What action may Del Taco take if a franchisee fails to promptly pay their suppliers?

According to Del Taco's 2025 Franchise Disclosure Document, if a franchisee fails to promptly pay their suppliers, Del Taco has the option to step in and make the payments on behalf of the franchisee. If Del Taco chooses to do so, the franchisee is obligated to promptly reimburse Del Taco for the payments made. Del Taco can collect this reimbursement either through direct notice to the franchisee, requiring immediate payment, or through an Electronic Funds Transfer (EFT) process as detailed in Section 3.5 of the FDD and the Del Taco manuals.

This clause protects Del Taco's brand reputation and supply chain. By ensuring suppliers are paid, Del Taco minimizes disruptions to the supply of goods and services necessary for the franchisee's restaurant operation. This also prevents potential legal issues or loss of favorable supplier relationships that could arise from a franchisee's failure to pay.

Furthermore, the FDD states that a franchisee's failure to pay suppliers when due, and failure to cure such default within the time period specified by the supplier or in the applicable supply contract, can lead to termination of the franchise agreement. This underscores the importance of maintaining good relationships with suppliers and adhering to payment terms. Del Taco's intervention is not mandatory, but it provides a safety net while also creating a pathway for Del Taco to terminate the agreement if the payment issues are not resolved.

Prospective franchisees should be aware of this clause and ensure they have sufficient financial resources and management practices in place to meet their obligations to suppliers. Failure to do so could not only result in Del Taco taking control of payments but also potentially lead to the termination of their franchise agreement.