There are an astonishing number of fast food restaurants in the United States, more than 97.000 locations, just from some of the larger fast food brands. This sector was negatively impacted during the economic crisis, but it fared better than the remainder of the restaurant industry because of its scale and lower meal price points.

One trend in the industry has been longer operating hours including more breakfast offerings and later hours. Many Subway and McDonald locations, for example, are open 24 hours a day. These longer hours of operation have resulted in proportionally larger energy operating costs, providing an incentive to restaurant operators to install more energy efficient building equipment. Long life low energy consumption LED lighting is now being introduced into this sector. An understanding of the EPAct tax incentives and potential utility rebates for installing LED's should accelerate these developments.

Because the EPAct lighting tax incentive drives off total enterprise square footage, the opportunity for these companies to achieve tremendous energy cost savings, and thereby generate tax deductions worth millions of dollars is immediate and more easily achievable than they may realize.

Fast-food companies’ skill set centers on their ability to optimize their operations and provide a uniform customer experience, meaning that the implementation of a consistent wide-scale tax effective energy retrofit program will come easily to them.

The EPAct Tax Opportunity

Pursuant to Energy Policy Act (EPAct) Section 179D, fast-food chains making qualifying energy-reducing investments in their new or existing restaurant locations can obtain immediate tax deductions of up to $1.80 per square foot.

If the building project doesn't qualify for the maximum $1.80 per square foot immediate tax deduction, there are tax deductions of up to $0.60 per square foot for each of the three major building subsystems: lighting, HVAC (heating, ventilating, and air conditioning), and the building envelope. The building envelope is every item on the building’s exterior perimeter that touches the outside world including roof, walls, insulation, doors, windows and foundation.

The chart below illustrated the millions of dollars that can be saved for each of these well-known brands:

Brands’ commitments:

Fast-food chains have long been keen on the importance of reducing their operating costs, but only recently have they realized the money-saving potential inherent in energy efficiency. In a previous article, the authors described the magnitude of EPAct benefits available to some of the larger square footage national chains.

McDonald’s

In order to capitalize on the energy savings opportunity, McDonald’s has recently undertaken several large-scale projects to make their restaurants energy efficient. At its Saltbox Village Shopping Center location in Cray, North Carolina, McDonald’s is featuring a completely automated, intelligent lighting-control system. They will be using Cree LED lighting and Solatube skylights for day-lighting, with a photo sensor to maintain the desired light levels. Cree’s LED products can be seen in the kitchen, the dining area, restrooms, hallways, the entryways and parking lot. In addition to incorporating enough energy efficient equipment and design to become LEED-certified, the store uses 97% LED lights that reduce the total electricity consumption by 78%. As the fast food brand with the largest total square footage in the U.S. at 51,216,000, McDonald’s has the potential for $92,188,800 in EPAct tax deductions upon completion of the necessary retrofits

Burger King

Burger King is another contender competing to reduce their operating costs by making energy retrofits. The brand was awarded the 2010 Energy Efficiency Excellence Award from the Southern California Gas Company for its innovative kitchen equipment, like the Duke Flexible Batch Broiler, and its recent installation of LED lighting in 80 restaurants in California. By continuing to install energy efficient lighting and HVAC equipment Burger King can soon realize substantive EPAct tax deductions. In September 2010 Burger King was acquired by 3G Capital. 3G Capital has announced that the existing stores require $3 billion in upgrades. If these upgrades meet or surpass the EPAct energy standards , substantial EPAct tax deductions will be available.

Dairy Queen

At the ground level, ambitious franchisees are coming up with creative ways of reducing energy. One Chicago-based development group, CG Development Group, has applied a “whole-building” approach in order to cut its energy expenses in one of its Dairy Queen locations. The building shell is entirely thermally broken—that is, no physical elements directly connect between the interior and exterior. As a result, less heat is transmitted to the outside. Good insulation and high-performance glazing also help create energy savings in the building. A water-to-water heat pump with a glycol loop captures waste heat from all the cold-food storage equipment that preserves the frozen items and transfers that heat to domestic hot water. A solar-thermal vacuum tube acts as a secondary booster for the system. The list goes on; by taking decisive action to cut energy expenses, CG is saving up to $3,000 per month in this location, and is sure to adopt a similar method in its other locations.

Subway

Meanwhile, Subway has created its flagship “eco-store” in Winter Park, Florida. Elements of the Eco-Store include high efficiency HVAC systems, remote condensing units for refrigeration and ice making equipment, day lighting and controls for high efficiency lighting, LED interior and exterior signs, low flow water fixtures, and building and décor materials from sustainable sources. There is also an extensive use of recycled products and furnishings in the restaurant’s construction and an increased emphasis on recycling in customer areas.

Additional Energy Cost Saving Opportunities

Fast-food chains are different from ordinary buildings because lighting and air-conditioning account for 25-40% of total energy expenses rather than the usual 75-80%. Their largest energy-related expenses derive from refrigeration and building envelope, like the drive through windows that are often left open or are not well insulated. Therefore, there are unique opportunities to drive down energy expenditures in fast-food facilities such as installing motion sensors that alert staff when refrigerators, windows or ovens are left open or smart occupancy sensors that can calibrate the optimal level of ovens that need to be running based on how full the restaurant is.

Conclusion

The pattern is clear: fast-food brands are warming up to the cost-saving potential of energy reductions, which bodes well for their investors and their bottom lines. Energy expenses constitute a major operational cost, which if minimized, will enable more funds to be allocated towards menu development and advertising. The fast food restaurant category has tremendous opportunity and maintenance cost savings available for low wattage, long life LED lighting applications. Those store locations that utilize EPAct can obtain additional economic benefits supporting these initiatives.

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