{"id":5472,"date":"2016-11-09T12:09:07","date_gmt":"2016-11-09T12:09:07","guid":{"rendered":"https:\/\/www.arffinancial.com\/development\/?p=5472"},"modified":"2021-02-24T16:07:25","modified_gmt":"2021-02-24T21:07:25","slug":"new-tax-rules-helping-restaurants","status":"publish","type":"post","link":"https:\/\/www.arffinancial.com\/development\/new-tax-rules-helping-restaurants\/","title":{"rendered":"New Tax Rules – Big Help for Mandatory Restaurant Remodels"},"content":{"rendered":"

\u201cAny time you can get the government to share in an investment, which this does\u2014it\u2019s very good news,\u201d says Dusty Profumo, CFO of Church\u2019s Chicken. His is one of many franchise brands mandating remodeling programs for its franchisees, but this year it has an incentive to offer, courtesy of an unlikely source\u2014the Internal Revenue Service.<\/p>\n

\"restaurant<\/a><\/p>\n

That\u2019s right, after at least three years of heavy negotiating and a big effort by the National Restaurant Association, among others, the IRS has finalized what\u2019s known as the remodel safe harbor rule. It allows qualified restaurant operators and retailers to deduct a big chunk of certain remodeling costs in the first year\u2014rather than spreading those out over years and years. Thus their tax bill is lowered and the remodeling program becomes much more attractive. Plus, operators don\u2019t have to ask their accounting firms to conduct expensive and complicated cost segregation studies to get the benefits, although some may continue to do so, anyway, to maximize their return.<\/p>\n

Shorter depreciation<\/strong>
\nAnother change makes permanent shorter depreciation times, to 15 years in some cases compared with the former 39. Shorter depreciation times have been a temporary feature of the tax law in recent years, but the PATH act, otherwise known as Protecting Americans from Tax Hikes, lent certainty by making them permanent in December.<\/p>\n

\u201cIt\u2019s very good news for the restaurant industry,\u201d says Profumo, who was busy this spring working with his accounting firm to provide examples to franchisees about what their return on investment would be before and after these changes. One of the chain\u2019s largest franchisees has contacted him, he says, to get details about what he expected to be significant benefits.<\/p>\n

Here\u2019s a disclaimer right off the bat, which Profumo and everyone else we talked to for this story emphasized: Each person\u2019s individual situation is different, and so of course careful consultation with tax advisers is imperative.<\/p>\n

That being said, accountants and franchisors are expecting a sweeter time urging their franchisees to complete remodeling programs. \u201cMaybe this is the year to get them on board,\u201d says Charles Bailey, referring to the often-resistant multi-unit operators who are mandated to do remodels. Bailey is an audit partner with Warren Averett CPAs and Advisors in Atlanta.<\/p>\n

To qualify for the remodel safe harbor rule, Bailey emphasizes, operators must either be publicly traded or have audited financial statements, something a single- or few-unit operator is unlikely to find worthwhile. But for those with five, 10 or many more units, it\u2019s a boon.<\/p>\n

Bailey offers a rough example, for an operator with a 41 percent combined federal and state tax rate who will be spending $10 million on qualified renovations (and setting aside any tax elections that need to be made.) In the past, that operator would get a $660,000 deduction, for tax savings of $273,000 that would be spread over 15 years. Under the new rules, the operator who spends $10 million gets a 75 percent or $7.5 million deduction the first year. \u201cSo you just saved $3.1 million off your tax bill\u201d in year one, Bailey explains, and then that operator can deduct the rest of the savings over 15 years.<\/p>\n

\"restaurant<\/a><\/p>\n

Bone of contention<\/strong>
\nMandated remodel programs, particularly for legacy operators with many, many units owned for years, can be a bone of contention between franchisors and franchisees. The most visible example today is between Wendy\u2019s and DavCo, Wendy\u2019s fourth-largest franchisee who balked at completing the remodels, only to be sued last year by the franchisor. At the time, a Wendy\u2019s spokesman said it is \u201cconfident in our position and had no other choice but to file suit,\u201d to compel DavCo to comply. \u201cWe believe the vast majority of franchisees support our initiatives to grow the Wendy\u2019s brand.\u201d<\/p>\n

