How does the Del Taco Development Agreement affect the franchisee's ability to sell or transfer their development rights?

According to Del Taco's 2025 Franchise Disclosure Document, a Del Taco developer's ability to sell or transfer their development rights is significantly restricted. The Development Agreement explicitly states that the development rights granted are for personal services and cannot be sold, assigned, transferred, or encumbered, either in whole or in part. This means a developer cannot independently transfer their rights to another party.

Furthermore, if the developer is a legal entity (like a corporation or LLC), the organizational documents must restrict the issuance and transfer of ownership interests in a way that would violate the Development Agreement. Any ownership interests issued by the developer must carry a legend stating that their transfer is subject to the terms of the agreement with Del Taco LLC. The developer is also required to place a stop transfer order against any ownership interest transfers, except those specifically permitted within the agreement.

This tight control over transfer rights is typical in franchising, as franchisors like Del Taco want to ensure that any new developers or owners meet their standards and are capable of fulfilling the development obligations. A prospective Del Taco developer should carefully consider these restrictions and discuss with Del Taco the circumstances under which a transfer might be considered or approved, as any unauthorized transfer could lead to a breach of the Development Agreement.