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Fast-Food Cost Segregation Studies

Fast-food restaurants have much in common with traditional dining. Much short-life depreciation can be found in the kitchen, with specialty gas appliances, cooking appliances, industrial refrigerators, and countless other appliances for making a quick meal. Then there is the counter area, where more savings can be found to help lower your income taxes.

A cost segregation study from O’Connor will not only focus on the interior of your fast-food establishment but also look at the exterior. The parking lot, signage, landscaping, and drive-thru lanes are just some components that can be used. Whether they are short-life or long-term depreciable assets, O’Connor will find and utilize all of them.

There is some upfront cost for a cost segregation study, but this can often be mitigated quickly by income tax savings using accelerated depreciation. The typical study is paid back by a ratio of 2-1, though this can be as high as 15-1 depending on circumstances. And that is just the first year! The table below shows other fast-food establishments that O’Connor has helped in the past.

Real Clients That Used Cost Segregation

Depreciable Basis Purchase price Purchase Date Year of Study 1st Year Tax Savings Year 1 Payback Initial 5 Years Tax Savings 5 Year Payback
$2,150,000 10/1/2015 2015 $18,840 $7,461 1.2:1 $136,055 23.7:1
$714,706 1/1/2012 2012 $78,127 $33,595 12.4:1 $148,911 56.0:1
$5,476,716 12/1/2015 2015 $100,339 $39,734 9.1:1 $653,681 151.0:1
$1,623,500 2/1/2011 2011 $62,613 $26,924 10.5:1 $135,187 53.7:1
$1,318,776 11/1/2015 2015 $16,434 $6,508 2.4:1 $109,941 41.6:1

Results

* Results from studies using mid-quarter depreciation convention due to timing of purchase and other factors.

NOTE: The above listed tax savings are based on a 39.6% tax rate for the owner.