Does the Del Taco Development Agreement prohibit the franchisee from engaging in any specific actions?
Del_Taco Franchise · 2025 FDDAnswer from 2025 FDD Document
to an agreement with Del Taco. If the Developer has reason to believe that any person has violated the provisions of the confidentiality agreement or this Section 17, the Developer shall notify Del Taco and shall cooperate with Del Taco to protect Del Taco against infringement or other unlawful use of the Del Taco System, including (without limitation) the prosecution of any lawsuits if deemed necessary or advisable by Del Taco.
- (e) The Developer (and if a legal entity, the Developer's owners holding a 10% or greater interest in the Developer), during the term of this Agreement and for a period of two years after the expiration or termination of this Agreement, shall not, within the Protected Area of any Restaurant or within two miles of any other Del Taco restaurant owned and/or operated by Del Taco or any other franchisee or licensee of Del Taco, (i) engage in or acquire any direct or indirect interest in any business that uses, duplicates or simulates in any way the Del Taco System or any portion of the Del Taco System, and/or (ii) engage in any food service business similar to the food service business operated under the Del Taco System.
- (f) The Developer acknowledges that any violation of this Section 17 shall constitute both a material breach of this Agreement and a tortious interference with Del Taco's rights in its confidential information and trade secrets. The Developer further acknowledges that any violation will cause irreparable and incalculable harm to Del Taco and agrees that Del Taco shall have the right to obtain temporary and permanent injunctions to prevent violations.
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- Arbitration. Except as otherwise provided in this Agreement, any claim, controversy or dispute arising out of or relating to this Agreement, the Restaurant, or the relationship created by this Agreement, including any claim by Developer or its owners, concerning the entry into, the performance under, or the termination of this Agreement, or any other agreement between the parties will be resolved via binding arbitration under the authority of the Federal Arbitration Act in accordance with the following provisions:
- (a) Any arbitration will be administered by the American Arbitration Association (or its successor) pursuant to its then-current commercial arbitration rules and procedures. The arbitrator will have the authority to decide issues regarding arbitrability and the scope of the arbitrator's jurisdiction. The arbitration must take place in the county in which our headquarters are located at the time of the dispute (currently Orange County, California).
- (b) Any arbitration must be on an individual basis, and not as part of a common, consolidated, or class action. The parties and the arbitrator will have no authority or power to proceed with any claim as a class action or otherwise to join or consolidate any claim with any other claim or any other proceeding involving third parties. If a court determines that this limitation on joinder of or class action
certification of claims is unenforceable, then this entire commitment to arbitrate will become null and void and the parties will submit all claims to the jurisdiction of the courts.
- (c) The arbitrator must follow the law and not disregard the terms of this Agreement or its related agreements. Except as otherwise provided in this Agreement, the arbitrator will have the authority to award any interim, interlocutory, or final remedy or relief that a court of the State of California could order or grant, including, without limitation, general damages, specific performance of any obligation created under this Agreement, the issuance of an injunction or other extraordinary relief, or the imposition of sanctions for abuse or frustration of the arbitration process;
Source: Item 23 — RECEIPTS (FDD pages 59–325)
What This Means (2025 FDD)
According to the 2025 Del Taco Franchise Disclosure Document, the Development Agreement places several restrictions on what a franchisee can do, both during the term of the agreement and for a period afterward. Specifically, the agreement prohibits the developer and their owners (with 10% or greater interest) from engaging in or acquiring interest in businesses that use, duplicate, or simulate the Del Taco system. This restriction applies within the Protected Area of any Del Taco restaurant or within two miles of any other Del Taco restaurant owned by Del Taco or its franchisees. This non-compete clause extends for two years after the agreement expires or terminates.
Del Taco also outlines several events that would constitute a default under the Development Agreement. These include failing to submit a complete Site Approval Package on time, starting construction before site and plan approval, not opening restaurants per the development schedule, misusing Del Taco's system or marks without a valid Franchise Agreement, having an interest in a competing Mexican food restaurant, failing to make required payments, beginning work before meeting all agreement conditions, attempting to assign rights under the agreement, making misrepresentations to Del Taco, failing to obtain required approvals, or defaulting on any obligation under the Development Agreement, Franchise Agreement, or any other agreement with Del Taco.
These restrictions are fairly standard in franchising to protect the brand's integrity, market share, and confidential information. The non-compete agreement ensures that franchisees do not directly leverage the Del Taco system to benefit a competing business, while the default conditions ensure adherence to the development schedule and operational standards. The consequences for violating these restrictions can be severe, including legal action and termination of the agreement.
Prospective Del Taco franchisees should carefully review these restrictions and default conditions to fully understand their obligations and limitations under the Development Agreement. It is important to assess whether these restrictions align with their business goals and risk tolerance before entering into the agreement. Understanding these limitations is crucial for a successful and compliant franchise operation.