 2027 budget request proposes no Business and Industry program level, and the fiscal 2025 program obligated a record $2,111,702,000 [20]. In May 2026 USDA revoked the approved-lender status of ten lenders whose portfolios held about $620 million in delinquent loans, roughly 47% of Rural Development's delinquent loans, and said more than 750 lenders remained [21]. A trade-association study found that B&I loans in Opportunity Zones rose 59.29% between 2018 and 2025, and that the number of loans fell from 309 in fiscal 2015 to 176 in fiscal 2024 while the average loan rose from $2.75 million to $8.1 million [22]. A grocery loan of this size sits far below that average. The research found no B&I lender or loan in Ness County for 2024 to 2026, and Kansas applications are taken on a rolling basis [14]. Finding a lender that is both approved and willing to make a loan this small is a task of the engagement, not a given.

As proposed, the sponsor puts in 25.0% ($663,287) and asks for a $1,989,861 guaranteed loan. Annual debt service is $199,728, and Year 3 coverage is -0.34x against a 1.25x floor. Coverage is negative because net operating income is negative, so the store would need new money each year to meet its payments.

As restructured, the engine takes equity up to the assumed minimum and then searches for the smallest equity share that meets the floor. It finds none: with net operating income below zero in Year 3, no loan, however small, produces coverage of 1.25x. The restructured structure is the same as the proposed one, with 25.0% equity, a $1,989,861 loan and Year 3 coverage of -0.34x. The determination is negative: the market as measured does not support this loan, as proposed or as restructured.

That is a finding about this hypothetical store and its placeholder inputs, reached before any land is bought. The page models only a new building. A study of a real project would test other structures, such as an existing building, different payroll or sales assumptions, or a community-owned store under a different USDA program [25], and none of those is modelled here.

If your project faces a question like this one, talk to us about a feasibility study.

The matrix moves the store's share of county food spending against the grocery gross margin, the two numbers the research could not measure. The share steps run from a fifth below the underwritten level to more than double it, because the downside cannot rescue the loan and the upside shows how far the share would have to rise. Coverage in Year 3 on the restructured loan runs from -1.09x to 3.05x.

The top-left cell, where both the share and the margin fall, shows what a better-priced incumbent would do to the store. The bottom-right cell, where both rise, shows the reward for a store that wins most of the county's grocery trade at a stronger margin. The cells that clear the floor all sit in the bottom two rows, where the share is far above the underwritten level, and every cell in the underwritten row is red: none of them covers debt service at any margin tested. The distance between the corners is the value of the household survey and the wholesaler's quote.