In addition to other amounts, what expenses is a defaulting Del Taco franchisee responsible for paying?
Del_Taco Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchisee shall also pay to Del Taco, in addition to any amounts then due and owing, all expenses incurred by Del Taco as a result of any default, including reasonable attorneys' fees, expenses, and costs, and interest on such attorneys' fees, expenses, and costs.
- 14.1.2 Cease Use of Proprietary Marks.
Franchisee shall immediately and permanently cease to use, in any manner whatsoever, any confidential methods, procedures and techniques associated with the System, the mark "Del Taco" and all other Proprietary Marks and distinctive forms, slogans, signs, symbols, and devices associated with the System.
In particular, Franchisee shall cease to use all signs, advertising materials, displays, stationery, forms, and any other articles that display the Proprietary Marks, remove all such articles and/or permit Del Taco to enter the Restaurant and remove or permanently cover all signs or advertisements identifiable in any way with Del Taco's name or business, at Franchisee's expense.
- 14.1.3 Cancellation of Assumed Names.
Franchisee shall take such action as may be necessary to cancel any assumed name or equivalent registration which contains the Proprietary Mark "Del Taco" and all other Proprietary Marks, and/or any other service mark or trademark, and Franchisee shall furnish Del Taco with evidence satisfactory to Del Taco of compliance with this obligation within five (5) days after termination or expiration of this Agreement.
If an inspection should reveal that any payments have been understated or overstated in any report to Del Taco, then Franchisee shall immediately pay Del Taco, in the event of an understatement, the amount understated upon demand, in addition to interest from the date such amount was due until paid, at the rate of one and one half percent (1.5%) per month, or the maximum rate permitted by law, whichever is less.
If an inspection is necessitated because Franchisee fails to timely provide Sales Reports or if an inspection discloses an understatement in any report by Franchisee of two percent (2%) or more, Franchisee shall, in addition, reimburse Del Taco for any and all costs and expenses connected with the inspection (including, without limitation, travel, lodging and wages expenses, and reasonable accounting and legal costs).
Source: Item 22 — CONTRACTS (FDD pages 58–59)
What This Means (2025 FDD)
According to Del Taco's 2025 Franchise Disclosure Document, a franchisee who defaults on their agreement is responsible for covering Del Taco's expenses resulting from the default. These expenses include reasonable attorneys' fees, costs, and interest on those fees and costs. This means that if a Del Taco franchisee fails to meet their obligations under the franchise agreement, leading to termination or other enforcement actions, they will be required to pay for Del Taco's legal costs associated with addressing the default.
Furthermore, if an inspection reveals that a Del Taco franchisee has understated payments in any report to Del Taco, the franchisee must pay the understated amount immediately upon demand. They will also be charged interest from the date the amount was originally due until it is paid, at a rate of 1.5% per month, or the maximum rate permitted by law, whichever is less. If the understatement in any report is two percent or more, or if the inspection was necessary due to the franchisee's failure to provide timely sales reports, the franchisee must reimburse Del Taco for all costs and expenses connected with the inspection. These costs include travel, lodging, wages, accounting, and legal fees.
In addition to covering Del Taco's costs, a defaulting franchisee must also take specific actions related to the brand's intellectual property and business operations. They must immediately cease operating the Del Taco restaurant and cannot represent themselves as a current or former franchisee. The franchisee must also stop using any confidential methods, procedures, or techniques associated with the Del Taco system, including the "Del Taco" mark and other proprietary marks. This includes removing all signs, advertising materials, and other articles displaying the proprietary marks at the franchisee's expense, or allowing Del Taco to enter the restaurant to remove or cover these items.
Finally, the defaulting franchisee must cancel any assumed name registrations that contain the "Del Taco" proprietary mark or any other service mark or trademark associated with the brand. They must provide Del Taco with evidence of compliance with this obligation within five days after the termination or expiration of the agreement. These measures ensure that a terminated franchisee does not continue to benefit from or misuse the Del Taco brand and system after their agreement has ended.