In a countersuit, DavCo said franchisees \u201cstand to make little or no return on their investment\u201d from the mandated remodeling program, and estimated its own costs would be \u201cat least $55 million in present dollars for the first 60 percent of its restaurants,\u201d and \u201cat least $20 million or more\u201d for the remaining 40 percent. In other words, remodels can cost big money and cause big problems. Of course, these tax rule changes won\u2019t fix all the disputes, but they may help smooth the way.<\/p>\n

At Church\u2019s Chicken, for example, Profumo says its mandated re-imaging program costs a relatively modest $100,000 to $125,000, with a few items such as a digital image board that are optional. Under the new rules, \u201cyou can write a large share of that off immediately,\u201d he points out, making for lower tax payments. Church\u2019s has remodeled about 30 percent of its corporate-owned restaurants, which total 250, \u201cso we have a good feeling for what it\u2019s going to cost. We\u2019ve always tried to lead the system and do things first, and now the 2016 focus will be to get the franchisees to catch up with us,\u201d he says. Church\u2019s has about 950 franchised units.<\/p>\n

\u201cThis is a big, big help to any franchisees that are required to do reimage projects over the next several years.\u201dYou\u2019ve heard that old joke: \u201cI\u2019m from the government and I\u2019m here to help you.\u201d In this case, and likely to the surprise of many restaurant operators, it may just be true.<\/p>\n

Five things to know about the new tax rules<\/strong><\/p>\n

    \n
  1. The \u201cremodel safe harbor rule,\u201d as it\u2019s known, offers significant benefits to restaurant owners that remodel.<\/li>\n
  2. To qualify, operators must be publicly held or have audited financial statements\u2014so the one-to-three-unit operators may not benefit. Larger operators definitely will.<\/li>\n
  3. The biggest bang: Taxpayers can deduct 75 percent of qualified remodeling expenses in the first year, rather than spreading the deduction over as many as 39 years, for an immediate, significant tax cut.<\/li>\n
  4. Also, qualified improvements under previous law could be written off over 15 years, but that was only a temporary provision. Lending certainty to operators\u2019 plans, Congress has now made the shorter time frame permanent.<\/li>\n
  5. Of course, don\u2019t even think about taking this advice without consulting your own tax advisers, experts insist, including asking about the benefits of a cost segregation study. That outsourced function can be a boon for taxpayers.<\/li>\n<\/ol>\n

    (Source: Franchise Times; by Beth Ewen)<\/p>\n

    Need financial assistance to make those mandatory franchise updates? We have affordable and easy to obtain working capital products to meet your needs! Click here<\/a> to receive a free, no-obligation quote.<\/span><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

