Is a Del Taco buyer allowed to assign the contract or any rights and obligations under it?
Del_Taco Franchise · 2025 FDDAnswer from 2025 FDD Document
- 11.8 Assignment and Binding Effect. Franchisee shall not assign this Agreement or any of its rights or obligations under this Agreement to any third party without the prior written consent of Del Taco; provided, however, that the merger or consolidation of Franchisee into, or the sale of all or substantially all of the assets of Franchisee to, a third party shall not be deemed to be an assignment. Del Taco may freely assign this Agreement or any of its rights or obligations under this Agreement. Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of the parties to this Agreement and their permitted successors and assigns.
Source: Item 23 — RECEIPTS (FDD pages 59–325)
What This Means (2025 FDD)
According to the 2025 Del Taco Franchise Disclosure Document, a franchisee is generally restricted from assigning their Franchise Agreement or any associated rights and obligations to another party without first obtaining written consent from Del Taco. However, there is an exception to this rule: a merger or consolidation of the franchisee into another entity, or the sale of substantially all of the franchisee's assets to a third party, is not considered an assignment requiring Del Taco's consent. Del Taco, on the other hand, retains the right to freely assign the Franchise Agreement or any of its rights and obligations.
This clause ensures that Del Taco maintains control over who operates its franchises and upholds brand standards. By requiring consent for assignment, Del Taco can vet potential new franchisees to ensure they meet the company's criteria for financial stability, operational experience, and commitment to the Del Taco brand. This protects the integrity of the franchise system and the interests of other franchisees.
For a prospective Del Taco franchisee, this means that if they wish to sell their franchise to someone else, they must first seek approval from Del Taco. This process may involve providing information about the potential buyer's background, financial resources, and business plan. Del Taco has the discretion to approve or deny the assignment based on its assessment of the buyer's suitability. The franchisee should factor in the time and potential costs associated with obtaining Del Taco's consent when considering a sale. The exception for mergers or asset sales provides some flexibility for franchisees looking to exit the business through these types of transactions, as long as the fundamental control of the franchise doesn't change without Del Taco's approval.
It is also important to note that the lease or sublease agreement for the restaurant location may include provisions allowing the franchisee to assign the lease to Del Taco or another franchisee, providing additional flexibility in certain situations. Franchisees should carefully review both the Franchise Agreement and the lease agreement to understand their rights and obligations regarding assignment.