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McDonald's charges a $45,000 franchisee fee and an ongoing monthly service fee equal to 4% of gross sales.
For the first time in about 30 years, McDonald’s is increasing its royalty fee for franchise operators opening new restaurants in the US and Canada.
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Section 162(a) of the Internal Revenue Code (26 U.S.C. § 162(a)), is part of United States taxation law.It concerns deductions for business expenses. It is one of the most important provisions in the Code, because it is the most widely used authority for deductions. [1]
Many but not all states incorporate federal law principles in their tax laws to some extent. Federal taxable income equals gross income [21] (gross receipts and other income less cost of goods sold) less tax deductions. [22] Gross income of a corporation and business deductions are determined in much the same manner as for individuals. [23]
Though these payments qualified for § 162 deduction as expenses paid in the course of the opticians' trade or business, the IRS argued that the expenses should be disallowed as against public policy. [8] While the Court disapproved of the business ethics displayed by the opticians, the Court upheld the deductions as valid under the Code. [8]
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A franchise is merely a temporary business investment involving renting or leasing an opportunity, not the purchase of a business for the purpose of ownership. It is classified as a wasting asset due to the finite term of the license. Franchise fees are on average 6.7% with an additional average marketing fee of 2%. [10]