With tax season upon us, Dunkin’ Donuts franchise owners might be interested to know about noteworthy tax-saving strategies. Enter: cost segregation which, depending largely on the scope of a franchisee’s holdings and investments, can yield upwards of $1 million in additional tax deductions.
“Cost segregation studies can benefit franchisees in many ways,” according to CPA Jim Ventriglia. “By accelerating depreciation, it has the effect of lowering the taxable income of property owners, and lower tax liabilities can provide additional cash flow. Cost segregation can work even if you’re a tenant. I encourage clients to explore the benefits. In every instance we have done so, the benefits far outweighed the expense involved.”
J&M Batista Limited Family Partnership, a real estate company involved in developing multiple Dunkin’ Donuts locations, became aware of the remarkable potential benefits and enlisted the services of Bedford Cost Segregation (Bedford), a DDIFO Sponsor. The principals of J&M Batista, along with their affiliates, have developed more than 50 Dunkin’ Donuts locations in Massachusetts, Ohio, New York and Florida. John Batista, founder of J&M Batista, took over the very first franchised Dunkin’ Donuts shop more than 30 years ago and continues to operate that location, which recently underwent a major remodel.
The leadership at J&M Batista engaged Bedford to perform cost segregation studies on six of its Worcester area buildings. While the properties were built between 2002 and 2008, IRS guidelines and tax law allow for retroactive studies that will yield tax benefits in the current year. With the help of J&M Batista’s Director of Construction and Dunkin’ Donuts Franchisee Matt Doyle, Bedford engineers went to work to document the value of specialty components—including select electrical, plumbing, HVAC, millwork, finishes and many outdoor components—eligible for accelerated depreciation (5-year or 15-year rather than 39-year). This resulted in much higher depreciation deductions as well as critical information for the write-down of certain assets when these properties are remodeled in the future. Bedford worked closely with Doyle and with J&M Batista’s CPA to ensure that every tax benefit was realized.
“We feel that 39 years is too long to wait to recoup our investments, and cost segregation is proving to be a great tool to expedite that recovery,” said J&M Batista President and Dunkin’ Donuts Franchisee Rob Branca. “Plus the additional cash flow derived from Bedford’s studies will serve to fuel our growth and remodels without having to go to the bank to borrow.”
The studies generated an increased depreciation deduction of more than $1 million in tax year 2009. In addition to this tremendous year-one benefit, J&M Batista will realize another $400,000 in depreciation over the next four years. Bedford has worked with several other Dunkin’ Donuts-related organizations and has experienced similar success. J&M Batista was so pleased with the return on the initial six studies that the organization has further engaged Bedford to perform studies on several other properties.
“We’re proud to have been selected by J&M Batista to provide this service and are thrilled that it’s worked out so well for them,” said Bedford Director of Business Development Bill Cusato. “We are also excited about our track record with the Dunkin’ Donuts community and encourage franchise owners and operators to contact us to evaluate how we can help them as well.”
Bedford has emerged among the nation’s leading and most experienced providers of engineering-based cost segregation services, having completed more than 5,000 studies throughout the country. The company’s team includes engineers, architects and construction professionals along with tax experts and business development consultants. Bedford’s property reports are second to none, employing a detailed engineering approach and conforming to the highest standards established by the IRS.
There are many times during the life of a property when cost segregation can add value. Basically, if you have bought, built or made significant capital improvements to a building within the last six to eight years, chances are you could benefit from a study.
“Since 9/11, the government has enacted a number of incentive programs to encourage business owners to invest in their operations by helping them to write-off those costs more quickly,” said Cusato. “Cost segregation is a tool that often helps to unlock much of that value by triggering those incentives and, consequently, is a tremendous way for franchisees to sustain and grow their businesses.”
For more information on how cost segregation can help you achieve considerable tax savings and increase your cash flow, contact Bill Cusato at email@example.com or 978-263-5055. You can also learn more at www.bedfordcostseg.com.