    \u201cAny time you can get the government to share in…<\/p>\n","protected":false},"author":5,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"content-type":"","om_disable_all_campaigns":false,"footnotes":""},"categories":[111,128,690],"tags":[114,135,136],"class_list":{"0":"post-5472","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-business-financing","7":"category-day-to-day-business-operations","8":"category-restaurant-financing","9":"tag-business-working-capital-loan","10":"tag-restaurant-tax-savings","11":"tag-working-capital-loans"},"acf":[],"yoast_head":"\nNew Tax Rules - Big Help for Mandatory Restaurant Remodels - ARF Financial<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.arffinancial.com\/development\/new-tax-rules-helping-restaurants\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"New Tax Rules - Big Help for Mandatory Restaurant Remodels - ARF Financial\" \/>\n<meta property=\"og:description\" content=\"\u201cAny time you can get the government to share in...\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.arffinancial.com\/development\/new-tax-rules-helping-restaurants\/\" \/>\n<meta property=\"og:site_name\" content=\"ARF Financial\" \/>\n<meta property=\"article:published_time\" content=\"2016-11-09T12:09:07+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2021-02-24T21:07:25+00:00\" \/>\n<meta name=\"author\" content=\"Robert Whited\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Robert Whited\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"5 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/www.arffinancial.com\/development\/new-tax-rules-helping-restaurants\/#article\",\"isPartOf\":{\"@id\":\"https:\/\/www.arffinancial.com\/development\/new-tax-rules-helping-restaurants\/\"},\"author\":{\"name\":\"Robert Whited\",\"@id\":\"https:\/\/www.arffinancial.com\/development\/#\/schema\/person\/ab727372fcd4ff548d759472b7c7fecc\"},\"headline\":\"New Tax Rules – Big Help for Mandatory Restaurant Remodels\",\"datePublished\":\"2016-11-09T12:09:07+00:00\",\"dateModified\":\"2021-02-24T21:07:25+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/www.arffinancial.com\/development\/new-tax-rules-helping-restaurants\/\"},\"wordCount\":1073,\"publisher\":{\"@id\":\"https:\/\/www.arffinancial.com\/development\/#organization\"},\"image\":{\"@id\":\"https:\/\/www.arffinancial.com\/development\/new-tax-rules-helping-restaurants\/#primaryimage\"},\"thumbnailUrl\":\"https:\/\/www.arffinancial.com\/development\/wp-content\/uploads\/2016\/08\/restaurant-manager-and-chef.jpg\",\"keywords\":[\"business working capital loan\",\"restaurant tax savings\",\"working capital loans\"],\"articleSection\":[\"Business Financing 101\",\"Day-to-Day Business Operations\",\"Restaurant Financing\"],\"inLanguage\":\"en-US\"},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.arffinancial.com\/development\/new-tax-rules-helping-restaurants\/\",\"url\":\"https:\/\/www.arffinancial.com\/development\/new-tax-rules-helping-restaurants\/\",\"name\":\"New Tax Rules - Big Help for Mandatory Restaurant Remodels - ARF Financial\",\"isPartOf\":{\"@id\":\"https:\/\/www.arffinancial.com\/development\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\/\/www.arffinancial.com\/development\/new-tax-rules-helping-restaurants\/#primaryimage\"},\"image\":{\"@id\":\"https:\/\/www.arffinancial.com\/development\/new-tax-rules-helping-restaurants\/#primaryimage\"},\"thumbnailUrl\":\"https:\/\/www.arffinancial.com\/development\/wp-content\/uploads\/2016\/08\/restaurant-manager-and-chef.jpg\",\"datePublished\":\"2016-11-09T12:09:07+00:00\",\"dateModified\":\"2021-02-24T21:07:25+00:00\",\"breadcrumb\":{\"@id\":\"https:\/\/www.arffinancial.com\/development\/new-tax-rules-helping-restaurants\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/www.arffinancial.com\/development\/new-tax-rules-helping-restaurants\/\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.arffinancial.com\/development\/new-tax-rules-helping-restaurants\/#primaryimage\",\"url\":\"https:\/\/www.arffinancial.com\/development\/wp-content\/uploads\/2016\/08\/restaurant-manager-and-chef.jpg\",\"contentUrl\":\"https:\/\/www.arffinancial.com\/development\/wp-content\/uploads\/2016\/08\/restaurant-manager-and-chef.jpg\"},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/www.arffinancial.com\/development\/new-tax-rules-helping-restaurants\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/www.arffinancial.com\/development\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"New