What are the consequences if a Del Taco franchisee understates payments in a report?
Del_Taco Franchise · 2025 FDDAnswer from 2025 FDD Document
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).
The foregoing remedies shall be in addition to any other remedies Del Taco may have.
Source: Item 22 — CONTRACTS (FDD pages 58–59)
What This Means (2025 FDD)
According to Del Taco's 2025 Franchise Disclosure Document, if an inspection reveals that a franchisee has understated payments in any report to Del Taco, the franchisee must immediately pay the understated amount upon demand. Additionally, Del Taco will charge interest from the date the amount was due until it is paid. The interest rate is 1.5% per month, or the maximum rate permitted by law, whichever is less.
Furthermore, if the inspection that revealed the understatement was necessary because the franchisee failed to provide sales reports on time, or if the understatement in any report is 2% or more, the franchisee must reimburse Del Taco for all costs and expenses connected with the inspection. These costs include travel, lodging, wage expenses, and reasonable accounting and legal costs.
Del Taco emphasizes that these remedies are in addition to any other remedies they may have under the franchise agreement. This means that underreporting can lead to multiple financial penalties and potentially further legal action, making accurate and timely reporting crucial for Del Taco franchisees.