How are leasehold improvements depreciated for Carbones Pizzeria, and what determines the depreciation period?

According to Carbones Pizzeria's 2025 Franchise Disclosure Document, property and equipment are recorded at cost, net of accumulated depreciation and amortization, and are depreciated or amortized using the straight-line method. The franchise depreciates furniture and equipment, and vehicles over a period of five to seven years. Leasehold improvements are depreciated over the shorter of the lease term or the life of the asset.

For a Carbones Pizzeria franchisee, this means that when you make improvements to your leased restaurant space, you can deduct a portion of the cost each year as a depreciation expense. This can lower your taxable income and reduce your overall tax liability. The specific amount you can deduct each year depends on how long the lease lasts and the estimated lifespan of the improvements.

It is important to note that the depreciation method used for financial reporting purposes is the straight-line method, while accelerated methods are used for income tax purposes. This means that the depreciation expense recognized in the financial statements may differ from the depreciation expense used for tax purposes. Franchisees should consult with a tax advisor to determine the most appropriate depreciation method for their specific circumstances.