Tax Rules – Big Help for Mandatory Restaurant Remodels\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/www.arffinancial.com\/development\/#website\",\"url\":\"https:\/\/www.arffinancial.com\/development\/\",\"name\":\"ARF Financial\",\"description\":\"Businesses Bank on Us\",\"publisher\":{\"@id\":\"https:\/\/www.arffinancial.com\/development\/#organization\"},\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/www.arffinancial.com\/development\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"},{\"@type\":\"Organization\",\"@id\":\"https:\/\/www.arffinancial.com\/development\/#organization\",\"name\":\"ARF Financial LLC\",\"url\":\"https:\/\/www.arffinancial.com\/development\/\",\"logo\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.arffinancial.com\/development\/#\/schema\/logo\/image\/\",\"url\":\"https:\/\/www.arffinancial.com\/development\/wp-content\/uploads\/2018\/06\/ARFFinancialHorizontal.png\",\"contentUrl\":\"https:\/\/www.arffinancial.com\/development\/wp-content\/uploads\/2018\/06\/ARFFinancialHorizontal.png\",\"width\":792,\"height\":612,\"caption\":\"ARF Financial LLC\"},\"image\":{\"@id\":\"https:\/\/www.arffinancial.com\/development\/#\/schema\/logo\/image\/\"}},{\"@type\":\"Person\",\"@id\":\"https:\/\/www.arffinancial.com\/development\/#\/schema\/person\/ab727372fcd4ff548d759472b7c7fecc\",\"name\":\"Robert Whited\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.arffinancial.com\/development\/#\/schema\/person\/image\/\",\"url\":\"https:\/\/secure.gravatar.com\/avatar\/c48be6a0ddfcae4b85fd444fdab27d247b8fef19292a5249b0340af7e31ea9a5?s=96&d=mm&r=g\",\"contentUrl\":\"https:\/\/secure.gravatar.com\/avatar\/c48be6a0ddfcae4b85fd444fdab27d247b8fef19292a5249b0340af7e31ea9a5?s=96&d=mm&r=g\",\"caption\":\"Robert Whited\"},\"url\":\"https:\/\/www.arffinancial.com\/development\/author\/robert\/\"}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"New Tax Rules - Big Help for Mandatory Restaurant Remodels - ARF Financial","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/www.arffinancial.com\/development\/new-tax-rules-helping-restaurants\/","og_locale":"en_US","og_type":"article","og_title":"New Tax Rules - Big Help for Mandatory Restaurant Remodels - ARF Financial","og_description":"\u201cAny time you can get the government to share in...","og_url":"https:\/\/www.arffinancial.com\/development\/new-tax-rules-helping-restaurants\/","og_site_name":"ARF Financial","article_published_time":"2016-11-09T12:09:07+00:00","article_modified_time":"2021-02-24T21:07:25+00:00","author":"Robert Whited","twitter_card":"summary_large_image","twitter_misc":{"Written by":"Robert Whited","Est. reading time":"5 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"Article","@id":"https:\/\/www.arffinancial.com\/development\/new-tax-rules-helping-restaurants\/#article","isPartOf":{"@id":"https:\/\/www.arffinancial.com\/development\/new-tax-rules-helping-restaurants\/"},"author":{"name":"Robert Whited","@id":"https:\/\/www.arffinancial.com\/development\/#\/schema\/person\/ab727372fcd4ff548d759472b7c7fecc"},"headline":"New Tax Rules – Big Help for Mandatory Restaurant Remodels","datePublished":"2016-11-09T12:09:07+00:00","dateModified":"2021-02-24T21:07:25+00:00","mainEntityOfPage":{"@id":"https:\/\/www.arffinancial.com\/development\/new-tax-rules-helping-restaurants\/"},"wordCount":1073,"publisher":{"@id":"https:\/\/www.arffinancial.com\/development\/#organization"},"image":{"@id":"https:\/\/www.arffinancial.com\/development\/new-tax-rules-helping-restaurants\/#primaryimage"},"thumbnailUrl":"https:\/\/www.arffinancial.com\/development\/wp-content\/uploads\/2016\/08\/restaurant-manager-and-chef.jpg","keywords":["business working capital loan","restaurant tax savings","working capital loans"],"articleSection":["Business Financing 101","Day-to-Day Business Operations","Restaurant Financing"],"inLanguage":"en-US"},{"@type":"WebPage","@id":"https:\/\/www.arffinancial.com\/development\/new-tax-rules-helping-restaurants\/","url":"https:\/\/www.arffinancial.com\/development\/new-tax-rules-helping-restaurants\/","name":"New Tax Rules - Big Help for Mandatory