Monthly Archives: September 2020

Section 179 Deductions – What Are They?

Potentially Save $1,000s In Taxes with Section 179 Deductions

2020 has hit all of us hard, especially those of us working in foodservice and small businesses. How can we invest in our businesses in this economy and still be relatively financially stable? Well, we have the rundown on Section 179 deductions, a hidden small business gem buried in the tax code. Believe me, if I can understand it, it’ll be a piece of cake for you.

(If you read our last blog about Section 179, there are essential changes here to note for 2020).

What Are Section 179 Deductions?

Section 179 deductions are a tax incentive specifically for small businesses to invest in themselves. It allows businesses to deduct the ENTIRE amount of qualifying equipment purchases in the current tax year from their gross income, rather than writing off a partial amount each year. These deductions are available as long as equipment is purchased and fully operational before they end of the tax year (12/31).

Qualifying Deductions

Eligible business expenses for deduction are both new and used equipment, software, and/or business vehicles purchased or financed during the current tax year. Again, any equipment purchased must also be fully operational by the end of the day on December 31, 2020. Financing your equipment will also allow you to slowly pay off your equipment purchase while still being able to deduct the full purchase price* (unlike a bank loan).

* Terms & Conditions may vary, dependent on your specific situation

Section 179 Limitations

To truly make this a small business incentive, the IRS designates spending caps on equipment purchases for companies to qualify.

Company Spending Cap: The maximum amount able to be spent on equipment in 2020 is $2,590,000. Once a company reaches this limit, the deduction will be reduced dollar-for-dollar.

Company Deduction Limit: The IRS has increased the deduction limit in 2020 to $1,040,000.

What does this mean? Any company spending more than $3,630,000 on equipment and software will not qualify for a deduction using Section 179.

Savings

2020 has been a year of chaos and unforeseen challenges. Financing your equipment can ensure you still have extra cash on hand for anything that might come your way. The amount that you can write off in taxes can exceed profits, which allows you to finance more equipment and reinvest in your business.

Keep in mind that we at Burkett are not tax professionals and you should always consult your own to figure out what’s best for your business!

If you have any questions or are ready to purchase or lease foodservice equipment, contact us! Call, email, or website live chat to talk to a sales specialist today!

Everything You Need to Know About Ghost Kitchens

kitchen prep

We’ve all heard buzzwords flying around since the beginning of the pandemic – unprecedented, PPE, social distancing, etc. But one phrase keeps popping up in the foodservice industry: ghost kitchens. You may find yourself wondering what the emergence of these means for the future of our industry and how you may be able to leverage this trend for your own business. That’s where we come in. We’re here to answer your questions and help you learn everything you need to know about ghost kitchens.

What are ghost kitchens?

The question we’ve all been asking for a few months now: what are ghost kitchens? While they seem to have sprung up very recently to some, Ghost Kitchens have been around since 2013. Ghost Kitchens are a virtual concept focused solely on delivery and takeout, eliminating front-of-house and on-site dining. You may also see these referred to as “cloud” or “virtual” kitchens.

If you’re thinking of pivoting to this virtual trend, there are two main ghost kitchen models to consider: Shared Kitchens (also called Commissary) or Private.

Shared Kitchens are exactly what they sound like: the sharing of resources and space between foodservice providers. The model may vary by community or location, but typically you’ll rent a commercial kitchen that comes fully equipped by the hour, week, or month. Other chefs will work alongside you, so make sure there’s space to rent during the times you’ll need it. Maintenance, storage, equipment, and supplies will generally be provided for you.

Private Kitchens give you more control, but will also give you more upfront costs. Depending on your location, you may be able to rent a commercial kitchen already equipped, or you may have to outfit it yourself. These are essentially a regular restaurant kitchen with no dine-in option: it’s all yours.

If you’re looking to rent an already established space, there are virtual brands already taking over in the United States: Cloud Kitchens, Kitchen United, and Virtual Kitchen Co are among the biggest brands so far.

Why ghost kitchens?

There are many advantages to adopting this model. The main appeal is that virtual kitchens cut down many of the everyday operational expenses of a regular restaurant model. As there’s no on-site dining, these kitchens can help cut costs so you have more time to focus on the quality of food and the efficiency of service. The costs may vary by layout, but some examples of these costs include:

  • Uniforms. With takeout or delivery, there’s less of a need for a homogeneous staff look.
  • Equipment. If you’re going to be using a shared kitchen, the resources are all shared and the space has already been equipped.
  • Front of House. Eliminate the expenses of furniture, artwork, music, and other entertainment as no diners are on-site waiting to be served.
  • Real Estate. Cut down real estate costs with less square footage and shared kitchens.
  • Quick Turnaround Time. With the help of the virtual kitchen brands mentioned above, opening a new kitchen will only take about a month!

With many of these everyday costs cut down or eliminated, you’ll have more time to focus on the food you’re serving, or even testing new recipes and concepts to keep the menu fresh each season!

What are the challenges?

1. Efficiency

While there are many advantages to virtual kitchens, the main challenge is a big one. As you’ll no longer have the ability to remake wrong orders on-site or keep guests entertained during a long wait, your service will need to be more efficient all around.

2. Delivery

Quick delivery is key to keeping your diners happy and coming back for more. You’ll need to decide whether you will be providing in-house delivery or using a third-party app. Delivery software education and staff training are imperative in order to successfully run a delivery-only kitchen.

To learn more, read How Can I Start a Delivery Service for My Restaurant on the Burkett Blog.

How will ghost kitchens impact the future of the foodservice industry?

These past 7 months may seem as if our industry has been completely transformed. In reality, the COVID-19 pandemic only accelerated an already growing trend. Online ordering was already slated to become a $38 billion industry by 2020. Of course, what they didn’t account for was a worldwide pandemic that would shut down on-site dining for the better part of 2020. This lead to an increased need for businesses to quickly adapt to the takeout and delivery model.

In other words, the emergence of more virtual kitchens in 2020 is not changing the course of the foodservice industry, only quickening its pace. As the world becomes more digital, it only makes sense that our industry will follow. However, this won’t fully replace the social aspect of the traditional brick-and-mortar restaurants. Ghost kitchens will most likely be the future of fast casual, quick serve dining where meals are already optimized to go. The model’s long-term future is still to be determined, but for now they

If you want more information on how to adopt the ghost kitchen model, we have a knowledgeable sales team just waiting to help you – Contact us today!

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