4Thought Blog

McDonald’s new rules may affect a lot of Owners, including how you transfer your restaurants.

Restaurant transfers and sales have always been an important and complicated part of McDonald’s ownership – it affects how you’ll be set up for retirement and how the next Owners will be set up for success in the future.

Here’s what Owners should know about McDonald’s new rules affecting Next Gen Owners.

While the two biggest benefits for McDonald’s Owner/Operators in the second federal stimulus were changes to PPP loans and the expansion of Employee Retention Tax Credit, there are some other benefits franchisees should consider, as well.

Both the Work Opportunity Tax Credit and Empowerment Zones have been around for some time but the second stimulus – formally known as 2021 Consolidated Appropriations Act – extends both of them for five years, providing a long window for tax planning opportunities.

Here are the details you’ll need to consider for these opportunities:

Federal tax reform through the Tax Cuts and Jobs Act provides many new tax benefits to McDonald’s Owner/Operators, including some major depreciation changes, most of which are beneficial, as we interpret the tax law changes.

Under the new act, Bonus Depreciation is increased from 50% to 100% for qualifying property. The new provision also expands Bonus Depreciation to include both new and used qualifying assets, assuming they are acquired under an arms-length transaction. Thus, in a sales between operators transaction, the equipment allocation is now eligible for Bonus Depreciation.

When McDonald’s Owner/Operators consider retirement – especially if there is a Next Gen involved – it is advantageous to begin the process as early as possible.

The longer the time frame, the more options you have. Selling or gifting the entire business all in one year can result in unnecessary tax implications. If you have the ability to transfer over the course of time, you are provided with many more options.

We’ve been advising McDonald’s Owner/Operators on Next Gen transitions for decades, and have well-tested strategies to make the transition as easy – and as profitable – as possible.