Restaurant Remodels - ARF Financial","isPartOf":{"@id":"https:\/\/www.arffinancial.com\/development\/#website"},"primaryImageOfPage":{"@id":"https:\/\/www.arffinancial.com\/development\/new-tax-rules-helping-restaurants\/#primaryimage"},"image":{"@id":"https:\/\/www.arffinancial.com\/development\/new-tax-rules-helping-restaurants\/#primaryimage"},"thumbnailUrl":"https:\/\/www.arffinancial.com\/development\/wp-content\/uploads\/2016\/08\/restaurant-manager-and-chef.jpg","datePublished":"2016-11-09T12:09:07+00:00","dateModified":"2021-02-24T21:07:25+00:00","breadcrumb":{"@id":"https:\/\/www.arffinancial.com\/development\/new-tax-rules-helping-restaurants\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/www.arffinancial.com\/development\/new-tax-rules-helping-restaurants\/"]}]},{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.arffinancial.com\/development\/new-tax-rules-helping-restaurants\/#primaryimage","url":"https:\/\/www.arffinancial.com\/development\/wp-content\/uploads\/2016\/08\/restaurant-manager-and-chef.jpg","contentUrl":"https:\/\/www.arffinancial.com\/development\/wp-content\/uploads\/2016\/08\/restaurant-manager-and-chef.jpg"},{"@type":"BreadcrumbList","@id":"https:\/\/www.arffinancial.com\/development\/new-tax-rules-helping-restaurants\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/www.arffinancial.com\/development\/"},{"@type":"ListItem","position":2,"name":"New Tax Rules – Big Help for Mandatory Restaurant Remodels"}]},{"@type":"WebSite","@id":"https:\/\/www.arffinancial.com\/development\/#website","url":"https:\/\/www.arffinancial.com\/development\/","name":"ARF Financial","description":"Businesses Bank on Us","publisher":{"@id":"https:\/\/www.arffinancial.com\/development\/#organization"},"potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/www.arffinancial.com\/development\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"},{"@type":"Organization","@id":"https:\/\/www.arffinancial.com\/development\/#organization","name":"ARF Financial LLC","url":"https:\/\/www.arffinancial.com\/development\/","logo":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.arffinancial.com\/development\/#\/schema\/logo\/image\/","url":"https:\/\/www.arffinancial.com\/development\/wp-content\/uploads\/2018\/06\/ARFFinancialHorizontal.png","contentUrl":"https:\/\/www.arffinancial.com\/development\/wp-content\/uploads\/2018\/06\/ARFFinancialHorizontal.png","width":792,"height":612,"caption":"ARF Financial LLC"},"image":{"@id":"https:\/\/www.arffinancial.com\/development\/#\/schema\/logo\/image\/"}},{"@type":"Person","@id":"https:\/\/www.arffinancial.com\/development\/#\/schema\/person\/ab727372fcd4ff548d759472b7c7fecc","name":"Robert Whited","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.arffinancial.com\/development\/#\/schema\/person\/image\/","url":"https:\/\/secure.gravatar.com\/avatar\/c48be6a0ddfcae4b85fd444fdab27d247b8fef19292a5249b0340af7e31ea9a5?s=96&d=mm&r=g","contentUrl":"https:\/\/secure.gravatar.com\/avatar\/c48be6a0ddfcae4b85fd444fdab27d247b8fef19292a5249b0340af7e31ea9a5?s=96&d=mm&r=g","caption":"Robert Whited"},"url":"https:\/\/www.arffinancial.com\/development\/author\/robert\/"}]}},"menu_order":0,"_links":{"self":[{"href":"https:\/\/www.arffinancial.com\/development\/wp-json\/wp\/v2\/posts\/5472","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.arffinancial.com\/development\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.arffinancial.com\/development\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.arffinancial.com\/development\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/www.arffinancial.com\/development\/wp-json\/wp\/v2\/comments?post=5472"}],"version-history":[{"count":1,"href":"https:\/\/www.arffinancial.com\/development\/wp-json\/wp\/v2\/posts\/5472\/revisions"}],"predecessor-version":[{"id":36140,"href":"https:\/\/www.arffinancial.com\/development\/wp-json\/wp\/v2\/posts\/5472\/revisions\/36140"}],"wp:attachment":[{"href":"https:\/\/www.arffinancial.com\/development\/wp-json\/wp\/v2\/media?parent=5472"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.arffinancial.com\/development\/wp-json\/wp\/v2\/categories?post=5472"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.arffinancial.com\/development\/wp-json\/wp\/v2\/tags?post=5472"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}