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 Restaurant Marketing Newsletter |
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Quantified Marketing Group is the nation's largest full-service strategic marketing and public relations firm focused exclusively in the restaurant industry. To find out how we can help your restaurant, click here or call (407) 936-1010.
IN THIS ISSUE...
Letter from the CEO
Cost Segregation Analysis
Ask the Experts
This Month's Question: Cost Segregation Q &A
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 Aloha from Honolulu!
I am in Waikiki preparing for the opening of the newest Señor Frogs location and am pleased to provide you with this week's newsletter on Cost Segregation Analysis. Before beginning the 17-hour flight back to Orlando, I had time to approve this article that I think you will find very interesting and could potentially mean hundreds of thousands of dollars for you this tax season.
Cost Segregation Analysis has been around for years now but is not very well known in the restaurant industry. A long-time friend of mine has been persistent to discuss it and now that I understand it, I felt you just had to know – immediately.
You see, in years past, build-outs and construction costs were amortized over a 39-year period, but now many of those costs can be reclassified and dramatically accelerated. Simply put, there is potential that you can erase your total tax liability this year! Amazing, I know, but true. Tax seminars are low on my list of things to do or bother you with, but when it could mean this much to you financially, I just knew we needed to put it on the table as a newsletter topic.
Over the next several weeks we will bring you a series of newsletters focused on restaurant financial issues. This one is one of the most important. Please take notice of it. There is a CPA on every block, but very few are bringing the full benefit of Cost Segregation Analysis to our restaurant clients. Most everyone I talked to originally on this subject said that their CPA was covering this for them, but once they dug in more they realized tens or hundreds of thousands in additional tax savings per location.
If you are interested in learning more about this subject, we have recently hired a senior financial consultant that has 20+ years of senior-level restaurant finance and accounting experience with major companies such as Hard Rock, Planet Hollywood, Margaritaville and others. Click here if you are interested in scheduling an appointment to discuss further and Larry can explain in more detail.
Please let us know if you find value in this topic and let us know what other subjects you'd like covered in the future. It is very important to me and to our entire company that we bring you timely, relevant and value-laden content each week.
Sincerely,
Aaron Allen
Founder/CEO
Quantified Marketing Group
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Don't overpay in taxes this year
Many restaurateurs are unaware of a tax tool that could save them thousands of dollars on their taxes.
Cost segregation is a tax strategy restaurateurs can use to reduce their tax liabilities by
identifying hidden tax deductions that result in thousands of dollars in tax savings. Because cost segregation isn't commonly utilized by CPAs, many restaurant owners end up overpaying in taxes.
Cost segregation breaks out certain non-structural components of a restaurant building and allocates shorter life classes to those components depreciating them at an accelerated rate. This means more tax deductions are available in the earlier years of a restaurant.
 How does it work?
For tax purposes, the standard class life for most non-residential buildings is 39 years. However, certain non-structural elements of a building, such as most land improvements, dedicated electrical & plumbing work related to restaurant equipment, certain decorative features and elements considered accessories to the operation of the building may qualify for shorter class lives.
For some restaurants, as much as 50 percent of building components can be reduced to five-, seven- and 15-year class lives, which significantly increase a restaurant's overall tax deductions.
Cost segregation analysis can be performed on real estate put in service as far back as 1987. Tax laws even allow a restaurant owner to go back in time and deduct any depreciation benefits that were missed in prior years, without the need to amend prior year tax returns.
If a restaurateur has constructed, purchased, expanded or remodeled a restaurant, cost segregation analysis can be used to depreciate certain types of property and land improvements over a much shorter period.
What are the qualifications?
All types of restaurant facilities may qualify for a cost segregation analysis – including quick-service, casual and fine dining – even if a restaurateur does not own the building their restaurant operates from.
Restaurants placed in service after 1986, which were constructed or acquired by the current owner, are eligible for a cost segregation analysis. Free-standing buildings and build-outs that are part of a multi-tenant space, including malls or strip centers, are all eligible for cost segregation studies.
Continue Reading...
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 Do you have a question about restaurant public relations, marketing, design, culinary development or concept development? Well, here's your chance to pick the experts' brains.
Click here to submit a question, and if selected, it will be featured in a future Quantified Marketing Group newsletter.
Submit a Question
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 Steve Erwin, Quantified Marketing Group's cost segregation specialist, answers some of the most frequently asked questions concerning cost segregation analysis. Feel free to send us any additional questions that we haven't addressed here.
Q: Doesn't my CPA already do cost segregation studies for me when they prepare my taxes?
A: Almost always, the answer is no. It is possible your CPA is taking what is known as a "rule-of-thumb" approach and allocating an estimated percentage of the total project cost to the various components of your restaurant facility. This not recommended by the Internal Revenue Service, nor would it substantiate your tax return if the agency ever audited your restaurant.
A general practitioner may be able to determine that you have a heart condition, but that doesn't mean he can operate on your heart. Similarly, most CPA firms are capable of explaining the benefits of a cost segregation analysis but don't have the experience and resources to execute one correctly.
A cost segregation analysis requires a vast understanding of construction methods, the ability to interpret blueprints and estimate construction costs of building components.
Q: Why not use an engineering firm for my cost segregation analysis?
A: Although an engineering firm is qualified to estimate all of the costs associated with building or acquiring a property, they will almost always lack the understanding of the important tax matters that could be involved in a study.
A restaurant should be very cautious when considering a cost segregation study if engineers aren't also analyzing potential 1031 exchanges, Sections 1245 and 1250 recapture, sales, passive losses, negative basis or net operating losses.
Although a cost segregation study can be executed in all of these scenarios, the ability to plan for the effects of these issues is crucial in order to put a client in the most beneficial tax situation. This is best handled by a firm that has both engineering and tax expertise.
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For more information please visit us at www.quantifiedmarketing.com. To forward this newsletter to a friend, click here.
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