Your Restaurant’s Big Purchases: And How GAAP Says To Depreciate Them

October 13, 2025

Get A Handle On Your Fixed Assets

When it comes to managing your restaurant’s books, understanding the useful lives of your fixed assets is key to staying GAAP-compliant, planning for long-term growth, and determining your return on investment. Whether you’re opening your first location or expanding a multi-unit operation, here is a quick breakdown of the most common fixed asset categories in the restaurant industry and their typical useful lives under Generally Accepted Accounting Principles (GAAP).

1. Leasehold Improvements

Leasehold improvements (think: custom buildouts, installed lighting, non-removable fixtures) are amortized over the shorter of the lease term (including reasonably certain renewal options) or their useful life, which is commonly 10–15 years in practice.

2. Restaurant Equipment

This includes ovens, fryers, grills, and refrigeration units. Most of this equipment is depreciated over 5 to 7 years, depending on expected wear and usage.

3. Furniture & Fixtures

Tables, chairs, booths, host stands, and decorative lighting typically fall into this category. These are generally depreciated over 5–7 years.

4. Smallwares

Smallwares, like utensils, pans, mixing bowls, dishes, and glassware, are treated differently by many operators. There are a few common approaches:

- Capitalize the opening inventory, then expense replacements as incurred.
- Depreciate down to 50% of the original cost and treat future replacements as maintenance expenses to maintain a steady inventory level.

Which method is best often depends on your volume, scale, and internal controls. We recommend having a clear policy that’s consistently applied and aligning it with your capitalization threshold.

5. Technology (POS systems, computers)

Technology assets, including POS systems, tablets, and back-office computers, usually fall into the 3 to 5-year depreciation range.

6. Buildings (if owned)

If your restaurant owns the building, GAAP calls for a 39-year straight-line depreciation period. Although individual components may qualify for shorter lives if broken out in a cost segregation study.

Fixed Asset Policy Pro Tips

A few things to keep in mind when setting fixed asset policies:

Set a dollar limit for what you capitalize: Not everything needs to be depreciated. Set a capitalization policy that makes sense to your organization and consult with your audit or tax professional to ensure it is reasonable. Those falling under this threshold are expensed immediately and normally classified as repairs and maintenance.

- It is important to consider the impact this may have on your debt covenants, as too high a threshold could trigger a violation of your debt covenants by expensing too much, as non-depreciation expense is not a normal add-back for debt covenants.

Use the straight-line method (most of the time): This just means you spread the cost evenly over the asset’s life. Simple and GAAP-friendly.

Leasehold improvements can be tricky: If you build something into your leased space, like a new bar space, you can’t just depreciate it over 15 years if your lease ends in 3 years. GAAP says pick the shorter timeline, unless you’re sure you will renew your lease. If so, make sure your lease life also assumes the extension.

Don’t forget about asset write-offs: As assets are replaced, have a system in place to ensure you are disposing of the old assets. Consider a rotating physical count of store equipment and assets to ensure your books and records reflect what you have.

Repairs vs. capital improvements: If you fix something up, like replacing a part in your oven that doesn’t extend the overall life of the asset, that’s a repair that should be expensed. However, if a repair extends the length of time the asset can be used, increases capacity/productivity, enhances the quality of output, or reduces operating costs over a long period of time (more than 1 year), those costs can be capitalized and depreciated.

Reconcile your fixed asset ledger to the general ledger: As you update your fixed asset ledger with additions, disposals, and depreciation, ensure the prior year-end and current period end balances reconcile to the general ledger to capture all activity.

A well-defined fixed asset policy helps streamline tax planning, budgeting, and financial reporting. Document your approach to capitalization policies and useful lives to ensure your policies remain consistent year after year.

Have questions about fixed asset tracking or restaurant accounting in general? We’re here to help.

By Kari Maue, CPA, Director, Assurance & Advisory