For Monicals Pizza, over what period are leasehold improvements depreciated?

According to the 2025 Monicals Pizza Franchise Disclosure Document, leasehold improvements are depreciated over the lesser of the lease term or 10 years.

For a prospective Monicals Pizza franchisee, this means that the cost of any improvements made to the leased property will be written off as an expense over a period that will not exceed 10 years, but could be shorter if the lease itself is for a shorter duration. Leasehold improvements can include modifications to the building's interior, such as new flooring, walls, or fixtures, that are necessary to prepare the space for Monicals Pizza operations.

The depreciation method used for leasehold improvements can impact the franchisee's financial statements and tax obligations. A shorter depreciation period results in larger annual deductions, which can reduce taxable income in the early years of the lease. Conversely, a longer depreciation period spreads the deductions out over a greater number of years. Franchisees should consult with a financial professional to understand the tax implications of leasehold improvements and depreciation.

This depreciation policy is a fairly standard accounting practice. The IRS generally allows businesses to depreciate leasehold improvements over their useful life or the term of the lease, whichever is shorter. Monicals Pizza's policy aligns with these guidelines, providing franchisees with a clear framework for managing these assets.