Restaurant Leasehold Improvements

Leasehold improvements are investments that are made in a business's property that add to its value. They are permanent improvements that are not easily removed, such as renovations performed on a physical building.

Examples

In the case of a restaurant, these investments can include equipment that is installed into the physical building such as a ventilation system or a walk-in refrigeration unit. It can also include permanent decor in the interior or exterior of the building such as permanent signs, flooring or wall coverings. Leasehold improvements generally do not include things that can be easily removed. For example, tables and chairs would not be considered a leasehold improvement, but a built-in bar would be.

Accounting Leasehold Expenses

The value of a leasehold improvement can be depreciated either over the lifetime of the business or the expected life of the improvement. Generally it is easier to depreciate the value over the expected life of the improvement because it is difficult to know how long most restaurants will remain in business.

Benefits

There are two benefits to leasehold improvements for a restaurant. They give the restaurant things that it needs or that it can benefit from, such as decor that improves the atmosphere or equipment that is needed to run a restaurant. The second, a long term benefit, is an increase to the value of the property.

References

• Investor Words: Leasehold Improvements
• The CPA Journal: A New Lease on Life