Where are the accruals for Del Taco's legal matters presented on the consolidated balance sheet?
Del_Taco Franchise · 2025 FDDAnswer from 2025 FDD Document
itional $9.3 million. These amounts are included within "Accrued liabilities" on our consolidated balance sheet as of September 29, 2024. The Company will continue to accrue for post-judgment interest until the matter is resolved.
Torrez — In March 2014, a former Del Taco employee filed a purported Private Attorneys General Act claim and class action alleging various causes of action under California's labor, wage, and hour laws. The plaintiff generally alleges Del Taco did not appropriately provide meal and rest breaks and failed to pay wages and reimburse business expenses to its California non-exempt employees. On November 12, 2021, the court granted, in part, the plaintiff's motion for class certification. The parties participated in a voluntary mediation on May 24, 2022 and June 3, 2022. On June 4, 2022, we entered into a Settlement Memorandum of Understanding (the "Agreement") which obligates the Company to pay a gross settlement amount of $50.0 million, for which in exchange we will be released from all claims by the parties. On August 8, 2023, the court issued its final approval of the settlement and on August 9, 2023 final judgment was entered. The Company made the full payments for the settlement amounts. As of September 29, 2024, the Company has no further amounts accrued on its consolidated balance sheet.
J&D Restaurant Group — On April 17, 2019, the trustee for a bankrupt former franchisee filed a complaint generally alleging the Company wrongfully terminated the franchise agreements and unreasonably denied two perspective purchasers the former franchisee presented. The parties participated in a mediation in April 2021, and again in December 2022, but the matter did not settle. Trial commenced on January 9, 2023. On February 8, 2023, the jury returned a verdict finding the Company had not breached any contracts in terminating the franchise agreements or denying the proposed buyers. However, while the jury also found the Company had not violated the California Unfair Practices Act, it found for the plaintiff on the claim for breach of implied covenant of good faith and fair dealing, and awarded $8.0 million in damages. On May 9, 2023, the court granted the Company's post-trial motion, overturning the jury verdict and ordering the plaintiff take nothing on its claims. As a result,
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 58)
What This Means (2025 FDD)
According to Del Taco's 2025 Franchise Disclosure Document, specific accruals for legal matters are addressed in Item 21, which pertains to the company's financial statements. The document details two legal cases, Torrez and J&D Restaurant Group, and explains how accruals related to these cases were handled. As of September 29, 2024, Del Taco has no further amounts accrued on its consolidated balance sheet for the Torrez case, as the company made full payments for the settlement amounts. Similarly, for the J&D Restaurant Group case, the company reversed a prior $8.0 million accrual, and as of September 29, 2024, there are no amounts accrued for this case on its consolidated balance sheet. However, it is noted that the Plaintiff has appealed the trial court's post-trial rulings.
These details are significant for prospective franchisees as they provide insight into how Del Taco manages and resolves legal disputes, and how these resolutions impact the company's financial statements. The absence of accrued amounts as of September 29, 2024, suggests that these particular legal matters are not currently posing a financial liability on the company's balance sheet. However, the ongoing appeal in the J&D Restaurant Group case indicates a potential for future financial impact, depending on the outcome of the appeal.
Item 21 also mentions other financial aspects, such as the acquisition of Del Taco, equity compensation plans, debt refinancing, and assets held for sale. While these topics are not directly related to legal accruals, they provide a broader context of the company's financial health and strategic decisions. For instance, the acquisition-related transaction costs of $12.3 million are presented in "Other operating expense, net" in the consolidated statement of operations, offering a glimpse into the expenses associated with company growth and restructuring.
In summary, while the specific accruals for the Torrez and J&D Restaurant Group cases are not present on the consolidated balance sheet as of September 29, 2024, the details surrounding these cases and other financial activities offer valuable information for potential franchisees to assess the financial stability and risk management practices of Del Taco.