What constitutes 'routine litigation incidental to the business' that would be an exception to pending actions considered significant by Del Taco, considering the number of franchisees and the size of the franchise system?
Del_Taco Franchise · 2025 FDDAnswer from 2025 FDD Document
FRANCHISE DISCLOSURE DOCUMENT.**
- The following is to be added at the end of Item 3:
Except as provided above, with regard to the franchisor, its predecessor, a person identified in Item 2, or an affiliate offering franchises under the franchisor's principal trademark:
- A. No such party has an administrative, criminal or civil action pending against that person alleging: a felony, a violation of a franchise, antitrust, or securities law, fraud, embezzlement, fraudulent conversi
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 42–46)
What This Means (2025 FDD)
According to the 2025 Del Taco Franchise Disclosure Document, Item 17 includes a disclosure regarding pending actions against the franchisor. Specifically, it states that no party has pending actions, other than routine litigation incidental to the business, which are significant in the context of the number of franchisees and the size, nature, or financial condition of the franchise system or its business operations.
This clause is designed to protect potential franchisees by ensuring they are aware of any significant legal issues facing Del Taco. However, it also acknowledges that a business of Del Taco's size will inevitably face some level of routine litigation. The FDD does not define 'routine litigation incidental to the business.'
For a prospective Del Taco franchisee, this means that while the franchisor is obligated to disclose significant legal actions, they are not required to disclose every minor lawsuit or claim. It would be prudent for a potential franchisee to ask Del Taco for examples of what they consider 'routine litigation' and to inquire about the nature and frequency of such claims. Understanding this distinction is crucial in assessing the overall risk associated with investing in a Del Taco franchise.