Who bears the cost of an audit performed by Del Taco or its agents?
Del_Taco Franchise · 2025 FDDAnswer from 2025 FDD Document
Del Taco or its designated agents shall have the right at all reasonable times to examine, copy, receive, and/or personally review or audit, at Del Taco's expense, all books, records, and sales and income tax returns of Franchisee.
The inspection or audit will be conducted at the location where the business records are customarily maintained or, at Del Taco's discretion, transmitted to Del Taco in digital or hardcopy format as Del Taco may require.
Franchisee shall cooperate fully with all audits and requests for information made by Del Taco or its designees.
Del Taco shall also have the right, at any time, to have an independent audit made of the books of Franchisee.
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, Del Taco will typically bear the cost of audits performed by Del Taco or its designated agents. Specifically, Del Taco has the right to examine and audit the franchisee's books, records, and tax returns at Del Taco's own expense. This audit can occur at the location where the franchisee maintains their business records or by transmitting the records to Del Taco.
However, the franchisee may become responsible for the costs of an inspection under certain conditions. If an inspection reveals that the franchisee understated payments in any report to Del Taco, the franchisee must pay the understated amount, plus interest of 1.5% per month (or the maximum legal rate, if lower). Furthermore, if the inspection is required because the franchisee failed to provide sales reports on time, or if the inspection uncovers an understatement of 2% or more in any report, the franchisee must reimburse Del Taco for all costs associated with the inspection. These costs can include travel, lodging, wages, accounting, and legal fees.
This arrangement is fairly standard in franchising, where franchisors need to ensure brand standards and accurate reporting of sales and royalties. The provision incentivizes franchisees to maintain accurate records and submit timely reports, as failure to do so can result in them bearing the costs of audits that would otherwise be covered by Del Taco. Prospective franchisees should be aware of these conditions and ensure they have systems in place to accurately track and report sales data to avoid potential audit-related expenses.