What accounting method does Del Taco use for the acquisition of franchised restaurants?
Del_Taco Franchise · 2025 FDDAnswer from 2025 FDD Document
l proceeds of $1.5 million, $0.9 million, and $1.4 million, respectively, related to the extension of the underlying franchise and lease agreements from the sale of restaurants in prior years.
Franchise acquisitions — In 2024, Del Taco purchased 10 franchise-operated restaurants for $86 thousand as part of three separate transactions, and recognized related gains of $2.7 million. In 2022, Jack in the Box acquired 13 franchise restaurants for total consideration of $0.3 million, comprised of franchise receivables owed to the Company as of the acquisition date. There were no such acquisitions in 2023. We account for the acquisition of franchised restaurants us
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 58)
What This Means (2025 FDD)
According to the 2025 Del Taco Franchise Disclosure Document, Del Taco uses the acquisition method of accounting for business combinations when acquiring franchised restaurants. This accounting method adheres to U.S. Generally Accepted Accounting Principles (GAAP). The purchase price allocations are based on fair value estimates determined using significant unobservable inputs (Level 3).
In 2024, Del Taco purchased 10 franchise-operated restaurants for $86 thousand as part of three separate transactions, and recognized related gains of $2.7 million. In 2022, Jack in the Box acquired 13 franchise restaurants for total consideration of $0.3 million, comprised of franchise receivables owed to the Company as of the acquisition date. There were no such acquisitions in 2023.
The acquisition method requires that the assets acquired and liabilities assumed are recognized at their acquisition date fair value. Goodwill, representing the excess of total consideration over tangible and identifiable intangible assets and assumed liabilities, is recorded. For Del Taco, the goodwill of $319.7 million arising from the acquisition was primarily attributable to the market position and future growth potential of Del Taco for both company-operated and franchised restaurants related to future store openings, expansion into new markets, and expected synergies. None of the goodwill resulting from the acquisition is deductible for tax purposes.