What was the amount of the goodwill impairment that Del Taco recognized during the third quarter of 2024?
Del_Taco Franchise · 2025 FDDAnswer from 2025 FDD Document
------------------------------------------------------------------------| | $ 323,833 | | (162,624) | | $ 161,209 | | 135 | | 323,968 | | (162,624) | | $ 161,344 | | 188,006 | | (162,624) | | 25,382 | | (52) | | 187,954 | | (162,624) | | 25,330 |
During the third quarter of 2024, the Company had identified triggering events that indicated the goodwill allocated to the Del Taco reporting unit might be impaired. As a result, the Company performed a quantitative test over the Del Taco reporting unit, noting that th
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 58)
What This Means (2025 FDD)
According to Del Taco's 2025 Franchise Disclosure Document, during the third quarter of 2024, the company identified events that suggested the goodwill allocated to the Del Taco reporting unit might be impaired. After performing a quantitative test, it was noted that the fair value of the reporting unit was less than the carrying value. As a result, Del Taco recognized a goodwill impairment of $162.6 million at that time. The document also states that there was no such triggering event for the Jack in the Box reporting unit.
Goodwill, as defined in the FDD, represents the excess of the purchase price over the fair value of identifiable net assets acquired. It is generally recorded when Del Taco acquires restaurants from franchisees or another business. Conversely, goodwill is reduced upon the sale of restaurants to franchisees. The amount written off is determined by the fair value of the disposed business as a percentage of the reporting unit's fair value before disposal. If the disposed business was never fully integrated, the current carrying amount of the acquired goodwill is written off.
Del Taco evaluates goodwill for impairment annually or more frequently if circumstances warrant, typically during the third quarter. The impairment analysis begins with a qualitative assessment to determine if it is more likely than not that the fair value of the reporting unit is less than its carrying value. Factors considered include macro-economic conditions, market and industry conditions, cost considerations, the competitive environment, share price fluctuations, and overall financial performance. If this assessment indicates impairment is likely, a quantitative impairment test is performed.
For a potential franchisee, this goodwill impairment indicates a significant write-down in the value of the Del Taco business unit. While this is a historical figure, it highlights the importance of understanding the financial health and performance of the brand. Prospective franchisees should inquire about the factors that led to this impairment and what steps Del Taco is taking to improve its financial performance and asset values.