4Thought Blog

Growing your business is the primary focus of every entrepreneur. Whether growth occurs by way of increasing sales and cash flows at existing business divisions or via acquisition and expansion, the challenges faced are often strikingly similar.

That being said, let’s examine for a moment the prospects and hurdles one will often face when buying a new restaurant, through the lens of a turnaround CFO.

The business world is in for a major generational shift – a recent survey found 79% of business owners plan to exit their businesses within the next 10 years.

The survey, conducted by the Business Enterprise Institute and the Conway Center for Family Business, found more surprising statistics. Only 30% of family-owned businesses succeed in transitioning their business to the second generation, and only 10% succeed in making it to the third generation!

In many ways, selling to a third party is far easier than selling to a family member – it is usually less emotional, and the focus is entirely on transferring the business.

To sell to a family member, it requires a plan for working with your family, transferring your knowledge and transferring the business. Of course, from our experience, the extra effort is worth it when you are rewarded with seeing your business continue on as a legacy for generations to come.

To accomplish your exit plan, you will need to plan early and communicate openly and often. Both parents and Next Gens must set expectations, and put the plan in writing. If you have an exit planning team, they can help keep you focused on achieving your goals and keep you on track in the process.

Federal tax reform through the Tax Cuts and Jobs Act significantly expands bonus depreciation under Section 168(k) of the Internal Revenue Code for both regular tax and alternative minimum tax purposes. Now, the IRS has released proposed regulations that clarify the requirements that businesses must satisfy to claim bonus depreciation deductions.

Although the regs are only proposed at this point, the IRS will allow taxpayers to rely on them for property placed in service after September 27, 2017, for tax years ending on or after September 28, 2017.

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.

The Tax Cuts and Jobs Act is massive, but here are a few changes that may benefit McDonald’s franchisees.

Qualified Business Income Deduction

The new 20% Qualified Business Income Deduction (QBI) is one of the biggest tax benefits for small business owners including McDonald’s franchisees in more than 60 years.

Here are the basics:

The ink on the Tax Cuts and Jobs Act (TCJA), which swept in a tidal wave of changes to federal tax rules, had been dry for only seven weeks before Congress passed more legislation that could affect many taxpayers. The Bipartisan Budget Act of 2018 (BBA), which President Trump signed into law on February 9, 2018, contains several tax-related provisions that could reduce the amounts some taxpayers owe for the 2017 tax year.

The Tax Cuts and Jobs Act (TCJA), which was signed into law on December 22, contains a treasure trove of tax breaks for businesses.

Overall, most companies and business owners will come out ahead under the new tax law, but there are a number of tax breaks that were eliminated or reduced to make room for other beneficial revisions.

Here are the most important changes in the new law that will affect businesses and their owners.

If your business is buying new equipment in 2018, you’ll be able to benefit in several ways under the new tax reform law, commonly referred to as the “Tax Cuts and Jobs Act” (TCJA), which was signed into law by President Trump on December 22. You even may be able to take advantage of some of the enhancements on your 2017 tax return!

The business of owning and operating a McDonald’s restaurant franchise is without a doubt, capital intensive. From the hefty initial investment to the steady stream of re-investments to keep your restaurant operating at peak performance, the amount of capital poured into your business is substantial.