Client Background
A franchise owner operating six quick-service restaurant (QSR) locations wanted to reduce taxable income and increase cash flow by accelerating depreciation on newly built locations and recent renovations. The client hired Development Theory to do a cost segregation study.
The Challenge
Standard 39-Year Depreciation Schedule: The owner was not benefiting from faster depreciation on short-life assets.
Significant Equipment & Interior Buildout Costs: Items such as kitchen appliances, lighting, and flooring weren’t being properly classified.
High Tax Burden Despite Profitability: The business was profitable but faced substantial tax liability due to slow depreciation schedules.
Multiple Locations with Different Buildout Costs: The owner had spent differently on each location, complicating asset classification.
Our Approach
Comprehensive Property & Equipment Review: Conducted a detailed asset analysis across all six locations.
Reclassification of QSR-Specific Assets: Identified drive-thru equipment, signage, and refrigeration for accelerated depreciation.
Bonus Depreciation Maximization: Applied 100% bonus depreciation to newly purchased assets.
Standardizing Cost Segregation Across Locations: Developed a streamlined approach to ensure tax benefits for future franchise locations.
Tax Strategy for Future Expansions: Created a multi-year tax planning approach, allowing reinvestment in new store growth.
The Solution
Reallocated $4.8 million in assets to 5-, 7-, and 15-year depreciation categories.
Applied bonus depreciation, allowing for immediate tax deductions.
Created a repeatable cost segregation model, making future location openings more tax-efficient.
Results & Impact
Added $1.9 million in tax deductions, reducing taxable income.
Improved cash flow, allowing the owner to open a seventh location earlier than expected.
Standardized depreciation schedules across all locations, simplifying financial reporting.
Reduced tax burden over the next five years, increasing profitability.
Client Feedback
"I had no idea how much of my investment could be deducted in the first year. This strategy allowed me to reinvest in my business much faster!"
Development Theory Can Help Business Owners Like You
Are you leaving money on the table with slow depreciation? A Cost Segregation Study can accelerate your tax deductions, improve cash flow, and free up capital to reinvest in your business. Whether you own commercial real estate, a rental property, or a specialty facility, our team at Development Theory helps business owners maximize tax savings while staying IRS-compliant. The best time to conduct a study is within the first few years of property ownership or after major renovations—don’t wait to take advantage of these savings.
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