Are You Leaving QBI on the Table as You Expand?
Authored by: Doug Gross — Partner, CPA, CGMA | Date Published: May 15, 2026
Most pizzeria owners spend years perfecting their craft before the idea of a second location even becomes a real conversation. The original spot is running well, the community has embraced it, the team knows what they are doing, and the numbers are finally telling a story worth celebrating. When expansion talks begin, the energy in the room is forward-looking: real estate searches, hiring timelines, equipment budgets, and how to bring the same experience to a new neighborhood. What rarely comes up early enough is the question of ownership structure, and how the way you connect your locations on paper will directly affect one of the most valuable tax deductions available to independent business owners.
Opening your second pizzeria location? How you structure ownership between locations could mean the difference between maximizing your QBI deduction and losing it. Here are some key considerations around aggregation rules that expanding pizzeria businesses often encounter too late in the process.
How the QBI Deduction Works for Independent Pizzeria Owners
The Qualified Business Income (QBI) tax deduction, found under Section 199A of the tax code, allows eligible pass-through business owners to deduct up to 20% of their qualified business income from their taxable income.
For a pizzeria reporting $300,000 in business income, that deduction could reduce your taxable income by $60,000. The benefit applies to sole proprietors and owners of pass-through entities such as partnerships, S corporations, and LLCs taxed as those entities. The One Big Beautiful Bill Act (OBBBA) has now made the QBI deduction a permanent fixture of the tax code, allowing business owners to build multi-decade expansion plans with confidence.
Once your income rises above a certain threshold, your deduction becomes tied to two calculations: the W-2 wages you pay your employees and the value of your qualified property. For a sit-down pizzeria with delivery, your commercial ovens, refrigeration units, prep tables, and delivery vehicles all count toward your property calculation. The equipment investment you made to run your business does not just serve your customers; it also factors into how much of your deduction you get to keep.
What Happens When Location 1 Is Profitable, and Location 2 Is Running at a Loss?
This is the scenario almost no one discusses, and it can quietly cost pizzeria owners a significant deduction they had every right to take.
When your original location is performing well and your second location is in its early months, ramp-up labor, marketing costs, and lower initial volume will often put that second location in the red. That is completely normal for a new restaurant, and it should not be a cause for concern on its own. The tax problem arises from how those two businesses are treated on your return. If the two locations are separate entities with no formal aggregation election in place, you calculate each business’s QBI independently. Location one produces a solid deduction based on its profit. Location two generates a negative QBI amount that carries forward and can reduce future deductions, without doing anything to help you in the current year.
With proper aggregation, the IRS sees the combined income picture. Location two’s startup losses reduce your overall taxable income while you still count location one’s wages and equipment value in your deduction calculation. The difference can be thousands of dollars annually, and whether you get it right depends entirely on how the businesses were set up from the start.
Do Your Pizzeria Locations Qualify for QBI Aggregation?
Aggregating multiple businesses for QBI purposes is not automatic. The aggregation election must be made on your original, timely-filed tax return, and once made, it is generally binding for future years. To aggregate your locations under Section 199A, your businesses generally must meet all of the following criteria:
- Be commonly owned, with at least 50% ownership held by the same individual or family members in each entity.
- Operate on the same tax year.
- Demonstrate integration through shared operations, customers, supply chains, or management.
- Fall outside the definition of a Specified Service Trade or Business, which standard restaurant operations do.
Two pizzeria locations under common ownership that share a brand, purchasing relationships, or management staff would typically meet the integration test. Documenting that relationship carefully and making the election on time every year is what protects the benefit.
Should Your Locations Be Separate Entities or One Entity With Multiple Locations?
There is no single right answer, and that is exactly why this decision deserves careful attention before you sign a new lease.
A single entity with multiple locations simplifies the QBI calculation. Income and losses net naturally, and wages and property are counted together across all locations without requiring an annual election. Separate entities give you stronger liability protection, which carries real weight in the restaurant business. With separate entities, the formal aggregation election must be made each year and supported by documentation. Depending on your specific income picture and where your total income falls relative to the wage and property limitation thresholds, one structure may produce better tax results than the other.
One detail worth particular attention: if you bring in outside investors at individual locations, that ownership dilution could affect your ability to meet the 50% common ownership requirement for aggregation. That conversation belongs with your CPA before any investment deal closes, not after the paperwork is signed.
How to Plan Your Tax Structure for Locations 3, 4, and 5?
The owners who protect their deductions as they grow are the ones who address structure before signing a new lease, not after. By the time you are opening your third location, you should have clear answers to each of the following questions:
- Are all locations under a common ownership structure that supports the aggregation election?
- Is payroll distributed across locations in a way that strengthens your W-2 wage calculation?
- Are equipment purchases documented and timed to support your qualified property basis?
- Is the aggregation election being filed on every return, consistently and on time?
Centralized operations, such as a commissary kitchen, shared management staff, or group purchasing, all strengthen your integration argument for aggregation. The more interconnected your locations are in day-to-day operations, the more supportable your aggregation position becomes.
More Opportunities Most Pizzeria Owners Do Not Know About
The details of tax structure, aggregation elections, and equipment deductions can stack up quickly as your pizzeria grows, and having a team at MBE CPAs that understands both the numbers and the day-to-day realities of running a restaurant can make a significant difference. Reach out to start that conversation today.
Multi-location success requires more than just a tax structure. It requires operations that protect your margins at every turn, including carefully evaluating how your next renovation or equipment upgrade could affect your tax position. Upgrading to energy-efficient equipment could qualify for immediate tax deductions up to $5.81 per square foot under Section 179D, provided construction begins before the June 30, 2026, sunset date. This is a provision most pizzeria owners have never heard of, but one that could save you $15,000-$50,000 on your next project.